Changing Organizational Culture: A How-To Guide for Leaders (And Why It Really Matters)

Every leader who has attempted organizational change knows how tough change can be to implement, especially when the company seems to be in a constant state of evolution. “Oh great – another re-org!” is a common response from employees in many companies today.

At the same time, leaders know change is critical for companies to compete and respond to the ever-evolving needs of customers, investors and stakeholders. And culture change – truly revising the core DNA and ways of working inside a company – is the hardest change of all. It’s also the kind of change that’s the most meaningful and important for leaders to get right.

The following guide walks leaders through the context behind culture change – why it’s so important and just how much getting culture change right can lead to a whole range of positives (i.e., people's attitude toward work, their motivation and the company’s bottom line). We also provide tips and case studies to help leaders see what positive culture change looks like.

What Is Organizational Culture Change?

Organizational culture change is the process of evolving your culture in an authentic way that engages people and inspires teams to optimal performance. It’s about defining and embedding desired behaviors and improving the employee experience to boost engagement, retention, morale and ultimately help you achieve your vision and strategy.

In essence, culture is the DNA of the company – the core set of values, vision, purpose and ways of working that the company sets out and defines for all employees.

Companies with strong cultures are the kind of places employees tend to flock to and stay. Employees understand what’s expected of them, they get what the business is trying to achieve, and for what purpose, and they feel pride in being part of it. You’ll hear employees say things like, “That’s the way we do things around here. We take care of our people, each other and our customers.”

Conversely, when the culture is negative or poorly defined, you’ll hear employees say a much different thing, more like, “Management really doesn’t care about us; they only care about the bottom line.”

With all the economic, political and societal pressures on businesses today, culture – and culture change – is taking on growing importance. As the "Great Resignation" got underway after the pandemic and employees left employers in droves for new opportunities, company culture began to get a lot more attention. Yet the trend was building even before the pandemic.

And now that so many teams are working remotely or in a hybrid situation, many companies worry their ways of working have become less clear to their scattered workforce. Without the benefit of always having everyone under one roof, leaders are looking to better define the culture – or redefine it altogether – to help strengthen the business overall and keep teams more motivated and engaged.

Why Is Organizational Culture Change So Important?

At The Grossman Group, we’ve seen firsthand how a stronger communication strategy and plan can help companies strengthen their culture to thrive and grow. Great cultures help all team members know what their individual role is in achieving the company’s success. The behaviors and expectations are clear, and individual employees have line-of-sight into how their work contributes to the overall company goals.

With the help of stronger and more strategic communication, we’ve seen many companies achieve significant wins in changing the organization’s overall culture and ways of working, including:

• A 10% increase in employee engagement scores over a one-year span
• 50% reduction in safety concerns over five years
• The top quality and customer satisfaction scores ever recorded for a particular company
• Double digit increases in leader effectiveness scores over just a one-year period
• Six-figure cost savings due to improved departmental processes

A growing body of research points to a company’s culture as a critical component in the organization’s success.

• Exceptional cultures improve company performance measures: Gallup has found that highly engaged employee business units achieve a significant difference in customer ratings and in sales. “Engaged employees are more present and productive; they are more attuned to the needs of customers; and they are more observant of processes, standards and systems. When taken together, the behaviors of highly engaged business units result in a 23% difference in profitability,” writes Jim Harter, Ph.D., Chief Scientist, Workplace for Gallup.
• Company culture is considered by job seekers: A 2019 Glassdoor survey, for example, polled more than 5,000 workers from the U.S., UK, France and Germany, finding that 77% would consider a company’s culture before seeking a job there. Additionally, 56% said a good workplace culture was more important than salary for job satisfaction, and 73% of respondents said they would not apply to a company unless its “values aligned with their own personal values.”
• It’s an important component of talent acquisition: “For companies fighting for talent today, this highlights the importance for employers to clearly define and communicate their values, as well as demonstrate they are living up to them,” Glassdoor leaders said in releasing the study.
• Poor company cultures lead to attrition: Similarly, “toxic work environments” was found to be the leading factor in employee attrition in a recent study by MIT Sloan researchers. “A toxic corporate culture is by far the strongest predictor of industry-adjusted attrition and is 10 times more important than compensation in predicting turnover,” the MIT researchers wrote. “Our analysis found that the leading elements contributing to toxic cultures include failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behavior.”

The Challenges of Culture Change in the Workplace

There are many reasons organizations struggle to effectively navigate culture change. In our work, we’ve found three core challenges get in the way:

1. Getting Leaders Truly on Board in the Culture Change Effort

The challenge for many companies is the inertia of leaders in taking culture seriously enough. James Heskett, Professor Emeritus at the Harvard Business School and the author of the recently released book Win from Within: Build Organizational Culture for Competitive Advantage, argues that leaders need to play a much bigger role in establishing and maintaining a successful culture.

“Most companies recognize the power of organizational culture and the impact that it can have on the bottom line. They acknowledge the importance of shared values and behaviors that influence the way an organization conducts its business,” Heskett wrote in a Harvard Business School publication. Despite this understanding, Heskett said the majority of leaders fail to take culture building seriously enough.

As one example, Heskett pointed to a Duke University study that found a strong corporate culture fosters “better execution, reduction in agency cost, and therefore, higher productivity and creativity. Of the many executives surveyed, 92% thought that improving a firm’s culture would improve its value. But only 16% felt that ‘their firm’s culture is exactly what it should be.’”

Many business leaders also say that the push for more adaptability inside their companies is here to stay, and corporate culture can be a key driver in helping build trust and a culture that supports that level of constant change.

2. Sincerely Engaging Employees in the Culture Change Process

In our work with many companies on organizational change initiatives, there’s two common mistakes that often don’t get enough attention.

The first is about embracing a sincere effort to truly listen to what’s on the minds of your employee audience.

Many companies simply don’t do enough listening at all. The change initiatives are imposed from top leadership without real input from employees on what the pain points and concerns may be. And even when they do listen, there’s a tendency to listen simply to validate or affirm the company’s own point of view on change, rather than coming in with an attitude of capturing the feelings and everyday challenges that employees are grappling with.

Companies that take more of an employee-centric approach are far likelier to get buy-in and engagement in the change process.

A second common mistake is that companies aren’t transparent with employees and don’t provide a true 360-degree view of what's happening outside their walls. The change narrative isn't transparent because leaders don't want to expose employees to the economic or industry realities the company confronts. Yet when leaders present an overly sanitized view of the business climate and challenges, employees can’t internalize and empathize with the roadblocks ahead.

During the pandemic, leaders who were honest about what was needed to beat deadlines and deliver critical supplies or provide special support to patients in healthcare settings were much more successful in motivating their employees. When people feel part of something important, they’re far more likely to make sacrifices to get the job done.

3. Embracing the Importance of Communication Strategy in the Culture Change

Fallout from the global pandemic and the ensuing trend toward remote and hybrid work has made the challenge of fostering a strong employee culture even harder. Leaders are simply losing out on important opportunities to collect employee feedback and to develop meaningful relationships with team members.

In an interview with the global consultancy McKinsey, Professor Emeritus at the Harvard Business School, Heskett argued that many organizations overlook how much genuine communication and engagement with their teams can carry a company forward.

“Something is wrong with the channels of communication in too many organizations. Even though, if you think back, Tom Peters and Bob Waterman told us years ago that management by walking around is really an important thing to do,” Heskett said. “Some organizations understand that, but too many still don’t. And it’s too easy to stay in the ivory tower and stay out of what’s going on in the field.”

12 Tips for Achieving a Stronger Organizational Culture

Based on our experience with clients, The Grossman Group has developed 12 tips for guiding culture change, the tips include:

1. Set your sights on long-term success, not just quick wins. When you start with a vision for the future that explains what’s changing – and why – employees get the needed roadmap for where the company is headed.
2. Define the current state and desired state of the culture change. Employees need to get a picture of the actions required to make the changes happen.
3. Engage teams in co-creating the desired culture. Bring together a task force that includes key employees representing a range of roles, so that employees are engaged in building the culture from the ground up.
4. Have clear and visible sponsorship for the change. This person is typically a high-level executive who advocates for alignment and engagement by other leaders, oversees the change process and addresses risks and barriers to achieving the vision.
5. Understand the current state, the goal and where you are at all times. Take important time to assess what employee groups will be most affected, what risks could get in the way of success and external factors that could influence the process.
6. Know your employee stakeholders. To make change happen, you need to get an honest view of your audience – your employees – and their mindsets about change. Interviews, focus groups, surveys and other kinds of creative employee engagement research are critical for gathering honest feedback.
7. Ensure leaders are able, ready and accountable. Employees look to their leaders to understand the change and decide if they want to get on board so it’s critical that managers are equipped to regularly communicate and be open to questions from their teams. Communicators and top leaders need to set the front-line leaders up for success so they can represent the organization with credibility and trust.
8. Create a guiding coalition of “change agents.” Specially selected employees at all levels can be terrific change ambassadors, helping to translate for their teams what’s happening, but also collecting a sense of the mood and potential pain points or concerns.
9. Develop and deliver communications through the most effective channels. It’s so important to look at how you are sharing news with employees and whether you’re using the channels that people actually pay attention to.
10. Listen carefully and respond religiously. Create informal and formal feedback channels designed to elicit employee views. When you see trends in feedback, use that information to adapt your plans whenever possible.
11. Remember, one size does not fit all. Understand and tailor messages to meet the diverse needs of your stakeholders. Front-line employee buy-in is critical to making change happen because they are the bridge to customers, competitors and other important audiences.
12. Communications isn’t the fix-all. Time and again, great companies have learned that no matter how good the communication, culture can’t change if effective operating policies and practices aren’t in place to support the change effort. The car won’t drive if the engine hasn’t been built.

A Common Culture Story

The scenario was a common one in business today: two companies merging to build on each other’s strengths and grow a bigger, better business set up for long-term success.

Sounds great on paper, but a lot harder to execute than many leaders realize. That’s because the most successful mergers marry two distinct cultures to become a united team with a common set of values, ways of working and one clear mission.

Knowing this, the two professional services firms we worked with understood the priority had to be defining the culture they’d aspire to under their newly merged company.

In less than four months, the two organizations engaged and facilitated task force teams to co-create and define the new purpose, mission, vision and values. The team then wrote a book to unify the firm around the new culture, including many examples of exemplary work that both firms had already done, and a tangible roadmap for their new firm and the future.

The company also held launch events for the culture book and enlisted more than 100 team members as champions for rolling out the firm’s DNA. The new book materials are now used to teach and train team members across the firm, so everyone fully understands the company’s values, what the firm stands for and why the company exists.

What’s so special about this case is that the leaders of these two firms realized that getting the culture right is one of the hardest and yet most important things to accomplish in business today, and they made it a true priority.

Case Studies of Effective Culture Change Programs

While culture change can certainly be challenging, so much work is getting done regardless – some of it fueled by the global pandemic crisis that forced change to happen faster than many thought possible.

Here’s just a glance at some of the types of successful culture change initiatives we’ve worked on in recent years:

Reinventing a Global Supply Chain Function

The Challenge: With growing competitive pressures on the company during the global pandemic, a major manufacturer of consumer goods and its global supply chain function needed to roll out a dynamic new strategy. The new leader of the function was called upon to execute the new plan.

The Solution: The supply chain leader worked with The Grossman Group to build an open, collaborative, iterative approach for co-creating the strategy with the top 200 hundred leaders. Close to 500 ideas were shared, giving voice to leaders who were traditionally not brought into the strategy development process, even though many of them were closest to the customer. As a result, nearly 100% of those leaders reported that they understood the strategy and path forward and more than 90% said they had confidence in the future of the company.

Building a New Culture of Trust

The Challenge: The new leadership team of a non-profit hospital faced a daunting challenge: transform their business model to remain competitive and improve quality of care, while simultaneously tackling employee morale and trust issues.

The Solution: The Grossman Group was tapped to serve as the organization’s internal communications team and build a first-ever communications function. Efforts included organizational and executive team messaging and communication plans to connect employees and physicians to the organization’s strategy and priorities. In one year, engagement scores increased in several key categories. Highlights included a 7% increase in communication between management and staff and a 17% increase in the perception that supervisors treated team members fairly.

Shaping a Common Culture of Care

The Challenge: On the heels of a major expansion and rebranding, a healthcare system needed its collection of hospitals made up of more than 35,000 employees – each with distinct cultures – to come together as one team.

The Solution: The Grossman Group helped the organization shape and introduce a new culture. The core work involved assessing the leadership and employee communication needs through a series of listening sessions. From that research, the communications team helped to reinforce the connection between the specific employee behaviors and actions needed to succeed throughout the hospital system. Coming out of this work, the healthcare system received positive feedback from employees and earned recognition for its patient experience from industry ratings groups.

Conclusion

No matter what type of change a company is working toward, it’s never been clearer how important a strong culture can be to achieving any organization’s goals. By building a community where employees feel not only heard but inspired and engaged, companies can achieve remarkable levels of lasting change. And that’s a win for the company and the team charged with making change happen.

—David Grossman

If you're looking to transform your company's culture to drive performance, see how our results-driven team of organizational culture change experts can help.