Wednesday, March 06, 2024

Why you need a faster, more nimble culture

 I wrote a piece last week introducing the idea that change is strategic, and that strategy should consider change competency as a core competency.  Change is happening so quickly and from so many different directions and dimensions that companies cannot create strategy without also preparing for and being ready to change. Companies cannot build static strategies that stretch over 3 or 5 years.  Strategy should be continually developed and re-evaluated, rather than developed once and put on a shelf.  If change is so prevalent and competitors are constantly entering and leaving markets, we don't need to worry about change management, we need to be change agents and create change capacity in the business.

If you are still with me so far, then the question might be - how do we create change capacity in our companies?  In the previous post, I indicated that you'd need the same things in order to change as you need to operate your businesses - good people, flexible and dynamic processes and systems that don't lock in processes and business models from the time you implemented the software a decade ago.  But you'll need to focus on at least one other major change barrier, and that's your corporate culture.

For decades, we've nurtured a careful, risk adverse, wait and see culture in most businesses, which is reinforced by compensation models, personnel recruitment and promotion, little tolerance for risk and uncertainty.  Not to mention that the new metrics most companies are governed by are now quarterly (at best) or monthly (at worst) EBITDA and other financial metrics.  If the change you are going to implement doesn't pay off for a year, but your evaluations occur monthly on an EBITDA basis, how likely are you to implement change?

Defining culture and its power

First, we ought to define what culture is, at least in this context.  Every company has a culture.  It is defined by the spoken or written, and just as importantly the unspoken tenets and rules, what team members tolerate and what they don't tolerate.  It is made up of beliefs, norms, decision making criteria and other factors that aren't often written down, although a lot of good, strong cultures will often intentionally document and communicate their decision criteria, beliefs and norms to the whole company.

Now that I've given you a sense of what culture is, we need to acknowledge just how powerful culture is.  For an invisible, intangible concept, it is exceptionally powerful.  It governs the way people think, the ideas they generate, the risks they take.  Culture works its way into every decision, every investment, every action of a company.  And since it is so pervasive, and often reinforces a status quo mentality, culture becomes a brake on doing things in a new way.  You may have heard someone say, in regards to a change in process or a new way of doing things " we don't do that here" or "that's not how we work".  These are expressions by individuals who are voicing what the culture would say, if the culture could talk.

Culture as an accelerator not a brake

What most companies need now are cultures of urgency and change, rather than the reactive, wait and see cultures that exist.  While it's nice to argue, as I did in my previous post, that companies need to embrace change, they cannot do that without a serious recalibration of their existing culture.

Why?  Strategies, like CEOs, come and go.  Fads such as artificial intelligence or digital transformation will emerge, run hot, draw a lot of attention and flame out.  Culture sticks around.  Need proof?  Look at Kodak.  As an R&D leader in digital photography, Kodak and its culture were so wedded to film production that they lost the digital camera battle, sticking with business models based on producing film, even though they were one of the leaders of digital technology.  Culture is slow to change, very pervasive and the biggest adherents to existing culture are often the most important or powerful people.  Notice I used two words, important and powerful.

There are powerful people in every organization at every level of the business.  You know these people; they are the ones who know how to get things done within the system.  They are the people that leaders turn to when they need an important project done.  They have mastered the internal processes and culture, know how they work, and know how to succeed within these frameworks.  Their value proposition is tied to the existing culture, so to rework the culture means they need to reframe their own value propositions.  Their power, such as it is, emanates from working with and through the existing culture.  Given this alignment to existing culture, some of a company's best people will be the least interested in changing the culture.

Educating and modifying culture

One should not speak about changing a culture, because culture like bureaucracies is highly resistant to change and has strong defenses.  No, we should talk about creating incentives for the culture to change, educating its staunchest defenders about the need for change, and running small pilots to demonstrate that change can create a better way of working.

Changing a culture requires changing incentives throughout the organization, and educating those who reinforce the culture most heavily to adapt and adjust to a new cultural model, one that embraces speed and change, rather than a reactive model and complacency.

For too long we've delegated the power to define and refine culture to others, or not taken the time to understand just how powerful culture can be and its influence on a business.  We need a much more direct way of working with corporate culture, a recognition that it exists and is powerful, and must be brought along in order to introduce more speed and agility to the corporation.

Shifting the culture to embrace change

First, we need to acknowledge that culture exists, is real and is powerful.  Then we need to agree on what the actual culture of the business is, and what we want it to be.  Think of this as current state and future state.  Then we'll need to identify who the keepers of the culture are, and encourage them to see a new future, where the culture supports and actually encourages the new behaviors that we want - speed, agility, the capacity to change quickly.  Of course, concepts like risk tolerance and incentives will also need to be addressed.  These are the outward symbols that indicate what the culture will do.  Just understanding your existing culture, its strengths and weaknesses, and the amount it needs to change is important.

Of course, you'll need a concerted effort to follow this analysis to create the conditions for the culture and people to adopt a new way of working and thinking. This is not an overnight change, but one that can occur over a period of months.  But what that investment will do is prepare the company to compete in a VUCA world much more effectively than it does today.

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posted by Jeffrey Phillips at 12:08 PM


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