Quest for cultural change

When Kenneth Hayne wrote in his final report of the banking royal commission that culture was to blame, the consulting industry jumped for joy.

The leaders of Australian companies of all shapes and sizes were already on the start-up culture express, believing it could turn their firms from what BCG used to quaintly call dogs into stars like Uber, Amazon, Apple and Alphabet. They were on the path to digital transformation through huddling, agiling, scrumming and standupping. But once Hayne spent 100 pages on it in his report and made it clear it was the responsibility of the chairman and the board, chairmen and their directors told their CEOs to get a new high-performance culture in place before this year’s AGM. As a result, all the usual management consultants, the big four accounting firms (which have transformed into professional services firms to escape audit conflict and the brown cardigan image) and every consultant who has ever uttered the magic words “culture change” have a full book of work.

Of course, when Hayne talked about culture, he really meant ethics. In other words, how can you put in place some positive and negative incentives to stop you and your employees ripping customers off? And from watching and advising companies for around 50 years, it’s pretty clear to me that cultures built up over decades or even longer don’t change overnight or even in a couple of years. It’s also obvious that most companies are made up of different cultures. And finally, it’s easy but not right to see culture as the driving force behind all successful start-ups.

Two recent books challenge the conventional thinking. In Nine Lies About Work, people and performance researcher Marcus Buckingham writes: “You crave feedback. Your organisation’s culture is the key to its success. Strategic planning is essential. Your competencies should be measured and your weaknesses shored up. Leadership is a thing. These may sound like basic truths of our work lives today. But actually, they’re lies.” He says companies faced with underperformance look to improve their culture or feedback, developing staff with more training, moving them around or employing people who are identical to their best performers.

“In essence, we have treated organisations like increasingly complex machines in which the humans are but component parts and in which the solutions to any ills involve tweaking the system from the top — by addressing culture broadly — or by upgrading the individual components, the humans, themselves,” Buckingham says. He believes the answer is to focus not on culture or individuals but the team. “One factor trumped all others in its ability to explain a worker being fully engaged: whether or not the worker was on a team.”

In her bestselling book Powerful: Building a culture of freedom and responsibility, ex Netflix HR boss Patty McCord advocates radical honesty, getting rid of employees who don’t fit the company as it changes, and motivating with challenging work, not promises, perks, and bonus plans. “The old standbys of corporate HR annual performance reviews, retention plans, employee empowerment and engagement programs often end up being a colossal waste of time and resources,” she writes. “The fundamental lesson we learned at Netflix about success in business today is this: the elaborate, cumbersome system for managing people that was developed over the course of the twentieth century is just not up to the challenges companies face in the twenty-first.”

McCord advocates encouraging independent decision-making by employees; sharing information openly; being candid with each other; keeping only your highly effective people; and avoiding rules. Hard to see many banks on that train.

Buckingham disagrees with her on radical honesty. “Radical candour and unvarnished and pervasive transparency have a swagger to them, (implying) those of us who recoil at the thought of working in a climate of continual judgement are condemned to mediocrity, and that as leaders our ability to look our colleagues squarely in the eye and lay out their faults ... is a measure of our integrity,” he wrote in last month’s Harvard Business Review.

“We humans do not do well when someone whose intentions are unclear tells us ... how good we ‘really’ are, and what we must do to fix ourselves. We excel only when people who know us and care about us tell us what they experience and what they feel, and in particular when they see something within us that really works.”

This article by John Connolly appeared in the June issue of The Deal

Julie Connolly