Why “Corporate Culture Change” Fails, And How To Succeed

The article below explores some of the reasons why corporate cultural transformation programs fail. If you want to read an article that outlines what can be implemented instead, see: CulturePods: The Cultural Transformation Process

Cultural transformations can be essential for the long-term survival and success of an organization. Markets change. New generations of employees enter. Customers shift and evolve. An enterprise may suddenly find that the fundamental value propositions are loosing meaning. Or that they are no longer competitive due to their work practices. Or that the work environment no longer attracts the best talent.

So companies look to incorporate culture change as a solution.

But it is no secret that many, perhaps most, attempts at corporate cultural change fail. McKinsey states that 1/3 of culture change programs fail. John Kotter writes in HBR that the majority of programs are failures. Here the authors are discussing explicitly culture-change programs, but we should also include an array of other change management programs from corporate reorganizations, M&A, or digital transformations — as each of these is ultimately a culture change process.

And when they do fail, they typically fail big.

With so much at stake, with so much invested, and typically with the support of the C-suite, why are failures so common? And how can you set yourself up for success?

I have seen a lot of rationales as to why culture change programs fail. Some reasons for failure include:

• failure to generate a sense of urgency

• inadequate senior support

• lack of a vision

• under-communicating internally

• not leading by example

These ideas are not wrong per se, but they are also not really correct either. The reason why is that they look at cultural change through the lens of folk theory — phenomenologically somewhat correct but without consideration for the underlying mechanics. Like Copernican Heliocentrism is more correct than Ptolemaic models, current corporate culture models are better than past ones but still erroneous on several levels. We can do better.

Let’s take an example to illustrate: failure to sufficiently communicate internally.

The idea that internal communications can drive culture change is based on a notion that abstract beliefs are the primary drivers of behavioral — that culture is some free-floating set of ideas that are not intimately tied to the physical and social realities that agents operate within. But such notions have never been supported by anthropology. While ideology can be a very strong motivational force, over time the basic economic realities are the driver of culture, not vice versa. Culture is embedded and not detached from the economic and social realities that actors operate within.

Also, wholesale changes in behavior among thousands or millions (WalMart has 2.3 million) of employees at once through “lively newsletters” is virtually impossible. To understand why, it is useful to think of a large enterprise, with different divisions, markets, and lines of business, as analogous to a decentralized society operating through a complex network of alliances and delicate implicit treaties. Wholesale change would threaten these alliances, creating uncertainty and risk for all — a direct attack on people’s careers and livelihood.

Indeed, large organizations are homeostatic entities build for stability and to resist radical change. So no degree of internal communication in isolation will be sufficient to drive culture change. I would argue, in fact, that wide-scale internal communication programs are in fact not necessary for culture change — as will become clear once the basic underlying mechanics are mapped out.

Let’s detail in more broad terms the reasons why culture change fails.

Unclear or Incorrect Definitions of Culture

A basic problem is a lack of clarity as to what culture means. Often time culture is depicted as the “thing in people’s heads.” Or I have seen this list:

• company vision

• values, norms

• systems

• symbols

• language

• assumptions

• beliefs

• habits

Or from HBR another list: vision, values, practices, people, narrative, and place.

These and other definitions often stress the symbolic and ignore the fact that culture is also phenotypical, or misunderstand the nature of the relationship between the symbolic and the phenotypical. Culture includes the physical manifestations that people move through (from architecture to urban planning). Within the enterprise, the culture is the open plan. It is the design of the parking lot. It is the time people take to eat lunch.

Definitions of culture also suffer from imprecise language. Habits, for instance, ought to refer to habitual behaviors not the total sum of all behaviors.

Think of it as if you were a breeder and engaged in artificial selection. It is true that the information is in the genes. But unless you have a CRISPER lab nearby, what you have to operate with are the physical organisms themselves. Selective breeding is the practice.

Jordan, David Starr, 1907

A large enterprise is similar. It is very difficult to go into people’s heads and directly modify the symbolic information contained in the mind. I guess that is what the goal is of “lively newsletters.” Rather, you have to alter the culture using the manifestations, the material culture. That is why cultural materialism (ref. Marvin Harris) as a framework is a good place to start in defining the domains of culture that need to be attended to. Because whether someone is talking about culture change or organizational change, what is really being discussed is social change.

And social change occurs on three levels: infrastructure, structure and superstructure.

Infrastructure refers to the fundamental economic activities. Think workflows, procedures, manufacturing activities, incentives, content creation, etc..

Structure connotes how people are organized: reporting, governance, org structure, associations & networks, etc.

Superstructure refers to norms, beliefs, ideologies, visions, and world views (what often gets relegated to the term “culture”)

Any significant change must attend to the inter-relationship between these three components. So when we refer to culture change we should be sure that what we are referring to the entire vertically integrated culture, from base economic behaviors, all the way up to values. One cannot expect people to change their ideology without changing their incentives or decision-making processes. Indeed, it has been argued that the general direction of influence is bottom up — that economics primarily drive ideology and not the other way around. When risk and failure are driven by actual incentives, one adopts a pro-risk and pro-failure ideology. On the other hand, if lip service is given to fast failure, but failures are not celebrated, if people who fail often are not promoted, one cannot expect an employee to adopt failure as a value.

Erroneous Folk Theories of Culture Transmission

Trickle-Down Culture

Faulty theories about the way culture works also impede culture change programs. Take the notion of trickle-down culture. There is a general belief that the culture of an enterprise emanates from the CEO. There are plenty of articles that advocate that senior leaders influence the rank and file by adopting behaviors that imbue the new culture.

The confession is understandable because founders have inordinate impact on a corporate culture. Founders, however, are distinct from leaders. The reason founders have such a strong impact on an organizations culture is analogous to the genetic effect referred to, coincidently, as founders effect (Ernst Myer). As the starting point of a company culture, the founders have tremendous knock-on effect on the culture. But leaders who enter a large enterprise actually have much less impact typically on a company culture.

In large organizations, most people have very little contact with the CEO, if any. And the behaviors of the very senior management have little influence on them day-to-day. Now, it is true that if senior leadership was behaving in a way that was antithetical to a new culture being implemented, this would be detrimental. But unfortunately, the C-Suite does not have the impact on the organization they may think or wish they have.

Urgency

Take the notion of urgency. There is no body of work that I am aware of that would suggest that culture change is driven by urgency. Let’s unpack this a bit. Urgency would seem to suggest a sense of heightened risk and reward. Swift action is needed to either avert disaster to take advantage of a window of opportunity. How does culture change relate to this?

credit: bit.ly/1ogOAUU

Well, assume that you are able to instill a real sense of urgency to your workforce, this would actually work against any culture change programs in place.

You see, duel inherence theory argues that the population is normally distributed for conformity vs individual experimentation. That is to say, people sit on a spectrum on how much they tend to be conservative and follow socially learned rules and norms, versus tend to be mavericks who scoff at convention in favor of personal experience. This is supported by the body of work done on psychology as well, with the Five Factors personality profiles. When the environment is stable for long periods of time, social learners would be more successful by following tried and true rules and behaviors. But during times of great environmental change, individual experimenters would have the advantage and be able to adopt more quickly. So while people have a general personality posture, they are able to adapt to a degree.

During times of great uncertainty, even conservative social learners will lean a bit more toward individual experimentation vs listening to what they are taught socially. So you see, generating a sense of urgency, in this case, would actually cause the employee population to be less inclined toward social inculcation and more likely to rely on personal experience.

Little Understanding of Cultural Transmission

Another key issue is a failure to understand some of the basic mechanics of cultural transmission. Scholars such as Boyd and Richardson (1985) have identified frequency and prestige as key determinants of successful cultural transmission. We emulate and learn from people who are high prestige and we tend to be sensitive to the distribution of a cultural trait in evaluating the trait’s benefits. Cultural traits that are widespread in the sampled population are probably quite adaptive and unlikely to be highly maladaptive.

Thus you would want high prestige people to be adopting the desired cultural variants. But prestige and power are not the same things. Often senior management has power but not necessarily prestige. So having the CEO adopt a behavior and expecting others to follow, especially if the employees’ immediate cohorts are not following this behavior, is not likely to succeed. Especially if the CEO is not highly charismatic and does not have grassroots support among the rank and file.

Likewise, when engineering corporate cultural change, one would not want to try to push behaviors or traits that are not common in the sample pool. This creates a conundrum for the consultant trying to drive culture change as the new cultural variant would by definition be uncommon. Perhaps this is the single greatest flaw in the implementation of culture change programs. To be successful, one needs to artificially create a situation where the new culture is the dominant culture. And this can only be accomplished by creating artificial barriers.

Others have argued that peer-to-peer learning is effective in driving conformity. (https://www.accenture.com/us-en/blogs/blogs-culture-change-fails). But here the concept of peer-to-peer conflates a number of components related to enculturation. People have biases to learn from people who are high prestige, regardless of status. So the fact that the teacher is of equal social status has little bearing. Likewise, one is unlikely to adopt a behavior of a peer if that peer is an outlier. So and peer-to-peer learning must happen within an environment of seclusion from the original culture, where the peer’s behavior, while novel to the learner, is common within the new sample pool.

Failure to Quarantine New Culture/Trying to Change Everything Everywhere All At Once

There is a reason why Darwin found the Galapagos Islands so helpful as a natural experiment. It demonstrates the power of barriers in driving rapid evolutionary change. The same pre-requisites are needed to drive cultural change. It may seem counter-intuitive, but rapid cultural change is more feasible when you focus on changing smaller units than if you try to change the culture of the entire large enterprise.

Another way to think about it is to compare a breeder using artificial selection versus the gradual change in gene frequencies that occur naturally among a large population of organisms over time. In large populations, you typically see gradualism — slow incremental change. We usually see radical change (e.g. punctuated equilibrium) when there has been a catastrophic event and populations are decimated. In these cases, the idiosyncratic characteristics of the few remaining survivors steer a new direction for the descendants. A breeder can have even more impact than a catastrophic event in the creation of a novel breed — achieving this in just a few generations by tightly controlling the reproduction of a small number of organisms.

So when a large enterprise wants more radical change, how do you reconcile the scale and speed of the desired shift with the size of the organization? How do you implement a punctuated equilibrium without decimating an enterprise?

The answer lies in the way one creates and manages boundaries between the existing organizational culture and the new one.

The inconvenient truth is that a large enterprise is not a singular culture to begin with. A number of distinct sub-cultures exist within the organization. Sales and marketing may have a distinct culture from operations. The Tokyo office may have a distinct culture from the Barcelona office. SO rarely are you moving from A to B when implementing a culture change program in an enterprise.

Speed can be achieved by mapping the true cultural boundaries and simultaneously seeding the new culture with a pod within each of these distinct cultural zones. There are lots of moving parts. And as with the Galapagos Islands, protecting these nascent cultures from the larger organization in each sub-culture is imperative. The new culture needs the opportunity to out-compete the old one, and as a breeder knows, this is a design process.

Conclusion

So here are just a few reasons why corporate culture change programs fail. It is not surprising really, that most programs fail, as the programs are defined and driven by individuals with no formal training in cultural transmission. They make valiant attempts, and even have some successes, in the same way that early breeders did not understand genetics.

But once the key mechanics are well understood, it is much easier to design a program around the way culture works. Any attempt to change the culture of an enterprise should be grounded in these basic principles. And while culture change can occur quickly, it cannot be done overnight.