Before the 2008 recession, large corporations took pride in
buying back shares of their own organization. This financial reengineering was a great way to boost
earnings and attract shareholders.
As a result, the stock price would rise. However, while billions of dollars were spent buying back
shares, opportunity costs were being created. It could be said that share buy backs create
no long-term
value. It could be seen as a poor
decision on the part of leadership.
It may be a sign that the company has so much money they do not know
what to do with it. Instead of
investing in product development, they invested in financial reengineering that
provides no competitive advantage in the marketplace. Therefore, in the long term, the enterprise may suffer from a disruptive competitor who steals market share.
Furthermore, it creates a corporate culture of maintain the
status quo. While leadership may
pontificate the need for innovation, the unspoken policy would appear that
financial reengineering is the new innovation. In most companies, employees follow what you do, not what
you say. Therefore, when a company
starts to lose market share, they cut R&D and layoff staff. That creates cognitive dissonance – the
state of having inconsistent thoughts, beliefs or attitudes, especially as
relating to behavioral decisions and attitude change. Hence, you hear executives throughout the US cry that
changing corporate culture is one of the most difficult things to do.
Perhaps it is not as difficult to change culture as it has
been made to believe. In most
cases, a change in perception can make the difference from hard to easy.
For example, in one of my past CEO roundtable discussions, a
sitting CEO of a Fortune 500 company told other CEOs about the challenges he
experienced with transforming corporate culture. He spoke in detail about how he fired many employees and
brought in new people he knew and trusted. Yet, this was insufficient to change the company’s
culture. After struggling to
transform culture in multiple organizations, a light went on for him. Instead of focusing on changing others,
he transformed himself. Once he transformed himself, it became much easier to drive the culture he desired. In other words, he had to
walk the talk before employees believed he was serious about transformation.
So what is corporate culture? Social anthropologists say a culture is simply a network of
conversations. It is the conversations
employees have in meetings. It
also includes conversations at the water cooler. In addition to staff and management, it includes the
conversations of vendors, clients, media and government – stakeholders. What do stakeholders say about the
enterprise?
In a client organization, I interviewed several key
people. They all said the company
culture was a cancer or black plague.
They said if a new person, who was good, was hired, it would be a matter
of time before they caught the same cancer that everyone else had. In time, they would not be as good of
an employee.
One of the common threads in companies with so-called
cancerous cultures is that leadership says one thing and does another. That is the unspoken policy that
informs people about reward systems.
Sometimes the employees interpret that as ‘if you work hard, nothing
happens. If you’re lazy, nothing
happens. So who gives a
damn’.
With all that said, if the CEO is committed to transforming culture, he or she is the place to start it. To drive that transformation, language and conversation must
change. Instead of talking about
what leadership “wants” and “doesn’t want”, drive conversations that outline
what executives are committed to.
And talk about what “we” stand for. Then your actions, including investments have to follow the
stand and commitment.
Additionally, the leadership team must remember that failure
is not a problem. Transforming
culture is a paradigm shift. New
paradigms require new thinking and actions. In the beginning, people may revert to old behavioral
patterns or they make not meet expectations. Instead of punishing people for failure, reinforce the
message and make sure your actions reflect the new culture.
What do you
think? I would love to hear your feedback. And I’m open to ideas. Or if you
want to write me about a specific topic, let me know.
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