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Five bold moves to quickly transform your organization’s culture

May 16, 2024 | Public | 0 comments

When business leaders think about culture transformation, they could do worse than look to Taylor Swift’s country–pop hit “You Belong with Me,” which offers a cautionary tale about relationships and sticking with the one who appreciates you most. The data show that, now more than ever, people need to feel like they belong at work. In McKinsey’s 2023 State of Organizations research, 20 percent of the more than 2,500 people polled said they were concerned about the lack of community in their organizations, and among the top reasons employees gave for leaving a job were that they did not feel they were truly valued and appreciated, and they didn’t feel a sense of belonging (cue the song).

In a world of hybrid and remote work, both on- and off-site employees are looking for more connectivity, more purpose, and a sense of how and where they fit into a company’s long-term talent strategy. When workers don’t find those things in an organization, they disengage, retention takes a hit, and performance and productivity can suffer. In fact, McKinsey research on employee productivity suggests that employee disengagement could cost a median-size S&P 500 company between $228 million and $355 million per year in lost productivity.

Beyond those numbers, our decades of work with companies across industries and geographies tells us that a sense of relatedness among team members is correlated with higher levels of coordination among them and an enhanced ability to solve complex problems.

An inclusive culture is no longer just nice to have; it’s becoming a key factor in companies’ ability to unlock performance and productivity across the organization, appeal to a range of diverse consumers, and stave off employee burnout.

Leaders can’t manage or transform their cultures in the same old ways, however. Culture transformation needs to start, as all change initiatives should, with four actions: fostering understanding and conviction, reinforcing changes through formal mechanisms, developing talent and skills, and role modeling. These four factors are critical for changing and then sustaining the mindsets and behaviors that allow for high performance. They are the building blocks. But within this influence model, there are five power moves that leaders can take to reinforce their transformation plans and drive a culture movement in their organizations:

  • Don’t just tell—show. It’s not enough to outline plans for culture change and expect managers, employees, and other key stakeholders to simply fall in line. Senior leaders need to actively expose individuals to ideas and best practices they might not have previously considered, encouraging them to take lessons from wherever it makes the most sense.
  • Don’t assign—enroll. It’s also not enough to just assign people various roles in a culture transformation. Large-scale change requires everyone to step up on their own and contribute to the cause of their own free will. Without such voluntary enrollment, the status quo will be too strong, and the odds of a successful transformation will decline.
  • Shake it up—all of it. For a transformation to take hold, leaders should introduce and embed new rituals into the workplace and continually revisit and refine employees’ roles, mindsets, and behaviors. The new rituals and changes must be widespread and meaningful (and even hard to reverse). And any role changes must reflect what the organization needs to execute effectively on its strategy.
  • Connect the dots. We all know about the hidden influencers in an organization who can have an outsize impact on their colleagues’ actions and behaviors. Particularly in a cultural transformation, it’s important to bring these individuals out of the shadows. Leaders should provide these individuals—some of whom may be the mavericks in an organization—with the tools and information they need and turn them into change agents.
  • Remember, it’s personal. It’s important for business leaders to acknowledge the sometimes-personal nature of changes associated with a culture transformation. It’s difficult for people to drop long-established ways of working, take up new roles, and otherwise change the way they think and operate. Business leaders therefore need to attend to employees’ minds, bodies, and spirits during a transformation. They should reiterate the connections between the company’s culture and its role in helping employees achieve peak performance.

Each of these power moves can deliver significant performance premiums. Here’s how leaders can make them work in their own organizations.

Don’t just tell—show

It’s difficult for everyone involved in culture transformations—leaders, middle managers, and frontline workers alike—to look beyond what they know toward future possibilities. This may be especially true at the functional level, where people may feel disconnected from what’s happening at the line level. It’s not a failure of imagination. Often there is just no time to envision the long term when short-term deadlines are looming. Its critical, then, for leaders in culture transformations to widen the aperture for teams and individuals in their organizations. They must find space for creativity, build enthusiasm for it, and inject it into employees’ everyday activities.

It’s difficult for everyone involved in culture transformations—leaders, middle managers, and frontline workers alike—to look beyond what they know toward future possibilities.

Storytelling must play a central role in this process—and not just any stories, but those that inspire. For example, one aerospace and defense manufacturer wanted to strengthen its focus on execution, so it embarked on a series of go-and-see sessions at world-class manufacturers with award-winning cultures to understand “the art of the possible.” An oil and gas company did the same. There, senior leaders wanted to inspire more innovation in the company’s energy transition efforts. They brought small teams to visit those organizations considered the most advanced in this area. Team members had a chance to observe operations different from their own, ask questions, and, ideally, bring fresh insights and lessons back with them to the company. Team members also gained more direct access to senior leaders, which has improved relationships across the organization.

To achieve the same goals, some organizations carve out time for employees to attend skill-based and leadership workshops. The events are often cosponsored by industry associations and academic institutions and range from a few hours to a few days to a full week. Employees temporarily leave deadlines behind, listen to new voices and stories, connect with other professionals in their field, and can return to their organizations with a reframed sense of what’s possible.

Don’t assign—enroll

In any sort of transformation initiative, there can be a sense among employees that change is happening to them rather than by or for them. This can be especially true in culture transformations, which can involve senior leaders’ close examinations of behaviors alongside operational processes. For instance, at one mining company looking to centralize several functions and responsibilities, a general manager understandably expressed concerns to senior leaders about loss of control and authority because of the impending transformation.

In any sort of transformation initiative, there can be a sense among employees that change is happening to them rather than by or for them. This can be especially true in culture transformations.

In these instances, transformation leaders can create enrollment among employees, helping them see themselves as owners of the change. Leaders in the mining company, for instance, conducted ethnographic research to understand the concerns that various teams in the organization might have because of the culture change and then developed ways to mitigate those concerns. In essence, they stepped into the shoes of each employee cohort. In this way, leaders could address concerns before they became clear impediments to change. They were also able to earn goodwill among employees.

Several years ago, leaders of the US Navy SEALs revised their recruiting, assessment, and selection processes to emphasize the character, cognitive abilities, and leadership attributes required for strategic national security missions. Such abilities and attributes reinforce the program’s foundational values and culture and have fostered a deeper sense of enrollment among members of this special operations force—and not just in the literal sense. Among the values are humility and openness, or the willingness to take in new information and try different approaches that could give teams a competitive edge. Another critical factor is stewardship, where SEAL team members strive to leave the enterprise as relevant and healthy as it was when they joined. Through written communications and in meetings and speeches, members of the SEALs are continually reminded of these values and of their purpose as “a team humble in triumph and fully accountable in failure.”

Meanwhile, one large healthcare company has used the concept of social contracts—a form of literal enrollment—to engage physicians and other important employee groups in its cultural transformation. The contract identifies the critical goals of the transformation: among them, taking great care of patients, recruiting and developing top talent, and teaching and driving groundbreaking research. By signing the contract, physicians agree to take steps toward these goals. They commit to speaking about the social contract with other physicians and teams (thereby serving as role models). Additionally, they agree to use internal communications and other platforms to highlight progress made against the goals.

Shake it up—all of it

Rituals and routines make up the backbone of an organization’s culture. The workplace community adopts certain habits and norms. It might be a social habit, like sharing one good thing or one bad thing from the weekend at the start of Monday morning team calls. It might be a performance-related norm along the lines of regularly scheduled postmortems or Amazon’s working-backward approach to problem-solving. Whatever the form factor, such routines and rituals are the ways and means by which tasks get done and conversations happen. When the culture changes, so must these activities. But for a variety of cognitive and behavioral reasons, it can be hard for employees to let go of what’s entrenched.

For a culture transformation to succeed, senior leaders need to shake things up—and not just incrementally. They must establish entirely new workplace norms, and part of that means being clear on expected behaviors and developing routines and rituals to reinforce those behaviors. As one technology leader told us, such changes must be material to the business. Transformation leaders must signal to people that things are really changing—by, for instance, changing incentives; resetting where, how, and when tasks are managed; or even changing the colors of the company logo. The leader also noted that it’s important to communicate the potential risks of not changing, or the opportunities that could be left behind, as well as the benefits. Leaders should signal to employees that if certain behaviors were being encouraged before, well, now they would be rewarded.

For a variety of cognitive and behavioral reasons, it can be hard for employees to let go of what’s entrenched. For a culture transformation to succeed, senior leaders need to shake things up—and not just incrementally.

Take the case of a large retailer that was facing duplication of work across multiple locations. Collaboration was uneven or, in some cases, nonexistent across different markets and functions. The company’s attempts to create new products and services had stalled. Senior leaders saw a need for new cultural norms: among them, faster decision making and more transparency in performance management. They engaged several hundred of the company’s top managers as catalysts for introducing new norms and routines. Teams were reorganized around customer problems rather than in functions or internal silos. Additionally, meeting norms were refined, and decision-making processes were streamlined. The company publicly recognized the early successes in the transformation. Throughout the process, employees received ample coaching and direction and frequent transformation-related communications from senior leaders, all of which made changes easier to understand and execute.

Connect the dots

As transformation leaders lock in and amplify culture changes across the organization, they’ll need to monitor the results. They should ensure that they have two-way communications to track employee sentiment and shifts in behaviors and mindsets. Influencers will play a critical role in that plan. Indeed, McKinsey research shows that change efforts are about four times more likely to succeed when influencers support them. These are heavily networked, highly respected individuals in an organization. They can break through silos (acting as microphones), serve as role models (acting as megaphones), and help win over change skeptics (acting as champions). When influencers are identified and empowered to collect and share feedback on change efforts, a transformation is more likely to succeed than if they aren’t.

But it’s not enough to count on these change agents only for communication. One financial-services company identified a pool of influential individuals and asked for volunteers to become part of the company’s change agent network. Once they agreed, each member of this network was trained on the company’s transformation objectives and desired culture shifts. Influencers were asked to identify and observe how certain behaviors (old and new) were affecting the organization’s ability to create value. They were then empowered to experiment with ways to implement new behaviors that supported value creation.

Meanwhile, a large manufacturer created a videoconferencing forum to encourage its influencers to meet periodically and help one another. It divided these influencers into smaller groups focused on common themes. This change made it easier for groups to connect with colleagues working on similar projects in other regions or business units. The participants’ sense of community and of themselves as change leaders grew as they shared best practices, discussed new ideas, and addressed challenges.

It’s worth noting the importance of intentionally managing (and even protecting) influencers, some of whom may be mavericks in an organization, or the employees most likely to challenge the status quo. Their very ability to push back could help break through organizational inertia and reveal new business opportunities. Empowering and mentoring these mavericks may prove to be a value-creating move longer term.

Remember, it’s personal

Leaders must think holistically about redesigning workplace culture—that is, identifying and modifying the behaviors and actions required to meet their strategy goals but doing so in a way that allows employees to bring their whole authentic selves to work, achieve peak performance, and stay balanced during crises and disruptions. Research shows that failure to do so may result in absenteeism, lower engagement, and decreased productivity and grit. Indeed, McKinsey’s 2024 refresh of the Organizational Health Index identifies the importance of valuing the distinctive talents and perspectives of all employees. This is particularly vital as generative AI and other technologies take over routine tasks and leave room for people to bring higher-level, more creative thinking and skills to the table.

Valuing the distinctive talents and perspectives of all employees is particularly vital as generative AI and other technologies take over routine tasks and leave room for people to bring higher-level, more creative thinking and skills to the table.

Cultural improvements focused on employees’ well-being will require time and commitment. But the good news is that there are many paths that senior leaders can take to help their workforces thrive. In fact, McKinsey Health Institute research suggests that there are significant benefits for both employers and employees alike when companies help to address six specific aspects of employee well-being: economic security, mindsets and beliefs, productive activity, sleep, social interaction, and stress.

In the area of social interaction, for instance, some companies are designating clear collaboration rituals. For example, they are requiring teams to work on-site only when interrelated tasks call for it. They’re also establishing a zero-tolerance policy for toxic language and behavior and creating anonymous-feedback processes for reporting any lapses. Such moves have helped to build more connected and inclusive work cultures.

Some organizations are also recognizing that many employees, just like top-tier athletes, need recovery time as part of their core working routines. So they are creating opportunities, space, and time for employees to connect with their communities and find purpose. In these instances, recovery doesn’t slow productivity or performance; rather, it can be a critical accelerant.

We started this conversation with a mention of Taylor Swift, an artist who continues to prove to a worldwide audience why they “belong with” her. She’s built a global brand and a fan experience that incorporates elements of enrollment and authenticity. She uses rituals to create engagement at levels that have earned her billions of dollars in revenues from concerts, merchandising, and recording. She’s developed deep connections with fans—who have remained loyal to her regardless of the musical styles and themes she’s explored.

Organizations can similarly launch a culture movement using the transformation principles discussed here—five moves that can help set the foundation for greater employee engagement, increased productivity and performance, and a lasting competitive advantage.

The post "Five bold moves to quickly transform your organization’s culture" appeared first on McKinsey Insights


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