Culture Is Key

Renewing the foundations while managing change

By Matthew Rogozinski

Businesses today are dealing with significant new challenges. Some are seeking to regain community trust and renew their social licences by clearly and genuinely prioritising their customers. Some are redoubling their compliance efforts in evolving and potentially more demanding regulatory regimes, while attempting to address the limitations of their legacy systems. At the same time, many are reinventing themselves as digital businesses; fending off new-tech and global tech players; trying to acquire or build new, scarce skills; and learning to use data for competitive advantage. And most are making investment decisions in an environment where rapid change is a certainty, but its direction is certainly not.

What are the foundations for success in the face of such challenges (and the opportunities that change of this magnitude can deliver)? Having the right incentives, management controls, processes, policies and systems in place is an obvious prerequisite but it’s not enough. Business leaders and regulators agree that organisational culture is key. In simple terms, the right organisational culture is one where everyone consistently does the ‘right thing’. Staff speak up and know their leaders will back them up; make near-term decisions that are beneficial in the long term; identify problems and tackle them rather than ignore them or invent workarounds and band-aid solutions; spot opportunities and deliver new products and services on time; and accept individual accountability for decisions made, actions taken (or not), and outcomes.

In our experience, getting the following levers right is fundamental to shaping a culture of integrity, ownership, accountability, innovation and delivery.

1. Clarity of purpose

As the starting point for organisational renewal and an anchor for its future operations, the organisation’s purpose may need to be revisited at the outset. By purpose, we don’t mean a marketing tagline but rather a statement that encapsulates the ‘why’ of the business’s existence to its shareholders, customers, employees, the community and, perhaps, the regulators. (For examples of recently updated purpose statements among the top 50 listed Australian companies see Clare Morgan, ‘Which Australian company has the best business purpose?’, The Australian Financial Review, 5 December 2018.)

An organisation’s purpose provides a framework for actions and behaviours at all levels and across all functions—it both implies and shapes the desired organisational culture. Leaders’ behaviours must therefore be congruent with purpose, and staff should have a safe, effective channel to raise concerns when that is not the case. At the extreme, a clearly defined, ‘lived’ purpose can act as a circuit breaker when a business is in danger of slowly sliding down an ethical slippery slope.

Because the purpose must to be authentic to drive the desired outcome, we recommend involving staff in its development or revision.

2. Collaboration and accountability in changing the business

Effecting major change can devour the same time and energy as running the business itself. This reflects not only the magnitude of the task but also the effort needed to deal with a lack of trust between business functions. Too often, individuals on change teams don’t feel empowered to make a change, so look up their reporting lines for answers; functions blame each other for slow or no progress; the ‘elephant in the room’ (and there’s usually more than one) is ignored; and decisions aren’t made. 

Successful change comes from teams with clear goals and accountabilities for achieving them, free to collaborate across functional boundaries. In every case we’ve observed, multidisciplinary teams freed up from silo agendas and provided with the right guidance are capable of coming up with customer-focused, innovative solutions to the most challenging business problems and opportunities. 

We outline our recommended approach in Cut-through to Break Through. Note that our approach relies on senior leaders setting clear goals for change teams and holding them accountable for delivery. Goals are set top-down to support the business strategy; teams are accountable for bottom-up solution development, delivery and change management in the affected business.

As the business tackles more change initiatives using this approach, and teams grow more capable and confident in its application, it becomes organically embedded as a new norm across the organisation.

3. Expediency in decision-making

Business leaders and teams often report frustration with the way decisions are made: they take too long, require too much time and require too many people to have a say. The result is a freewheeling cycle that can turn a change effort into a kind of battle.  

While the problems are recognised, decision-making policies, protocols and—most importantly—behaviours are notoriously difficult to change. This is essentially because decision rights distribute influence in an organisation. However, the best results are achieved when decisions are pushed closest to the people who have the appropriate information—which usually means the lowest appropriate organisational level—and the focus is shifted from function-oriented to outcome-oriented. We outline an approach to achieve this in From a Maze to a Clearway.

We acknowledge that this is perhaps the hardest lever to pull, but not tackling it may create an illusion of progress that eventually disappoints. 

4. Business productivity

Productivity is an important driver of business performance and a rational improvement objective for BAU activities. This is particularly the case for incumbent competitors refocusing on mature domestic markets where regulatory intervention may further constrain growth opportunities. 

The approach to lifting productivity should be proactive—playing catch-up will be much less effective and may damage culture gains made elsewhere.

Realignment of the operating model should be the starting point, for example, to create single-point executive accountabilities for end-to-end customer processes and productivity uplift in each business function. 

Maintaining a highly engaged workforce that will continue to perform at its best will be challenging. Our article, Unlocking the Productive Power of Your People, summarises our approach to this. 

By definition, leaders are accountable for dealing with uncertainty and the performance and conduct of the business in response. The kind of cultural renewal we’ve described requires a strong, active leadership role. Leaders must clearly articulate the case for change; define goals and outcomes for change activities; be very clear on progress made and interventionist when needed; and consistently support renewal goals in their behaviours. 

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Changing organisational culture is neither simple nor rapidly achieved. Our approach draws its strength from giving people the incentives, opportunities and commitment to learn, practise and institutionalise new behaviours as they continue to perform their roles and deliver business outcomes. The organisational pain and consequent dip in business performance that so often comes with major change is ameliorated, and a foundation is laid for the flexibility and responsiveness needed to meet customer, shareholder and regulator expectations in uncertain and challenging times.  

The cultural renewal we’ve described will deliver:

• Clear, increased accountability for running and changing the business across all levels and functions;

• Enhanced productivity that delivers for customers and shareholders;

• Timely delivery of business change initiatives aligned with the business strategy; 

• A more customer-focused culture, greater staff engagement and ownership, enhanced responsiveness to changes in the business environment, and more effective risk control.

If you would like to discuss our approach to and lessons from this type of cultural renewal, please contact Inhance Partners.