5 Levers for Changing Organisational Culture

Organisational culture is one of the most powerful, and misunderstood, concepts around. Leaders and coaches alike understand the power of culture to make—or, more likely, break—an agile transformation. Often cited as the biggest impediment to agility, culture cannot be ignored. In their book Corporate Culture and Performance, James Heskett and John Kotter describe an 11-year-long study that showed that companies with a performance-enhancing culture enjoyed net income growth of 756 percent over 11 years, vs one percent for companies without.

I like to consider organisational culture as the thing that guides our actions when there are no rules to do so. As such, it can be an incredible force for good—or otherwise. It is thus vital that coaches and leaders have a good understanding of how to shape culture proactively. Yet, for many, this remains a nebulous concept, and they lack a consistent coordination, and coherent approach to shifting it. All too often, this leads people to avoid tackling culture altogether. This is a mistake. As I have outlined in previous posts, culture is a key enabler of business agility and must not be ignored.

There are things leaders can do to change culture, but let me start by saying that you do not change culture by trying to change culture. It is not something that can be directly addressed. Like a shadow on the wall, it is the result of other things. To change a shadow, one does not change the shadow. Instead, it is either the light source or the object casting the shadow that must change. Only then will a new shadow emerge. The same is true of culture. Culture is the set of shared values, beliefs, and assumptions present in an organisation. While these cannot be changed directly, the most powerful influencer of these things is people’s behaviours. Thankfully, it is far easier to change behaviours than it is to change values and beliefs. Once behaviours change, people form new insights and perspectives. Over time, and with reinforcement, these new perspectives lead to new values and assumptions, which ultimately lead to a new culture.

Changing behaviours involves changing the system in which people operate. That generally falls within the direct control of leadership. In my experience, there are five ways in which those leaders can directly influence behaviours through system change. These are structures, policies, incentives, metrics, and leadership behaviours. Let’s take a closer look at each in turn.

Lever 1 – Structures

Organisational structures refer to the org chart. This means how teams are set up, work together, and make decisions. Structures have a huge part to play in how work gets done and how people behave. There is no use in telling people to collaborate and communicate more effectively if they are stuck in rigid functional silos and cannot easily speak to those in other areas. In traditional hierarchies, decision-making authority is concentrated at the top and flows downward. Trying to devolve decision-making to teams is unlikely to work in such a structure.

Lever 2 – Policies

These are the rules that govern which behaviours are allowed and which are not. These tend to be incredibly wide-ranging. They could be around dress codes, holidays, or who makes decisions about investing in new ideas and on what criteria. Hoping your teams will try out creative new ideas and innovate is less likely to be successful than creating a firm policy that each team may spend 10 to 20 percent of its time trying out new ideas; Google once did this to great effect, and 3M still does it. We have that particular policy to thank for Post-It Notes.

Lever 3 – Incentives

It’s the age-old question for team members everywhere: Should I do what’s best for me, or what’s best for the team? If pay and progression come from one type of behaviour and we seek something different, we will be consistently disappointed. Telling people to collaborate and cooperate more is futile if they are being ranked against each other and collaboration could thus lead to a lower bonus. Microsoft attributes to this very policy (known as stack ranking) its culture challenges and its ‘lost decade’. Cooperation skyrocketed once this policy was abandoned. Leaders must ensure complete alignment among the interests of individuals, teams, and the organisation. A team with individual incentives will never collaborate like one with team-based incentives.

Lever 4 – Metrics

It is often stated that what gets measured, gets managed. Similar to incentives, the metrics and KPIs in an organisation give deep insight into what is truly valued. What is valued by the organisation tends to reflect what is valued by leadership, and this will lead people to optimise for those things. As such, the behaviours exhibited by teams will be highly dependent on these KPIs. For instance, to go back to 3M, one of the things they choose to track was the percentage of revenue resulting from products created within the last four years. They also have a policy that that percentage should be no lower than 30 percent. This drives all sorts of lower-level policies and, ultimately, behaviours that align with a culture of innovation and experimentation. This is reflected in the resulting culture.

Lever 5 – Leadership Behaviours

Finally, we have the lever that might have the most impact of these five. It is how leaders show up and behave toward others in the organisation. Trying to encourage experimentation, trying new things, requires that leaders not punish those who experience low-level failures. On the contrary, leaders must share their failures and encourage others to do the same so that the learning is not hidden. Likewise, in the quest for that all-important psychological safety, the language leaders use can have a huge effect on others’ behaviours. Who would want to ask for help, take a risk, or admit a mistake if leaders reacted badly to such things?

These five levers interact to shape the behaviours of those in your organisation and to shape their values, beliefs, and mindsets. Reinforcing the desired behaviours and dampening less-attractive ones will result in new connections that shift mindsets. Getting to a good place takes time, effort, and experimentation. Changes to the five levers must be consistent and coordinated to work together to achieve the desired result.

There is, however, no point at which you will be done. Organisational culture is something that needs constant attention and conscious shaping. Just as, over time, weeds can overrun a beautiful garden, so too can negative behaviours begin to emerge in even the healthiest workplaces. Crafting and maintaining a strong organisational culture is a never-ending endeavour that must never be far from a leader’s mind.

To find out more about the importance of organisational culture, check out Karim’s upcoming book The 6 Enablers of Business Agility: How to Thrive in an Uncertain World. This topic is also covered in detail in his Certified Agile Leadership (CAL) course.