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CEO Best Practice: Corporate Culture

Executive Tools

  • Executive Summary
  • Self Assessment Checklist

Expert Practices Articles

  • Corporate Culture: An Overview
  • The CEO and Culture: Calling the Shots
  • Toxic Cultures
  • Transforming the Culture
  • Culture: The Employee's View

Tools & Analysis

  • Corporate Culture: The Distorted View from the Top
  • A Step-by-Step Approach to Changing Culture
  • Market-Driven Culture Change
  • 10 Signs Your Culture is Out of Alignment

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Corporate Culture: An Overview

According to fellow Vistage expert Rick Seaman, a company's culture consists of the shared values and codes of conduct that bind everyone together. It defines how people act toward each other and toward their customers.

Culture includes these components:

  • Processes used to conduct business
  • How responsibilities are allocated
  • How complaints are handled
  • What's condoned, what's punished

For the TEC speakers, culture is rooted in values -- those moral standards shared by a company's staff that endure over time.

"Values drive culture," Hagberg says. "Depending on the culture, there can be a lot of agreement or disagreement about cultural values. The good news is that disagreement can make the task of changing the culture easier to achieve. Conversely, and contrary to expectations, when everyone shares the same values, it can take tremendous effort to change that culture."

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The CEO and Culture: Calling the Shots

According to Hagberg, "CEOs often have a very accurate perception of what's happening outside the company (the marketplace, competitors, customer issues, etc.), but a far less accurate idea of the corporation's internal landscape. They make decisions knowing why they made them, and assume that others will understand, when in fact others don't understand. When it comes to reading the culture and its climate, how employees really feel about things, the CEO and his or her senior staff often appear to be clueless."

Another "disconnect" occurs in the areas of excellence and quality.

"Senior executives have a much stronger belief that excellence and quality are highly valued, and are less willing to acknowledge when the organization tends toward a short-term, crisis mentality," says Hagberg.

Employees feeling pressured to generate quick results often wonder if senior management really does value quality. They see a more expedient, ‘Just ship it!' mentality at work.

"The words/actions disconnect only breeds cynicism and skepticism among employees," Seaman adds, "making it much harder to implement change of any kind. They sometimes seem to be saying, ‘What you're doing is loud, I can't hear what you're saying.'"

The subsequent "culture clash" insures that the CEO and senior management are forever seeing things differently than others within the company.

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Toxic Cultures

Too many organizations miss the opportunity to be "authentic," adds Seaman, and this is reflected both in the people who work in the companies and the type of employee applicants they attract.

"The CEO should know either intuitively or through measured analysis what tangible and intangible aspects of the company attract the right employees. Why would someone want to work for you? What wouldn't they change about their job? How is this consistent with your stated goals and mission?"

If the answers to these questions aren't clear, it could be a warning signal that something's wrong.

"A culture resistant to change is one of the major reasons for failure when it comes to implementing a new strategic initiative," Hagberg says. "Entrenched behaviors undermine the initiative from the beginning, robbing it of vital momentum and ensuring that implementation will fail."

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Transforming the Culture

"Let's say market conditions, like a storm front, are moving west at 10 miles an hour. What is the minimum rate of change to the culture needed to stay consistent with this? The obvious answer is 10 miles an hour, but CEOs often say, ‘We can only go west at five mph, any faster would be too traumatic.' The truth is, to actually get into alignment with the market's requirements, the culture should change at closer to 15 mph! The culture must be managed. A culture that is too far out of alignment with market conditions can produce the biggest trauma of all: failure."

Hagberg advises reviewing examples of past organizational changes and then asking these questions: How did these changes get started? Where was the resistance? How did things start moving in a positive direction? What was the overall impact?

"Understanding how your company handled change in the past will assist you in the future," he says. Other important elements include:

  • A high level of employee involvement. "Give employees responsibility for helping to direct change," Hagberg says. "This diminishes resistance by transferring ownership of the eventual outcome to the people who are most affected by change."
  • Continuous, reliable communications. By communicating the need for change, you build motivation and buy-in among key stakeholders. Employees at all levels should be brought into the loop in order to ask questions, provide input and understand the need for change.
  • An implementation plan with targets of intervention, time lines, milestones, and accountabilities. What are your priorities? Where should you focus your efforts? What resources will be needed? Says Hagberg: "These basic management steps must be followed if a change as complex as modifying a culture has any chance of succeeding."

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Culture: The Employee's View

Many CEOs fail to realize how sensitive employees are to the trappings of corporate culture, he says.

"With titles, office size, job perks and so on, employees see a much more class-structured system than senior management does. This applies to compensation, too. Executives believe they get paid big bucks because they deserve it, while to employees the link between performance and compensation is far less clear. As a result, their levels of dissatisfaction are higher."

Both TEC experts feel strongly that a company's culture can be greatly enhanced simply by asking employees what they think. This includes getting their opinions on:

  • What motivates them
  • Why they stay
  • What would they change in the company
  • What they wouldn't change

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