Business Transformation: Are you the hammer or the nail?

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Perhaps the title for this post should be ‘Why organisations resist change’ but in today’s pacy business environment, change is the standard against which the business agility of companies is measured. In the words of the Borg, ‘resistance is futile’. Yet change doesn’t happen easily.

Despite reports of the upswing in the UK economy, the financial pages are littered with examples of organisations who failed because they couldn’t or wouldn’t change. In reality, business transformation occurs because a) there is a burning platform and the business must change to survive; b) external forces such as competitor activity, technology or customers require it; or c) the board genuinely want things to be different…(see reasons a and b above!)

Of course, business transformation is not something binary, nor is it transactional. People matter, and if your aim is successful corporate evolution, it’s important to have the right people making the right changes at the right time. Change is relatively easy if you are the one inflicting it. Not so much if you are on the receiving end. Which is probably why some organisations resist change so successfully, by the time the burning platform is in sight, it’s too late to call for rescue.

So how do successful organisations bring their employees along with them? Much as the CEO might want to embed change by dint of a strong personality, stakeholder engagement is key if you want the change to stick. But is it enough? Tempting though it might be to adopt a hammer approach, your people aren’t accessories in a hardware store!

Really transformational business change targets leadership, but also engages people across the organisation, while making sure that organisational structure and key enabling processes such as performance management align with the future vision for change. As well as making a rational case for change, stellar organisations also create the ’emotional’ case – to enable people to connect with, and buy into, the new reality they are facing. Their leaders become role models of the change – not simply paying lip service, but actually demonstrating the change they want to see – in everything they say and do. Most importantly, they stay focused and stay the course. Change is inevitable. Failure to change, doesn’t have to be.

The ‘C’ word…

Organisations are a lot like families.  They have history, they have memory, and they have personality.  And yes, in some organisations- like families – you find the odd, mad relative sequestered in the boardroom!

All of these attributes are what make up the behaviours, attitudes and culture of a company. In short, ‘the way things are done’ – or not done – depending on the organisational culture.  You ignore this at your peril.  Culture isn’t just the preserve of multinational organisations, it impacts the start-up as well as the SME. Like brand, culture is one of those intangible organisational assets – tricky to quantify, but something that will hit your bottom line if you get it wrong.

In the corporate world, many mergers fail, not because the deal is bad, but because insufficient cultural due diligence has been undertaken.  I’m sure you are familiar with post-merger cultural change programmes where the acquiring leadership bring on the bling – extolling the virtue of the shiny, new strategy and how it will magically meld the cultures, distilling the best of both, and so doing transform the business.  And I’m equally sure you have seen those people at the back of the room mentally giving the new leadership a two-fingered salute as they carry on doing what they’ve always done!

Culture can be an enabler to transformative change, or it can be an impermeable barrier.  Does this make cultural change a pipe-dream? Not necessarily. Jack Welch famously transformed GE, by fundamentally shifting the way employees thought and acted.  Although there are critics of this approach – he wasn’t called ‘Neutron Jack’ for nothing – GE’s business transformation succeeded because it was rooted in cultural change.  Stuart Rose, erstwhile CEO of Marks & Spencer is credited with re-energising the business – not simply making it more profitable, but capturing a young, more fashionable customer base.  He refocused the business by recalibrating the culture.

Really great organisational cultures can enhance employee productivity, strengthen talent retention and grow customer revenues.  Toxic cultures by contrast, corrode organisational confidence, haemorrhage talent, and alienate clients.  How so? Well, culture determines organisational priority – in other words, the way things are done will tell you a lot about what is considered important by the people who work for and with you.  Is it any surprise that performance-driven cultures place great emphasis on margin, acquisition and growth, while innovation-loving start-ups prize creativity and quirk?

To my mind, the determining factor in successful cultural change pivots on two fundamental axes. Leadership.  Leadership behaviour.  Do the words of the CEO match his or her deeds?  There are many hackneyed phrases to describe this, but if your leadership isn’t 110% behind the change in ‘everything they do’ it simply won’t happen.  If leadership lack the necessary pair to make tough decisions (and let’s face it, in a merger situation, some people will adapt to the new world order, and some will need to exit the building) then at best, you will have a hybrid culture – not one thing or the other.  Finally, if there are no consequences for non-compliance – in other words, counter-cultural behaviour is tolerated by leadership – don’t expect to make lasting change.

Ghandi once said that ‘a nation’s culture resides in the hearts and soul of its people.’ This holds just as true for organisations.  Real organisational change is based on cultural shifts that create corporate soul. Change the culture, transform the company.

So, what do you think?  Does culture matter? Comments on the blog please.