Leadership Matters

Perspectives on the key issues impacting senior leaders and their organizations
October 21, 2019

What It Takes to Drive Organizational Culture

Today, perhaps more than ever, a purpose-driven organizational culture can be a real source of competitive advantage. BlackRock CEO Larry Fink advocated for infusing purpose into companies’ strategies in his letter to CEOs. Just this summer, the CEOs who are members of the Business Roundtable issued “A Statement on the Purpose of a Corporation,” declaring that it’s not enough to deliver value to shareholders — organizations should also act in consideration of their employees, consumers and communities. 

In our work, we’re seeing a number of organizations try to shift their cultures to focus more on learning and purpose during a time of immense transformation and intense competition for talent. We recently met with the top HR leaders in the Austin area to discuss how to effectively shift corporate culture and the common misconception that culture change is largely the CHRO’s role.

Who should own the culture?
Everyone has a role to play in building culture, but ultimately the CEO and the leadership team must lead the way on culture. We define culture as the shared values, beliefs and hidden assumptions that shape how work gets done. Given how it permeates everything an organization does, culture is also a shared responsibility between the leaders and their teams.

There’s a saying in management circles that the CEO gets the culture that he or she deserves. Ideally, this is positive. Everyone watches how the CEO acts and what behaviors are enforced. One attendee cited her organization’s chief executive as evidence of this: “She believes that our culture is essentially our values in action. She knows everyone in the company, their spouses’ names, their children’s names. She talks to everyone. She has created a very warm and inclusive culture.”  

In addition, the type of organizational culture a CEO helps establish has implications for whether people follow him or her. For example, we were discussing CEO succession with the board of a healthcare organization. One board member said to us, “Odds are, Person X is going to be the next CEO.” However, after our executive assessment and interview process, we found that nobody wanted to follow this individual. We had the difficult task of coming back to the board and the current CEO to say that, while this candidate looks like the right person on paper, he doesn’t have the ability to take the organization and culture forward as a collection of individuals. Instead, we helped them get to the unexpected answer — a leader who was chosen in part because of his ability to energize people throughout the organization.

Organizational culture should be on the board agenda
The issue of culture is one of growing interest for boards, but as we saw with the healthcare organization, it may not always be at the forefront of succession discussions. To help prompt a conversation about culture, boards should ask:

What are our strategic and cultural aspirations for the organization? 
What is the difference between our current and ideal corporate culture?
What do those future aspirations imply about the profile that is needed for the next CEO?
What are the aspirations of the CEO? Do those align with the strategic and cultural aspirations of the organization?
How can we contribute to the tone at the top?

A company’s culture can make or break the best strategy. As such, boards need insight into the overall culture and the impact of the management team. Additionally, boards need to evaluate their own cultures, which can differ from that of the broader organization. (Learn more about the four main cultural styles of boards.)

HR’s role in helping to build a learning culture
We anticipate the next renaissance in HR will be around learning and development, both in establishing it as part of the broader culture and creating specific programs. In our culture framework, learning is about the ability to embrace change and adapt. In an age of constant disruption, learning-oriented cultures can help organizations shift quickly and compete. 

What is a learning culture?

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What it feels like

Characterized by exploration, openness and creativity. An inventive and open-minded place where people spark new ideas and explore alternatives

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Advantages

Improved innovation, agility and organizational learning

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Watch outs

Too much emphasis on exploration can lead to a lack of focus and inability to exploit existing advantages

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Successful employees

Employees are united and energized by shared curiosity and inquisitiveness

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Successful leaders

Leaders emphasize innovation, knowledge and adventure

 

Learning isn’t just about getting to a better end product or service. It plays a key role in talent retention. People want to work for organizations that provide them with paths for career growth and meaningfully invest in their development. How organizations get there will vary. We’re seeing hybrid approaches emerge: Companies are not just launching formal learning programs, but taking advantage of more casual opportunities, such as content available on open-access platforms like YouTube and Medium. It’s important to note that even robust learning opportunities are useless if there is no time for employees to take advantage of them. HR leaders can help build in time for learning across the organization. For instance, one top Fortune 50 company uses the 70-20-10 model: People spend 70 percent of their time focusing on their main roles, 20 percent on initiatives for the greater good and 10 percent for learning.

The power of partnership
Shifting a culture is not as simple as promoting a new inspirational slogan. It requires defining a target culture that aligns with the needs of the business, selecting and developing leaders with the culture in mind, gaining buy-in, and ensuring performance management and other processes support the ideal culture. These things can only happen when there is a shared sense of ownership among the CEO, board and CHRO.