The conventional wisdom is that it takes years to change a company’s culture. Few organizations use culture as a way to drive business performance or even believe that it could be sensible to do so. The logic that most leaders believe in usually works the other way: First they make specific changes to processes, then hope that, gradually, the cultural transformation will follow.
Yet some leading organizations are turning this conventional wisdom on its head. Consider Trane, the $US8 billion subsidiary of Ingersoll Rand that provides heating, ventilating, air conditioning and building management systems. By focusing first on changing its culture, the leaders at Trane have been driving results.
Jason Bingham, a vice president at Trane North America and the author of Cultureship: The ACBs of Business Leadership, explained the basics of this counterintuitive approach. Leaders at Trane use a combination of a culture survey and an employee engagement survey to assess the current state of the company’s culture. This assessment forms the basis of a conversation about the kind of culture they want. First, they identify areas of strength, such as customer focus, and areas for development, such as teamwork. The ideal future culture includes three essential elements:
1. Vision: Where is the organization headed and where does it want to be?
2. Mission: What do the members of the organization seek to accomplish together?
3. Guiding behavioral principles: How do leaders expect all associates to behave?
Leaders must create a clear connection between the target culture and the overarching strategy of the company. With a clear understanding of the target culture and the associated behaviors, leaders can more effectively influence employees, both with their own behavior and by how they “ARM” – allow, reward and model – the targeted behaviors of associates. The survey process also identifies specific offices that are leading the pack, as well as those that are falling behind with regard to culture. Interestingly, Trane has observed a very strong correlation between a healthy and effective culture and better business results.
For example, one sales office had the lowest score in the engagement survey for all of North America. A new leader was named whose No. 1 goal was to improve the office’s culture. He and his human resources business partner analyzed the engagement data and defined the target culture they wanted. For instance, they decided it was imperative that employees talk directly to each other about problems rather than behind each other’s backs. They called this behavior “direct with respect.” To get people to adopt it, they launched training for associates, demonstrated the behaviors themselves as managers and spent time training emerging leaders. The leaders made sure that the team heard from them directly before ever hearing news through the grapevine. When leaders saw or heard of one of their associates being direct with respect, they recognized the behavior with a thank you, and those who were not being direct with respect were asked to try harder next time. As teams improved their behavior, the amount of internal politics decreased and interactions with customers became less confused.
Once associates started taking ownership of their culture, they started thinking about how they could improve their work, rather than simply getting it done. The district started a “fix-it” event that allowed associates to identify “quick wins” and major opportunities to improve work. Then the associates were empowered to implement the changes that were approved. Examples of quick wins included reducing the number of system passwords in the parts department from eight to one, providing laptops for on-call parts support so they could check inventory from home, and creating an open calls report for better allocation of hours. The work improvements increased productivity substantially, as measured by increases in operating income.
Rather than waiting a year for the next cultural assessment to measure progress, the team at Trane took a “cultural pulse survey” six months after launching the office turnaround. The dramatic improvement in engagement surprised everyone; the company experienced a major reduction in attrition, from 12 per cent to 6 per cent. The behavior changes were visible to customers, too. A customer called the district manager and asked, “What is going on over there? There is something very cool about what you are doing because I see it in how your team is serving me.” And the changes showed up in business performance: That year the office had one of the highest increases in bottom-line profit relative to revenue growth. Overall, Trane grew its market share by two points on some products without introducing any new products or features.
Intrigued? Try running an experiment to see if you can change your own company’s culture. Trane’s leadership team in North America began by simply discussing the company culture in every meeting. At first, that discussion had a lot of listeners. But as the leaders began to feel more comfortable and confident talking about culture, they became more engaged. By the third meeting, the leaders started developing plans to drive a winning culture. In doing so, they grew Trane North America’s year-over-year operating income by more than 20 per cent, without introducing any new products or services and with very limited market growth.
Leaders and managers typically don’t think of cultural change as a lever for achieving breakthrough business results. But, as Trane’s achievements prove, they should think again.
Harvard Business Review
(Brad Power has consulted and conducted research on business process innovation for the past 30 years.)
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