Early this year, the Institute of Corporate Productivity (i4cp) released new research into what it takes for an organization to successfully transform its culture. It studied nearly 7,700 global business professionals representing thousands of companies — 64% of whom had experience with culture transformation.
The report identified a direct correlation between a company’s cultural health and its business performance. High-performing organizations — those that have experienced better revenue growth, market share profitability, and customer satisfaction over the past five years — are significantly more likely to exhibit the traits of a healthy culture, like bringing out the best in employees, nurturing innovation, and being collaborative.
They’re also more likely to rank highly across a range of good people management practices, including actively supporting diversity and inclusion, promoting continuous learning, and valuing transparency.
While some organizations only realize they need to change when a problem (like a scandal) rears its head, i4cp’s findings illustrate just how much of an impact you can have by improving your culture now. Unfortunately, culture change is really hard — and only 15% of the companies studied said their efforts had been successful.
“Nobody ever transforms their culture,” admits Kevin Oakes, CEO of i4cp. “They don’t completely change it. What they’re really trying to do is renovate their culture. They’re trying to get their culture ready for the future.”
One company that has achieved this is Microsoft. Since CEO Satya Nadella took the helm in 2014, Microsoft’s culture has undergone some rapid — and necessary — renovations, including a significant overhaul of its employee review process and interdepartmental relationships. And at Talent Connect 2019, Kevin was joined by Joe Whittinghill, Microsoft’s corporate vice president of talent, learning, and insights, to discuss what actions companies can take to ensure their culture renovation is a long-term success. Here are the three crucial steps they outlined:
1. Plan: Secure buy-in from leaders, survey your workforce, and understand what needs to change and what doesn’t
During one of the first shareholder meetings he attended as CEO, Satya announced that Microsoft’s ability to change its culture would be the leading indicator of the company’s future success. This kind of leadership buy-in is essential to a successful culture renovation.
“The CEO needs to be the culture champion,” Kevin explains. “We found that almost 90% of successful companies had commitment from the CEO for time and resources to see it through. At almost the same number, the CEO modeled the desired behavior change inside the organization.”
But buy-in from leaders is only half of the equation. You also need to co-create your new culture with your employee base.
“One of the worst things an organization can do is for the senior team to lock themselves in a room for a couple of days and decide what the culture is,” Kevin says. “Because they’re going to get it wrong.”
Surveying and talking to employees about what the culture currently looks like is the best way to understand what needs to change. But Kevin cautions against relying solely on annual surveys, as this can create false proxies (like fixating on one issue that seems very important at the time, but which employees have forgotten about a week later). Instead, he recommends surveying staff on an ongoing basis and using sentiment analysis tools like Glint to gain deeper insights into their responses.
This is a strategy used by two-thirds of the successful organizations surveyed. Microsoft has taken it a step further — asking employees one question every day to keep a pulse on what’s happening. If an issue comes up day after day, the company knows it’s one that needs to be tackled, rather than a flash in the pan.
In doing so, the company has also been able to pinpoint what not to change. There are aspects of the culture that former CEOs Bill Gates and Steve Ballmer had established that are still relevant and meaningful at the company today. But there were also elements, like the siloed approach to information sharing, that were not supporting the company’s ongoing success.
“Part of culture change is … understanding you don’t have to change everything,” Joe says. “That you only have to change the things that need to be changed and pull through the legacy that is helping you move forward.”
2. Build: Tell stories to reinforce the change you want to see and be on the lookout for detractors
Once you have a good idea of what’s going on with your existing culture, the next step is spotting the key influencers in the workforce. You’ll need these people on board with your culture renovation — because if they have doubts, the changes won’t stick.
“There are people that everyone turns to,” Kevin says. “They are the ones that have the answers to all the questions that employees might ask. Oftentimes, those people are invisible.”
To identify these influencers, Kevin recommends performing an organizational network analysis (ONA). This allows you to understand the true nature of the workflow within your company, rather than just the formal hierarchy.
Take the example below. Mares might be in charge, but it’s Mitchell, an employee low on the hierarchical structure, who is at the center of everybody’s network.
In some cases, you simply won’t be able to win key influencers over. In fact, 38% of companies i4cp surveyed ultimately had to replace senior leaders that didn’t want anything to change.
“What you need in culture change is to really understand who are the skeptics and non-believers and ferret those out early,” Kevin says. “There are going to be some people that aren’t willing to go along with the new way of the organization.”
For Microsoft, it was especially important to ensure managers were on the same page, because the company wanted to create a consistent experience for all 140,000 global employees. Now, every manager goes through required training to help them model, coach, and care for their teams. This helps to reinforce the core values ingrained in the new culture.
You can also reinforce these values for your workforce by telling stories and using symbols. At Microsoft, the biggest change that Satya wanted to drive was to instill a growth mindset in all employees. He made it a priority to educate employees about what this means, and uses posters like the one below to reinforce this:
“They have posters like this in conference rooms,” Kevin explains, “that say, ‘Is this going to be a fixed mindset meeting or is this going to be a growth mindset meeting?’ with examples of what each means underneath it. [It’s a] great visual reminder for what’s important inside the company.”
3. Maintain: Adjust your people management processes to ensure they align with your new culture
For Kevin, the most crucial stage of a culture renovation comes after the change has happened. i4cp found that many organizations revert back to the old way of doing things if the new culture isn’t carefully maintained.
Companies that succeed in this stage generally have to make changes to their talent practices. And one of the biggest changes often has to take place around performance management.
“Successful companies… changed their performance management practices to align with the culture that they’re trying to roll out,” Kevin says. “This is a great symbolic effort to show the workforce, ‘Hey, we’re serious about this. We’re changing our performance practices to show how serious we are.’”
This was a big area of focus for Microsoft. For decades, the company had a highly competitive culture and a performance review system that forced managers to rate their team on a scale of one to five. Those numbers are gone now, and Microsoft has redesigned the entire review process, which it calls Talent Talks, to center around constructive conversations rather than a rating system.
“We want it to be a dialogue versus a math camp test,” Joe says. “We talked about talent using spreadsheets. It was really dehumanizing, but we’ve gotten away from that and are now talking about the humans.” He adds that employees are now evaluated on three things: their impact, contributing to others, and leveraging others.
This change was essential for the company to prove that it stood behind the new culture it had created. If employees felt they were still being judged against the old scale, they would never be able to fully live the company’s new values.
It also made it easier for Microsoft to encourage talent mobility. Previously, managers at Microsoft had a tendency to hoard their top performers. And if an employee scored low in their performance reviews, even if these marks were more to do with quotas than their own performance, this could hurt their ability to change teams.
But when internal mobility is visible and rewarded, everybody benefits. i4cp found that companies that are highly successful at renovating their culture are 7.5 times more likely to place an emphasis on this practice.
“What’s best for the organization,” Kevin says, “is for that talent to move around. The reason it typically doesn’t is because most managers are rewarded on the performance of their organization first and foremost. They’re not rewarded on developing their people or moving their people.”
Shifting toward a culture of mobility is also good for managers, helping them attract great talent for their teams and boosting their reputation within the organization.
“Once they get known as a manager that helps people get promoted and moved in their career, they suddenly become a talent magnet,” Kevin explains. “Everybody wants to go work for that manager who’s going to get me promoted in my career.”
Renovating your culture is about more than just a fresh coat of paint
The idea of renovating your culture might not sound as impressive as transforming it completely. But by focusing on improving upon strong foundations and fixing what’s broken, you can do more than just add a shiny new coat of paint that flakes off a few years down the line. You can build something that will truly stand the test of time.
“When we look back at this 10 years from now,” Joe says, “it is the decisions… not to make a change, to keep what makes us Microsoft, that [are] going to be just as important as the changes we made in the company.”
To learn more about Microsoft’s culture journey and i4cp’s research, watch the full Talent Connect talk today: