When Satya Nadella became Microsoft CEO in 2014, he embraced a mission to transform the organization’s culture from one of infighting to a culture of collaboration. Where the organization was previously depicted as a group of warring factions, employees are now rewarded for helping their colleagues to succeed. That culture shift has helped Microsoft to chart a path of success. Microsoft has now overtaken Apple as the world’s most valuable company with a valuation of over $2.5 trillion.
Culture is Critical
In a survey of executives by researchers at Duke University, 92% admitted that improving a firm’s culture would improve its value, but only 16% felt that they had an ideal corporate culture. (Link) An overwhelming majority of leaders agreed that their culture was preventing them from achieving their business goals.
If that is the case, what then stops companies from changing their culture to help them achieve their goals? The reason might be similar to the reason most of us struggle with habits. Trying to change an organization’s culture could be complicated and resource-consuming. But like personal habits, an organization’s culture can also change with conscious and consistent effort.
Culture Eats Strategy for Breakfast (and Lunch?)
An organization will make progress or decline in line with its culture. A company’s culture refers to the prevailing values in an organization, the type of behavior that gets rewarded, or as any employee might say, “this is how we do things.”
An organization’s culture may help or hinder it from reaching its target. It is possible for an organization to adopt some seemingly rock-solid organizational strategy and yet fail when it comes to execution. Among other variables, a key reason may be because acting towards realizing the goal of the strategy is in conflict with the way work is done.
On the other hand, a company’s culture may help it to prosper. Harvard professors Philip Kotter and James Heskett studied 200 companies to find out how each company’s culture affected its long-term economic performance. They discovered that “those companies with strong corporate cultures that facilitate adaptation to a changing world are associated with strong financial results.”
What does it mean for a company to have a “strong culture”? A strong culture is one that highly values people, that is, employees, customers, and owners. It is also a culture that encourages leadership from everyone in the organization. The authors called these performance-enhancing cultures. The values embedded in the culture made it easy for employees to fulfill the organization’s strategy.
Examples of Strong Cultures
Ranked as #1 on the 2021 list of Great Place to Work, this is a quote from an employee:
“The attention that the executive team pays to the health and welfare of the surrounding community is extraordinary. Company leadership works to ensure that the company is an active member of the communities in which we operate and are quick to provide resources to support the most vulnerable. I also am heartened by our CEO’s focus on social justice issues, specificly [sic] those in support of the Black community. Before it became en vogue to do so, he was vested in listening and taking authentic strategic, meaningful actions.” (Link)
2. Zenefits (Human Resource Software as a Service Company)
Amidst a crisis, Zenefits’ interim CEO David Sacks announced a change in the culture based on three core values:
- #1 Operate with integrity.
- #2 Put the customer first.
- #3 Make this a great place to work for employees.
3. Southwest Airlines
Southwest Airlines decided to place their employees first, and not customers. The leadership believes that happy employees will lead to happy, satisfied customers and improved revenue. At a point in 2020, Southwest Airlines became the world’s biggest airline by the number of travelers.
How Long Does It Take to Change a Corporate Culture?
On the question of how long it takes to improve an organization’s culture, the answer is: it depends. The desired change depends on factors such as the existing system of recognition and rewards within the firm (who gets the applause? what gets rewarded?), the buy-in of people in management positions, and the behavior of top management (i.e., founder or CEO).
Leadership is the Key
Of these dependent factors and more, the most important element is the behavior of the leader. Employees will mimic or reflect the leader’s interest and focus. But the level of influence a leader has on the company depends on the level of employee engagement, or to put it very simply, trust.
In laying the foundation for cultural change, the leader must begin by asking such questions as:
- What are our values as an organization?
- What behaviors will we reward?
- How shall we continue to do business?
Leaders must start with themselves when addressing these questions. Employees may also be encouraged to speak up about what they consider an ideal corporate culture. More importantly, leaders must be deliberate about communicating their priorities to the organization.
Changing Your Corporate Culture
To sum it up, the quality of leadership is the critical factor to changing an organization’s culture. Employees will imitate the desired behaviors when they see leaders consistently demonstrating those attitudes and values.
The corporate culture would evolve in the anticipated direction in due course. The process of transformation cannot be engineered but with the right models and incentives, a company’s leader can alter the corporate culture to become a performance-enhancing one that helps to generate growth, revenue, and goodwill.