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Managing cultural change – Roundtable Report

19 January 2017     London
Hosted by theHRDIRECTOR.
Chaired by Jason Spiller.

DELEGATES
Sonya Alexander
, Talent and Organisational Capabilities Director – SITA
Tracey Connage, Director of HR – Chickenshed Theatre
David Ellis, Partner, People Advisory Services – Ernst & Young LLP
Mark Grimley, Interim Strategic Director HR/OD – Manchester City Council
Ian Johnston, HR Director
Paula Jordan, HR Director – McCarthy & Stone PLC
Brian Newman, Vice President – Human Resources – Live Nation Entertainment
Keith Pritchard, HR Director EMEA – Cyient
Paul Robertson, Marriott, Director HR Practice – Squire Patton Boggs
Douglas Talbot, Heading Organisational Thinking – Ocado Technology
Dan Wilson, Enterprise Sales Director – NGA HR
Jo Winstanley, Head of Human Resources – Addaction

Culture has the potential for competitive advantage and realising that potential is a business imperative, is unequivocal. Yet it is rarely benchmarked, challenged nor subjected to rigorous interrogation. Paradoxically, when there is corporate wrong-doing and reputational and widespread damage results, invariably it is the culture that makes the headlines. If asked every leader of every reputable organisation would place culture at the heart of the business but if what it stands for is about as relevant and authentic as a Latin motto of endeavour in a damned and failing comprehensive school, the statement of intent is irrelevant.

Although culture is a target on the radar, there is a wide belief that what cannot be defined cannot be changed. However doing nothing could ultimately lead to a dereliction of corporate duty. So what is defined as good culture in an organisation and what are the attributes?

Brian Newman: Culture in organisations has developed beyond something that is simply imposed on people. This is clear within our business, and something we have sometimes had to learn the hard way. A corporate line on “this is the kind of business we are” can exist at the top level for as long as it gets remembered, and then can very quickly dissolve into meaningless rhetoric. There’s a very clear line between something like corporate values defined for you and passed down as THE culture of the business, and what people feel about working in a given company.

Ian Johnston: Firstly you must ask, ‘does your aspired culture actually align with your business strategy’? If it doesn’t, it is highly unlikely to live and breathe. Secondly, I’m a huge believer that the largest impact comes from the leader, particularly the Chief Executive of the organisation, but also the whole executive team – how they behave, the values they hold, and do they role model in the organisation?

David Ellis: I believe that culture is, in a corporate context, how an organisation interacts with its stakeholders, and I mean not just shareholders, but employees, customers, suppliers and the wider community and environment. It is balancing out the needs of all of these different stakeholders that defines what a good corporate culture is. If we accept this meaning of culture, then we have a concept which is not only definable – but also distinctly measurable.

Sonya Alexander: We live in really interesting times, where the culture of an organisation is increasingly visible from the employee perspective, through social media as well as something that we are promoting through our employee value propositions, to attract talent to work with us. A culture which is seen as ethical and takes account of social and sustainability issues is often being cited as what prospective employees are looking for from an employer and, of course, is a key component to retaining the employees we have, and therefore could and should create a virtuous circle.

Mark Grimley: As an example, health and Social care has many players with many different cultures; the private sector with private equity cultures, pharmaceuticals etc. and all of these are being asked to work in a very different way in the system. It is not a homogenous group of people doing things together, there are lots of differences, so we are looking at affiliations rather than cultures at the moment. You have multi-disciplinary teams of people working together who have come from a background of different cultures and we are seeking their affiliation to a single purpose, rather than putting a lot of effort into changing culture.

Paul Robertson-Marriott: Attributes of a “good” culture means something different to each of us, we all buy into something at different points in our career. Do I care what the company culture is like at my level of maturity? No! Similarly, I have worked on assignments in the UK where the business is a division of an overseas parent, has multiple nationalities, is run by ex-pats and the environment is very multi-cultural. If you have a diverse workforce
which has come from different countries; how do you create a culture to satisfy all those needs?

Brian Newman: Understanding the importance of local culture can alter the position of having a truly global relevance, across International markets. I think there are levels of extremes of this which explain it better. Morally, there are standards that an organisation must abide by, and if you don’t, it can lead to a culture which is toxic. For example, if you pollute the environment and don’t give a damn, then that is clearly unacceptable. As you scale back into most organisations, back into how individuals treat each other, it is much more individual and less visible.

Dan Wilson: I would be interested to know if, in defining the business culture, whether you ask the workforce what they think it is?

Paula Jordan: I’m not sure you can ever dictate what the “right” culture is, but you can guide, encourage and drive towards models that are successful. We used a model called the Conflicting Values Framework” We identified that we are a “Competing” organisation, i.e. performance-led, but choosing to operate in a collaborative manner. We also differentiate in our employee survey between engagement questions and cultural questions and find that we score consistently higher on the engagement than we do on culture and so our goal over time is to bring those scores closer together.

Brian Newman: Models can help inform, but the frustration is where you have an appalling leader, a promoter of a terrible culture, but is supremely profitable. Now, depending on the industry you are in, it does pose the question, would you remove a detractor from your positive culture, if in fact they are your most commercially valuable member of staff? I believe this is a good case of identifying the right people for the right roles.

Ian Johnston: It is possible for a terrible leader to drive good results, but not indefinitely. The culture in the organisation becomes fairly toxic over time – it is not sustainable behaviour. I do agree that you can’t have a one-size-fits-all culture, but what you can have is a common sense of purpose, and I think that is really important in an organisation. I am also a strong believer that there are certain things that do hold true and relate to good culture; inclusivity in a leadership style, valuing diversity and diversity of opinion leads to positive outcomes.

Douglas Talbot: I have spent a couple of years in the banking industry and they can make money without worrying about whether they have a great culture or not and then they get rescued when they do look a bit dodgy. So the only defining systemic element of their culture has been the pressure that the stock markets put on them, and actually, we can’t change the legislation that defines this. Without truly competitive pressures, culture can be ignored.

Was it not Margaret Thatcher that said banks should regulate themselves and not be held back by government red tape and bureaucracy?

Ian Johnston: It is a great challenge and a fair one. Is culture really changing in that sector? My personal view is, not really. The changes in the sector are externally driven, by regulation, not the Chief Executive or executive committees believing that “X” is something that should be done for the good of society, as well as the good of the bank.

Paula Jordan: There is another dimension to this. A few years ago I worked in financial services, and the issues in that organisation lay not with the individual at the top, but with the next tier below. My concern about draconian regulation is that bad behaviour and practices will persist, but can be driven underground.

Ian Johnston: HR still has to focus on leadership and those expected behaviours that go with that. Over time, as regulation and reform changed the business, those leaders were subsequently moved on, but it took a change in executive leadership to hold firm to the value set of the organisation.

What about dealing in business with countries that don’t allow women to hire and drive cars, or where you can’t send gay colleagues? Or indeed if an organisation merges with a business that has a different set of cultures; how does that impact on people’s perceptions of the organisation they work for?

Keith Pritchard: We take such a decision to enter a country very seriously and question if it’s counter to our values. We still need to be cognisant to local customs or practices when deploying our diverse set of employees.

Jo Winstanley: We went through the second largest merger in the sector back in 2015, and undertook a major restructure and our “living the organisational values and behaviours” which runs like a golden thread through our organisation, held true.

Tracey Connage: In terms of culture change, if we can’t pin down more specifically what this means, in terms of our purpose, commercial or otherwise, then it just becomes words. The climate is of a lack of trust and confidence and it’s why we have more of these conversations, because everybody – us as customers, us as employees – seems to be much more vocal.

We have to factor in the whole issue of leadership, and we have new transparency of reward and remuneration of the upper echelons of organisations and the ratio comparison to the average salary.

Paul Robertson-Marriott: Yes a burning issue – some feared Armageddon. There’s the political will, but the point is, how do you inculcate a culture in a business, where staff are unhappy with what they deem unacceptable earnings of senior management?

Keith Pritchard: As someone who is on the UK board of a subsidiary of a FTSE 100 media company, I can say that the CEO was held in the upmost regard by the employees, but the shareholders had a huge issue with the sum that was planned to pay out and subsequently delayed the pay out until the following financial year. From an employee standpoint it didn’t get that much ground swell.

Mark Grimley: I was having a conversation with a private equity person and they were talking about all the due diligence and I challenged them; ‘do you look at the quality of the leadership, do you look at the quality of the culture of the organisation’? Because both of those drive value in that business. You need to be able to measure the effectiveness of that leadership. That drives value within an organisation.

Sonya Alexander: Leadership and management are fundamental to developing and nurturing a culture and ‘tone’ of the organisation. I have experienced organisations, with innovation as a value but also a prevailing management culture that didn’t encourage employees to articulate their ideas or speak up, which unfortunately meant that they missed the opportunity of gaining diverse insights and innovative thinking. We need to be honest about the culture we have.

David Ellis: From a cultural point of view, there is a perception that if a business is happy to pay a few people a very large sum, but that the large majority of employees in that business earn very low amounts, then there is an imbalance or the outcome unfair. Does this indicate a bad culture? It is not clear to me whether the problem is that people struggle with high pay in any real sense. The fix to this issue is paying the lowest paid people more. Culturally this is far more meaningful.

Douglas Talbot: You often see staff running around acting exactly like the CEO. A problem here is that there is no demand from the system that society puts around corporations, most of them only have financial motives to their shareholders and no responsibility to society built into the system that we live in. Therefore, a leader or CEO only has to create a culture that gets them the people that they need to make a profit. They don’t have to generate an ethical
or good culture, rather they need a profitable one.

Ian Johnston: If the CEO is earning one million or seven million, most people are really not that bothered, so long as they are getting what they need from that eco system. That said, is the pay gap widening? I think we all agree that it is. Is social mobility improving, doesn’t seem to be; it seems to be going the other way. So that is problematic. You have to enable social mobility in order for the whole eco system to be successful.

You can do an apprenticeship at a law company now; surely that’s a start?

Ian Johnston: I don’t think it’s widespread enough. There are loads of examples where organisations do good things, but it impacts a fairly small number of people in the grand scheme.

Dan Wilson: I think people probably talk about being disgruntled about the pay differentiation much less, because the labour market is more active so they can shift jobs and earn more money elsewhere. Also culturally there is less association with aspirational wealth and wanting to be rich. It’s become a bit of cliche but people really do seem to be otherwise motivated.

Brian Newman: Is Trump not the ultimate example of people’s propensity to move away from ‘you’ve got loads of money and I’ve got none’? In this case it appears to me that people still voted despite his obvious wealth because they believe he is going to add this value to their lives, and give them the same opportunities he now has, or even just aspiration of that is a powerful pull factor. Certainly in many businesses there will be some very highly remunerated people, this doesn’t have to be a negative as it can set a mark of success and aspiration. I am not disputing any points on the gap in wealth being morally upsetting and needing attention.

Paul Robertson-Marriott: Does that not go right back into what we have been discussing, the authenticity of leadership?

Douglas Talbot: If we really believe at this table that pay is not the most important thing, how many of our HR groups spend more of their time focussed on non-pay recognition and motivation in their organisation than pay?

Sonya Alexander: Understanding what motivates people such as development, autonomy, potential career options, and meeting those wider expectations, is paramount.

Jo Winstanley: Agreed, we look at benefits more than pay, but that is because we are a charity.

Keith Pritchard: You have to listen to employees, to fully understand what makes them turn up and give their best every day.

Ian Johnston: Pay might be a factor, but generally it isn’t the primary reason people leave. Typically, it’s how people are managed or career development opportunities etc.

Paula Jordan: I absolutely agree. I think that if the only lever we have to pull is the money one then we will fail because there is always somebody out there who will pay more. Clearly, to pay people too little is dangerous but to pay people enough and offer other retention and development interventions that draw them in more closely is so much more powerful.

Can analytics and big data be utilised in assessing standards and values within an organisation is culture?

Dan Wilson: Increasingly people are expecting more from analytics and data, but what HR is able to retrieve from the data doesn’t compare with, say, finance. I am also seeing that engagement, which might be a measure of culture, still tends to sit separately. It can be discussed separately, so there’s less integration in the organisation. I do believe that it absolutely should be measured, but I don’t think it is widely achieved.

Mark Grimley: The HR function really ought to be an assurance function, and it ought to be more inquisitive about cause and effect. There are many different types of indicators of culture, I don’t think organisations need a metric model to say ‘let’s measure all of these things’ because like anything else in your strategy, what is it you are trying to achieve, what are the key things that matter?

Keith Pritchard: The challenge with such predictive analytics is the reliability or validity. Just think, could such software predict and prevent cases of fraud in the investment bank or employee malpractice in hospitals for example?

Brian Newman: Who knows what the possibilities of the future will be? For now, you do have some clear metrics on very basic stuff that can be used to inform some of that decision making. For example, if you take something like employee turnover by leadership and you look at the leadership’s effect on turnover rates, its data that is easily accessible.

Douglas Talbot: What that tells you is that person is succeeding in retaining people as a good manager but tells you nothing about the culture in the organisation?

Brian Newman: Alongside engagement surveys we use to track key drivers, we have open access to our Senior Executives, which also gives us a really clear quantum on the effects of business change and/or project delivery and/or leadership. We cut it by project delivery teams, or by organisational structure, so it gives us a little insight with a huge caveat on big data.

Douglas Talbot: All that tells us is that the business is retaining people and that they are happy. It doesn’t tell us what our culture actually is! These are the indicators, about whether people are happy and whether they are leaving or not but the detail is limited to that.

Brian Newman: I don’t think, Douglas, that we are chasing a culture that’s been written down, that says if this is the score of six out of 100, then we have achieved our cultural aspirations. We are simply trying to look at where there are levers that have an effect on the organisation. High turnover means project delivery fails, we don’t want turnover to go over a certain percentage, for example.

Mark Grimley: The people that know best are line managers, those at the front. They have conversations on an everyday basis. So where do we get that qualitative information, how do we understand what is going on? We can see from a very high level all that basic data and we can make assumptions, test those things.

Douglas Talbot: We are discussing cultural change. But what tells us whether our culture is moving in the right direction or not? If we are saying we want it to go this way or that way, how do we know whether it is?

Ian Johnston: I have certainly used a number of indicators to initiate conversation around culture, and have subsequently on occasions used culture inventories. Some people will be familiar with the tool OCI, I have used it in the past. It has its limitations, but it is a reasonable indicator of what’s happening at the leadership level in your organisation. The difficulty then is in getting key stakeholder engagement, if that means changing themselves and their behaviour.

Douglas Talbot: We don’t need culture reporting at any different frequency to profit. We don’t look at our profit every day, week, month; we are just always trying to make it better. We should be doing the same with our culture. Does anyone have a specific metric that tells me what my culture is because I am not hearing one?

Ian Johnston: If you take a tool like OCI, it will certainly tell you about the dominant leadership styles in your organisation. For example, is it highly passive-aggressive? What does that lead to in terms of cultures and behaviours? You are typically doing a culture inventory at various levels in the organisation.

David Ellis: There is a balancing act here. When you talk about corporate culture we must be very careful that we are not just using “gut feel”. At the other end of the spectrum, however, we need to be careful saying that, ‘our culture is defined by eight measures’, because equally, this doesn’t encapsulate the richness of what the answer actually is.

Would you really give your very best sales person the boot, because they are not very empathetic?

David Ellis: A commercial dilemma, but this is where courage in leadership comes into play. If you are happy to ignore the bad morals, then prepare to accept that your culture will – to varying extents – be defined by such decisions.

Brian Newman: That’s where we get back to measuring the levers of impact of leadership behaviour. This hopefully then gives them opportunity to continue to be heavily competitive as a sales person, but not so as a leader, because those two things may not be compatible to the culture.

Sonya Alexander: This is about alignment and reinforcement, and we have mentioned accountability. It focuses on the important role leadership has in leading culture, through their actions and words. Reinforcement across people and business practices would then further embed. Development, is another important avenue for supporting cultural change and alignment to values, but the behavioural development must be reinforced by visible everyday practice and recognition.

Paul Robertson-Marriott: I have investigated cases where senior employees have harassed junior employees. The junior employee has left and the senior employee has remained in the business. Should the senior employee remain in the business? If yes, how does this impact on the culture of the organisation? What does it say about the culture of the business and its values?

Brian Newman: I imagine there are many HR directors that, if pushed, would say it is definitely much harder to remove your highest performing CEO. Balancing moral responsibility and commercial responsibility will never be easy, but people can learn and things can improve, if managed effectively. The key is having a clear bar for standards within your own culture.

Keith Pritchard: You cannot run the risk of bad behaviour being perceived as acceptable. I believe the key to dealing with such matters is to go back to your values as the foundation. Do the actions contradict the values?

How can you best manage culture change?

Paul Robertson-Marriott: It’s become a cliche that it rests with the senior team to articulate the culture and set the tone. In the flatter workforce, any business that doesn’t listen and discuss across the organisation is likely to get it wrong. And because of constant and rapid change, that dialogue cannot stop.

Douglas Talbot: We have a responsibility to start putting in the systems that generate specific types of behaviour and that might mean if you pay bonuses you potentially incentivise individualism, equally if you incentivise competition. So we should be measurably incentivising collaboration, perhaps, which might mean breaking apart the classic comparative ranking system. Incentive schemes that force rank and chop off the bottom level of employees are never going to work to create a collaborative culture.

Sonya Alexander: I experienced an organisation that went through a lot of change over a relatively short period of a few years, including changes in leadership. The consequence was that people became apathetic and complacent – why get too concerned when undoubtedly it will change again?

Paul Robertson-Marriott: Culture is going to come back centre stage and it’s going to become really critical for businesses because of the way the world of work is fragmenting. Culture is a difficult concept and very challenging, but that’s not a reason for not trying to address it.

Dan Wilson: Today’s debate shows that HR is absolutely central to culture in the organisation. To make impact, it is necessary for HR to remain in the thick of the action, as always, but it is a tough call in today’s constant change and competition.

Mark Grimley: An inverted, proportionate manipulation of a system – to try and achieve God knows what – is what HR classically has been very good at. “Let’s follow the latest thing”. It might not be about putting things in place, it might be taking things out, or aligning your culture with expectations and your strategy. What are you trying to achieve and how best can you achieve that? That then means articulating a strategy and your approach very simply so that there is no room for ambiguity or misinterpretation.

Paula Jordan: It is vital for HR to talk in a language which the business understands, and not be theoretical or mystical. HR has a tendency to over intellectualise and complicate things and consequently, we make ourselves difficult to listen to.

Brian Newman: It is like speaking another language and HR is in serious danger of ascertaining that if the data is good, then the culture is good too.

Ian Johnston: Quality of leadership, as keeps coming into the conversation, is paramount, engaging the new amalgamated organisation as a whole with really common messages consistently. It’s about systems and processes reinforcing what is important in the organisation and having a big impact on culture and ensuring that things
get embedded.

That is also true with mergers & acquisitions.

Brian Newman: Indeed, and it’s identifying who the decision makers are, when cultures are thrown together, is really important, very clearly identifying who the decision makers are and in what order decisions will be made will assist in delivery of the merged entities goals, and avoid some very obvious bit blockers to success, plus revisiting the positive reasons for the M&A, particularly in challenging moments. What is the purpose of the acquisition? If it is to eliminate a competitor, then just be clear about it, so it’s understood, and explain the reasons why, so that long-term survival and ultimately success is clearly laid out in making the tough decisions.

Dan Wilson: Absolutely, if you are acquiring then the process is, your board will raise capital from a bank which is lending the money on the basis that they are going to make money, that’s a starting point isn’t it, and it’s not anti-culture, it’s commercial reality.

Mark Grimley: I worked in a highly-acquisitive organisation plc. which literally hoovered up small enterprises, and grew from 12 people to almost 60,000 in 12 years. My perception is, that when they went through acquisitions, they never actually consolidated the culture, they weren’t live to the cultural side. That resulted in a lot of key people from the organisation leaving and setting up another business.

Paula Jordan: A small organisation that I was working with was taken over by a large organisation in the same field and there was a competitive process, which I oversaw, for appointment into roles in the new organisation. Although about 75 percent of the competitive situations were won by people from the smaller organisation, two years later all of them had left. They had decided that the culture and modus operandi of the larger organisation was not for them. Consequently, all that intellectual capital was lost to the acquiring organisation.

Keith Pritchard: When you look at M&A activity, I sometimes feel we miss or underestimate the importance of culture over financial return during the due diligence stages. The reality is that most business think about culture as a secondary item.

How do we build a learning culture that ensures employees and teams throughout the business are invested in it’s future?

Sonya Alexander: Absolutely, and perhaps more importantly, we need to focus on everyday learning, an ability to live and learn and provide ideas, which can be motivating for the individual, but also beneficial for the business. We need to continue to highlight the agile, digital and social learning available that enables the learner to determine what they want to learn and how they learn, a lot of which may be unconsciously done. Learning is key to supporting innovation and being competitive.

Brian Newman: Because we are a digital business, future sustainability means there is no option but to have our technical people one step ahead of the curve. Our leadership understands the way to achieve that is through continuous learning and allowing people to break out of their day-to-day jobs. Keeping pace with technology is a constant challenge, there are not enough skilled talent in many tech disciplines in the UK, and that’s pre Brexit, so going and grabbing what you need simply isn’t an option.

Douglas Talbot: Investment in learning appears in two different forms; one is providing time invested in innovative ventures, the other is actually providing time away from working on prescribed portfolio items so people can learn and explore. I find senior leaders almost don’t see money as a problem but when you tell them you want to take people away from their product, they all suddenly have a heart attack. No one joined their job hoping that they were going to get micromanaged into the ground every day and forget to use their brain.

Dan Wilson: Ultimately, we are talking cultural happiness and staff engagement. Allowing people to learn and creating the space is imperative to that. Alarm bells ring when in an organisation, too many people are saying they’re too busy to learn. That is a key element, there is no excuse as employers. We have a duty to make sure that our culture is fit for purpose.

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