A top down approach to building company culture no longer works for several reasons. For one, Covid-19 has upended how leaders interact with employees and how coworkers connect with each other. Next, company culture has grown in importance, thanks to recent high-profile crises at big name companies. A new culture-building approach is already in place at some organizations, one in which everyone in the organization is responsible for it. Importantly, this model doesn’t relegate culture-building to an amorphous concept that everyone influences but no one leads or is accountable for. And it weaves in perspectives from employees to customers, from middle managers to the CEO.
Here’s how organizational culture might have been handled in the past: The CEO commissions the Human Resources department to produce an effective company culture. HR designs a campaign to tout a mission statement and core values that the CEO and senior management developed. HR also implements some employee perks like free snacks in the break room or monthly birthday celebrations. Maybe they also field an annual employee engagement survey and report results back to the CEO. And then with their culture-building to-do lists completed, the CEO and HR move on to other priorities.
This approach no longer works for several reasons. For one, Covid-19 has upended how leaders interact with employees and how coworkers connect with each other. The need to adapt quickly and remain flexible during the pandemic has also revealed the ineffectiveness of a top-down leadership approach. Next, company culture has grown in importance, thanks to recent high-profile culture crises such as those at Uber and Wells Fargo, the intensified push for DEI (diversity, equity, and inclusion), and the continuing battle for talent. Culture has become a strategic priority with impact on the bottom line. It can’t just be delegated and compartmentalized anymore.
A new culture-building approach is already in place at some organizations, one in which everyone in the organization is responsible. Importantly, this model doesn’t relegate culture-building to an amorphous concept that everyone influences but no one leads or is accountable for. Shared responsibility for culture throughout an organization involves different people and functions within the organization playing different roles in developing and maintaining the culture.
In this context, culture can be defined as the ways people in the organization behave and the attitudes and beliefs that inform those behaviors (i.e., “the way we do things around here”) — including formal, stated norms as well as implicit ways people work and interact. At many organizations there is a gap between the existing culture and the “desired” culture — the culture needed to support and advance the company’s goals and strategies. In a new culture-building model, everyone is responsible for cultivating the desired culture.
This approach assigns different roles in defining and developing the culture. This happens through formal roles as well as informal spheres of influence and reflects how organizations actually operate these days. It also establishes clear accountabilities for results. While the actual implementation of this approach may vary based on the type, size, age, and structure of the organization, the general distribution of responsibility is like this:
- Board of directors: Guide the definition and development of the desired culture, ensuring that it aligns with business goals and meets the needs of all stakeholders.
- CEO and senior management team: Define the desired culture and cultivate it through leadership actions including setting objectives, strategies, and key results that prioritize culture-building; and designing the organization and its operational processes to support and advance the company’s purpose and core values.
- Human Resources department: Design employee experiences that interpret and reinforce the desired culture. Also, implement strategies and programs that enable the rest of the organization to fulfill their culture responsibilities, such as offering training programs that develop leader capacity for culture-building and employee engagement; and developing culture guidebooks, processes such as performance management, and systems such as rewards and recognition programs that nurture the desired culture.
- Compliance, Risk, and Ethics department: Provide input to the CEO and senior management team on the definition of the desired culture from the perspective of ethics and risk. Also, ensuring that execution on the desired culture across the organization aligns with the company’s risk management strategies through tools such as ethics decision trees, processes such as a whistleblower program, and systems such as compliance monitoring that align with the desired culture.
- Middle managers: Deliver employee experiences that interpret and reinforce the desired culture. Also, implementing culture-building strategies, cultivating employee engagement with the desired culture, and fulfilling the culture-building responsibilities of employees.
- Employees: Provide input to the CEO and senior management team on the definition of the desired culture and culture-building programs and tactics by providing insights on how the desired culture aligns with or differs from the actual culture, customer perspectives, and employee needs and expectations. Employees should provide feedback on existing culture-building efforts and ideas for new ones. Also, creating, adhering to, and enforcing routines and norms that interpret the desired culture; and aligning their attitudes and behaviors with the desired culture.
The Roles of Boards and Middle Managers
In this new distribution of culture-building responsibilities, let’s look at two groups that may be less well-understood: the board of directors and middle managers.
Board of Directors
Culture can be an asset as well as a risk to an organization. As Sir Adrian Montague, former Chairman of Aviva plc, says, “Culture is the glue that binds an organization together. It has a very significant impact on the firm’s effectiveness, ethics, and governance. How could a board not have a view on the fitness for purpose of the firm’s culture?” And yet, according to the Financial Reporting Council, boards of directors are often not actively engaged in culture-building.
What’s more, the average CEO tenure has decreased relative to board member tenure and is now approximately five years (vs. over twice that length for board members), according to an article in HBR and CGLytics. So, boards have a greater longitudinal perspective to inform the purpose of the company and to assess the organization’s delivery on it. And strategy+business reports that boards of directors are increasingly expected to enforce accountability on issues such as purpose, mission, and core values.
So, the board must play a more active role in culture-building. It should guide the definition and development of the desired culture, ensuring that it aligns with business goals and meets the needs of all stakeholders. The board carries out this responsibility by:
- Designating culture as a regular agenda item during board meetings
- Engaging ongoing conversations with the CEO/owner and the leads of Human Resources and Compliance, Risk, Ethics, and DEI about culture priorities, strengths, gaps, and challenges
- Commissioning culture audits and assessments and reviewing results and indicated actions
- Considering culture leadership capabilities in succession planning and senior officer recruitment
- Vetting and approving public statements about the organizational culture
At the nonprofit WaterAid, the board has been highly instrumental in ensuring the organization’s performance is aligned to its values. Board members regularly engage in conversations — with executives, among board members, and with staff in seminars on particular issues — about the changing context of the organization’s work and what it means for achieving its vision and strategy.
TalkTalk, the British telecom, provides another example of how a board exerts culture-shaping responsibilities. After a data breach crisis prompted widespread culture change at the company, board members began asking questions about risk differently. Instead of narrowly focusing on their technical responsibilities and simply asking, “Are we safe?” directors adopted broader oversight for the organization’s culture and enhanced influence on risk management. By asking “What risks are we taking and how can they be minimized?”, directors are able to make more informed judgements about the level of risk the company embraces.
Leaders in the middle layers of an organization’s hierarchy, such as department managers, store managers, and program leaders, wield the most influence on employees’ daily experiences, so they play a critical role in company culture. But middle managers in many organizations are not usually empowered to influence culture to the degree that higher-level leaders are — and they’re often overlooked in culture-building efforts.
Middle managers can and should play a critical role in cultivating the desired culture by:
- Ensuring the tools, environment, and intangible aspects of employees’ day-to-day worklife represent the company’s employee experience strategy
- Applying the organization-wide culture-building objectives, strategies, and key results to the context of their group or function
- Conducting coaching and training with employees to cultivate their engagement with the desired culture
- Communicating and role-modeling the desired culture
I was struck by the critical influence of middle managers on culture-building in a case study on a major oil producer presented in a paper published in Organization Science. While a corporate culture-change initiative met with resistance from employees for whom the old culture and processes were ingrained, one operating unit successfully adopted the new culture thanks to its savvy management team. These managers established accountabilities for certain actions, sanctioned other behaviors, and devised and enforced new metrics in support of the new culture. They were able to get traction where the organization’s senior leaders weren’t because their methods for culture-building were commensurate with their roles as middle managers.
Produce Results Through Shared Responsibility
With each group or function embracing its culture-building responsibilities, a healthy, well-aligned, effective culture improves business performance results. That’s what Old Mutual Wealth found back in 2012. In its efforts to recover from the financial crisis, the firm’s board drove the redefinition of the corporate purpose and mandated the senior management team pursue it.
To cultivate a customer-centric culture, executives set a new strategy to bolster customer experience, created a new group customer director role, and identified organization-wide customer-first behaviors that were incorporated into employee performance reviews, manager feedback systems, and an all-employee survey. To further operationalize the values of the new culture, they rolled out a new group operating model and new governance models were created.
The widespread changes spawned a new culture throughout the organization in which everyone took responsibility for their decisions, starting with the CEO who made clear that nobody would be blamed for giving him bad news. Within 12 months, 90% of the firm’s UK and European insurance books were replaced by new products aligned to the board’s vision. And Old Mutual’s share price more than doubled in five years.
Embrace the Changes and New Requirements of Culture
The shift to a culture-building approach based on shared-responsibility both reflects and requires changes in the nature of organizational culture and its impact on the business.
The new approach shows that organizational culture has become less a code established by leaders and more of a toolkit for all to draw from and input to. As the authors of a recent Stanford Social Innovation Review paper observe, “Culture persists only because people act in ways that uphold its principles and codes.” As employees engage with the culture as a resource from which to shape their skills and habits instead of a mandate decreed by top managers, culture becomes “expressed and reified through practice.”
A company’s culture needs to be adaptable. There are many external factors exerting pressure on any business as well as internal changes such as leadership transitions and expansions. The culture needs to change to keep up with these changes. Attempts to lock in a certain type of culture over the long term at best will fail; at worst, they will hinder the organization’s competitiveness and sustainability.
This points to a key requirement of the shared-responsibility approach to culture-building. Changes to the culture must be explicitly communicated and vetted by all. Everyone may not agree with the changes, but they must understand them and agree to support them.
To achieve the desired culture, everyone must have a clear, consistent, common understanding of it — and everyone must work together in a deliberate and coordinated effort to cultivate it. While each person or group is accountable in their own way, everyone shares accountability for achieving the desired culture.
The new job of the CEO and senior management team is not to hand company culture down from on high but to prioritize it and allocate the resources to ensure it.