How CEOs can lead the organizational culture change that creates all the right headlines

The influence of the CEO on a company’s organizational culture couldn’t be clearer, as recent headlines illustrate.

Elon Musk made headlines with his approach to changing the culture at Twitter and those headlines were ugly. Firing swathes of people, demanding longer and more intensive working were just some of the highly public and brutal attempts to impose his idea on the culture at Twitter. Advertisers abandoned the platform, associated share prices plummeted, and Twitter’s reputation was deeply damaged.

In contrast to Twitter, when Netflix co-founder and CEO Reed Hastings stepped down, the transition to a new CEO (or at least two co-CEOs) was far less disruptive.

Netflix could rely on a well-established culture that values internal transparency and innovation, and allows top-performers an unusual degree of autonomy. So whilst there was some minimal disquiet about the change of leadership, there was much more confidence and stability. Especially when the new CEOs promised to ‘ forge ahead using Hastings's playbook and had no major changes to announce’ despite Netflix facing some considerable headwinds.

CEO’s leading role in culture

Those two examples of the interaction between the CEO, corporate culture, stability and performance underline just how essential it is for CEO’s to play a leading role in creating an organizational culture with distinct values that can drive sustainable performance.

Certainly, we know that culture has always been a key driver of business performance. MITSloan has research that those companies that are listed among the best places to work – based on their corporate culture – are the ones that actually deliver 20% higher returns to shareholders versus comparable companies over a five-year period.

"If anything, the role of culture has become even more important as the pandemic and society’s demands have changed the workplace landscape", says Olaf H. Szangolies, Partner at Odgers Berndtson Germany.

It is the key to unlocking issues like the so-called ‘great reshuffling, the overdue emphasis on diversity and inclusion, an increase in employee expectations and the ever-present need to constantly upskill talent.

If, on the other hand,  your culture has a high degree of toxicity (as Twitter demonstrated) a recent study by MIT Sloan confirmed that your talent will leave.

The cultural challenges of hybrid working

Yes, many of the statistics we have quoted are largely US figures, but the principle remains. And the principle that you have to deliberately define, implement and monitor your culture has been given greater importance in the world of hybrid working.

Before we became separated from each other by new ways of distance working, the office environment allowed cultures to evolve more organically as people had numerous opportunities to spend time in each other’s company in a more informal manner.

But even that was no guarantee of a positive culture.

It comes from the top

As Teneo points out “While culture change can germinate in many ways across an organization, the journey can be accelerated when championed from the top, while still owned by everyone. The suggestion is that there are ‘four practical actions CEOs can take to lead from the front along the culture change journey’.

• Define the values and behaviors (ie the culture)
• Live the behaviors everywhere and every day
• Put weight behind adjusting organizational levers
• Track progress and impact

‘What do we stand for?’

The first step is undoubtedly the most important part of the culture journey. It is all about an inspiring purpose, clear strategic direction, compelling values and clearly understood behaviors. It defines what is expected of everyone and what type of behaviour is expected of them.

It is ultimately the moral compass when difficult questions come. Not just for the senior leaders, but for everyone in the organization, however new or junior.

As the person who more than anyone has to articulate and embody the company’s values with conviction, the CEO should be involved in every stage of the process of definition and refinement of the values and behaviours.

Any new culture definition must be informed not just about ‘where we want to be’ but ‘where are we coming from’. The importance of company-wide employee surveys and focus groups across multiple employee levels is an essential starting place for any CEO to understand the present situation.

A new culture must take cognizance of what the original culture was and to fully understand the ‘good bits’ and social assets that can be built on. Or, of course, the toxic aspects that must be jettisoned.

Once the values and behaviors are defined, what’s next?

It is important that the CEO and the executive team must now ‘walk the walk’. Their employees will only fully take on the culture if they actually see their leaders living that culture day in and day out.

It’s an important commitment, and also means getting out and about to meet people and discuss company habits with as wide a sample of the workforce as is practically possible.

Another good and visible way to embed a culture is for the CEO and the senior leaders to call out, recognise and reward those who really exemplify the new values and behaviours.

Fuel the fire

Like a fire without fuel, no culture change will catch alight and continue to burn without the right support, often practical.

Good communication is key, as is motivation through incentives and rewards for those who are living out the desired culture.

Giving workers the right skills and tools, in an appropriate work environment is another component to make positive change.

Like any important initiative, understanding progress is the final recommendation. Good analytics can help the CEO and his team make small adjustments of direction, alter an emphasis on a particular aspect of the cultural change, and understand progress.

For example, start looking for evidence of employees exhibiting the desired behaviors. You can track this through employee and customer surveys, or by monitoring the number of rewards given to people exhibiting the behaviors. Consistent engagement surveys will provide an overall measure of whether things are moving in the right direction.

"Culture is a living thing, and needs constant attention, from the CEO downwards. Do so, and the rewards are constant too", states Ralph Göller, Partner at Odgers Berndtson Germany.

If you want to discuss these issues and how they affect your talent and leadership planning, or perhaps want advice on your own career trajectory, please get in touch.