How to Change Corporate Culture

I was recently at an all-day retreat for an organization that is working on changing its culture. Like many fast-growing companies, this group is finding that what worked when it was smaller is no longer working. Ad hoc lines of communication break down as organizations grow. Old timers don’t trust newcomers, and the newcomers chafe under the mistrust. This is a common problem here in Silicon Valley, where growing companies are the norm.

Part of the challenge at this company, and at most companies in this position, is that founder who has gotten the company this far, often by being involved in every decision, is unable to let go even as she brings in experienced managers underneath her. Note that I am using female pronouns here, but this is definitely not a gendered issue.  If the corporate culture is one where nobody can act without founder approval, it will be challenging for the company to grow, no matter the gender of said founder.

More broadly speaking, this raises the question of corporate culture in general, and whether it can change without the people at the top also changing. Generally, corporate cultures reflect the personality of the founder; thus Oracle has a reputation as aggressively cut-throat, like Larry Ellison, while Microsoft long had the reputation as heartlessly numbers-driven, like Bill Gates.  James Baron, a professor at Yale, is one of the leaders in studying organizational change, and he notes that “founders impose cultural blueprints.” With older companies, a culture develops over time; IBM built a culture that was bureaucratic and risk-averse, and only an outsider like Lou Gerstner could change it.

Studies seem to indicate that corporate cultures will not easily change unless that change is driven from the top. This often means a founder ceding control to an outsider, but it can also mean a CEO committing to change and making that commitment public and real. Here are some factors which are essential to a CEO successfully changing a corporate culture:

  1. The CEO must announce the new values
  2. The CEO’s direct reports need to be on board with the changes
  3. A plan should be in place to drive these changes to all constituents
  4. There has to be a cost to violating the new norms; apostates must be punished.

The most important thing, however, is that the CEO needs to live the changes. Corporate culture comes from the top, and if the top doesn’t change the rest of the organization will see the announcement as empty words.

For example, what if a company has a culture of people showing up late for meetings, or not at all? Everyone at the company might agree that this is a cultural artifact they want to change. But most likely this culture exists because the founder is usually late for meetings, if she shows up at all. There are a number of reasons why a founder might act this way, but it doesn’t really matter why; what matters is that as long as she shows up late, everyone else will too. The only way for this culture to change is for the founder to embody the change.  That’s the thing about leadership; it requires you to lead.

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3 responses to “How to Change Corporate Culture

  1. Yes – this situation is messy! I went through this at a company started by very innovative entrepreneurs who were absolutely not capable of MANAGING a growing, complex company.

  2. Pingback: Is Corporate Culture The Same As Country Culture? | Thoughtbasket

  3. Pingback: CEOs: Imagine You Are The Janitor | Thoughtbasket

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