3 Common Steps for Company Culture Change

Recognize This! – Wise CEOs monitor company culture and proactively manage it.

Regular readers know I enjoy the weekly “Corner Office” column in the Sunday New York Times. I was catching up on a few columns and noticed similar themes from two CEOs in entirely different industries – and continents. Both CEOs spoke about three steps they followed to build their company cultures.

Robert LoCascio is founder and chief executive of LivePerson, a U.S. technology company. As founder, he had the privilege of creating the culture of his organization from scratch. On the other hand, Terry Leahy, former chief executive of Tesco, the British supermarket chain, inherited a culture and approach and evolved it over time. Yet in both interviews, these three steps jumped off the page for me:

1) The “Culture Is Important” A-Ha Moment

In every executive’s tenure, there comes a realization point where the existing culture slaps you in the face in makes you decide to take proactive steps to create the culture you want instead of continuing to passively let the culture create itself. Here is that “a-ha” moment for these two CEOs:

Robert LoCascio:

We had the cubicles in the middle and offices on the outside, and I walked past a small office and noticed two people shoved inside. And I asked them: “Why are you guys shoving yourselves in an office? You were just in cubes out here.” And they said, “Well, we’re directors now, and directors get offices.”

I’d never believed in culture and core values up to that point. But I really became very reflective because I wasn’t so happy with what was happening with the company. I’d seen things that had made me realize we were becoming very traditional. I started to spend more time with a couple other companies, and it made me realize, as a founder, that if I left the company, it could be a totally different place because of the next set of leaders. And that’s what kills companies. So I thought that values were the way to have a long-term sustainable company.

Terry Leahy:

When I joined Tesco, somebody said to me, “They’ll eat you alive,” because it was known as a bit of a hard-charging place. That sort of brought out the street kid in me, and made me a little bit hard and combative. I had to learn later that there’s another way to get the best out of people, which is to really motivate them and make them feel good about themselves. So I changed. I like to think that was closer to the real me anyway. I like to motivate people. I’m not political. I don’t hold grudges. Later on, I tried to codify for the company how people should behave, and what kind of treatment they could expect from others.

2) The Culture-Building Heavy Lifting

Once you realize the culture needs an overhaul, it’s time to roll up your sleeves to do the work of culture creation. Both CEOs approached this in very similar ways, speaking with all employees to create the new culture based on core values that mattered to and resonated with everyone.

Robert LoCascio:

And we ended up all going to Israel, where our research offices are. All the employees, more than 300 of them, came. ..We had 40 core values at that point — innovation, customer first, all the typical ones and then a bunch of other ones… We eventually got to two core values: be an owner and help others. Be an owner is about us being owners as individuals, driving the business, and helping others is about being reflective and understanding that we’re in a community here. We can’t be selfish. And so that’s where we ended up with our core values, and it was a really fascinating process.

Terry Leahy:

Before I became C.E.O., I got all Tesco people together in small groups — it took over a year — and asked two questions: “What do you think Tesco stands for? And what would you like it to stand for?” That was the more revealing question because of the golden rule of treat people the way you’d like to be treated. They were prepared to dedicate themselves to service, but they wanted a culture that was respectful and provided dignity for people. It was amazing how simple it was and how it coalesced around these two pillars of service and good manners.

3) The Tough Decisions – Letting Good People Go

As cultures change, not all people can work well within the new culture. This isn’t necessarily a judgment on the quality of the person, but on his or her own abilities and preferences. Leaders must be willing to allow these people to self-select out of the organization if they choose or help those who no longer fit find a better fit in another organization. Both CEOs experienced this, especially in terms of those who didn’t fit any longer with the change.

Robert LoCascio:

Over about a year and a half, about 120 employees left, and I ended up replacing about three-quarters of the management team in the end. Half chose to leave, and half were let go. And what was interesting is when we would be in meetings, somebody would say, “You’re not allowing me to be an owner.” Or I had an employee who came to me and said: “I’m leaving the company because I don’t want this. I can’t handle being an owner. I just want to be told what to do.”

Terry Leahy:

It is amazing how often you see people who can’t help themselves — because of their ambition or their insecurities or whatever — and that they’re basically selfish and they take out rather than give. For some people, that’s a transition that they have to make, and not everybody can make it. Sometimes the brightest find it the hardest to make that transition because they’ve always been better than the people around them. They find it hard to trust the people around them to do the work. They think, “Well, I know best.” When you see organizations that struggle, it’s mainly that people can’t trust. The leaders can’t trust, and then the teams don’t trust each other. You have to create conditions where people can work together because they trust each other, and that really empowers the organization.

Has your organization followed a similar path to culture transformation? How did the effort play out?

Derek Irvine

About Derek Irvine

The VP of Client Strategy and Consulting at Globoforce, Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their organizations. As a renowned speaker and co-author of "The Power of Thanks" and "Winning with a Culture of Recognition," he teaches companies how to use recognition to proactively manage company culture. Derek holds a B.Comm and Masters of Business Studies from the Smurfit Graduate Business School at University College Dublin.

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