Developing HR strategy: Developing the right culture

In
the final part of our step by step guide to delivering HR strategy, Keith
Rodgers examines the key factors behind creating a productive company
culture

Of
all the different elements that combine to form a comprehensive HR strategy,
corporate culture is perhaps the most difficult to pin down. While disciplines
such as organisational design and performance management can largely be
explained in concrete terms, ‘culture’ is a loose concept that means different
things to different people.

With
HR practitioners struggling to define what the word means in itself, it is
hardly surprising that turning the words into action and executing cultural
change is a major challenge.

In
the final part of Personnel Today’s eight-step guide on delivering HR strategy,
we analyse the components that contribute to corporate culture, and suggest
ways in which organisations can manage cultural change. Although there are no
easy answers – after all, change is typically measured over years, not months –
the huge impact that culture has on corporate performance means that few
companies can avoid meeting the challenge.

1
Pinning down cultural messages

The
first problem with corporate culture is that it consists of a complex mixture
of elements – partly conceptual, partly sensual, partly behavioural, partly a
set of values. That is why definitions vary so widely.

Is
it, as one HR practitioner believes, "the whole atmosphere, the ethos, the
value system, the buzz you get from a place"? Is it, as one business
school suggests, "the smell of the place"? Is it the organisation’s
characteristics, its personality, the way it behaves? Or is it, as one
consultant argues, simply "the way we do things round here"?

The
difficulty in reaching a consensus on definition is reflected in the way that
culture tends to be addressed on a day-to-day basis. When people talk about
‘good’ or ‘bad’ cultures, they are usually referring to specific elements
within the whole cultural make-up, rather than the whole.

An
organisation may be deemed to have a ‘good’ culture because it empowers
individual employees, allowing them to participate in the decision-making by
creating a ‘democratic’ environment. But equally, a culture may be ‘good’
because individuals work effectively together under a benignly autocratic
structure. In both instances, what is being judged is actually the quality of
leadership, which is just one component of the cultural mix.

Therefore,
it is easier to define culture by these different constituent parts. Chris
Parsons, who heads the change management practice at Penna Consulting, suggests
there are eight principle components:


Leadership and clarity of mission


Employee involvement and engagement


Information sharing and teamwork


Empowerment


Employee responsiveness and continuous learning


Flexibility and managing change


Innovation and forward focus


Customer orientation

While
this list is comprehensive, different practitioners will have different
priorities as they attempt to define and develop their own cultures.

Whatever
the terminology, however, the most important point is that the definition is
understood by everyone within the organisation, from board-level to the
shopfloor. This means cultural messages need to be conveyed as simply as
possible.

2
Linking culture to performance

Because
culture is such a vague concept, it is essential that it is seen to have a
recognisable impact on business performance. From an employee’s perspective,
creating a healthy, positive working environment is a goal in its own right:
from a management perspective, it is just a stepping-stone to the ultimate goal
of improving shareholder value.

Clearly,
the two are closely linked, but a connection that is intuitive to HR
professionals may need to be spelled out to other members of the management
team.

Establishing
that link isn’t always easy, as it requires managers to have an understanding
of the principles of human capital management and the critical importance of
key employee retention and development.

But
there are pragmatic solutions. Some level of proof comes in the form of
anecdotal evidence from the appraisal process, where performance improvements
can partly be measured by the employee’s own assessment of their motivation
levels.

In
addition, there is a wealth of case study material available in management
textbooks, demonstrating the link between employee motivation and corporate
performance at organisations such as Enterprise Rent-a-Car, Dell Computer and
Southwest Airlines.

3
Conflicting perspectives

A
major problem faced by HR practitioners addressing culture is the mismatch
between senior management perceptions and those of other employees.

Management
perspectives often reflect what goes on in the boardroom, an environment
characterised by healthy debate, some degree of mutual respect, and the
knowledge that decisions truly influence the shape of the business. Further
down the ranks, however, debate is often meaningless, respect may be shown only
grudgingly, and an individual’s ability to influence the direction of the
business could well be non-existent.

In
effect, two (or more) very different cultures can exist within the same
business – and management may be unaware.

As
well as narrowing this knowledge gap, it is also important that the internal
vision matches the external picture, particularly in terms of customer
perception. That is why Margaret Savage, BT’s group HR director for HR
strategy, policies and organisational development, cites "customer
passion" as one of the three cornerstones of the telecom company’s culture
(see case study).

4
Managing change

Resolving
these disparities is the starting point for any cultural change programme, and
doing so usually requires attention to several different components from the
cultural mix.

To
begin with, it is essential that the process of building cultural vision is
seen to be inclusive – the best way to ensure employee buy-in is by making sure
that they have some degree of ownership of the solution.

Once
the vision has been defined, change management requires strong leadership. As
well as having the capacity to drive initiatives throughout the organisation,
that means senior managers need to practice what they preach – culture is
defined as much by behaviour as by conceptual goals, so leadership actions and
attitudes will be critical.

Effective
change requires an infrastructure that supports ongoing, two-way
communications. Whether that comes in the form of workshops, employee surveys,
the appraisal process or any other interaction technique is irrelevant.

The
point is that every part of the enterprise must have the means to contribute to
the debate. For the same reason, messages about culture also need to be clearly
defined.

In
addition, there needs to be an element of incentive or reward attached to the
change process. For some employees, the impact of cultural change may not be
obvious – a new found corporate adherence to customer satisfaction, for
example, may have little direct bearing on an assembly-line worker who never
interfaces with the client base.

If
change is going to reap rewards for the organisation, companies need to
leverage their compensation systems to encourage every individual to
participate. That doesn’t necessarily have to be financial.

Louise
Allen, director at Cedar International, for example, was formerly head of HR at
a major retailer where she led a cultural change programme. In return for
taking steps to improve the customer experience, the retailer gave employees a
commitment to improve the quality of its management.

Finally,
be patient. Cultures take time to evolve – they won’t change overnight.

Take-home
points…

1
It is critical that the definition of a company’s culture is understood by
everyone within the organisation from board level to shop floor.

2
To make the link between employee satisfaction and shareholder value managers
need to understand the principles of human capital management.

3
One culture must dominate internally and externally – from the boardroom to the
shopfloor and the customers.

4
It is essential that the process of building a cultural vision is seen to be
inclusive.

Case
study: BT
Concentrating on cultural ‘characteristics’

For
much of the last 18 months, culture hasn’t been top of the agenda for BT.
Reeling from the collapse of the telecoms bubble, the company has been through
an extensive organisational change programme that will continue into 2003 and
beyond. At a time when its corporate survival was at stake, ‘soft’ issues like
cultural change gave way to the harsh realities of tackling crippling debt.

Today,
however, as it starts to see the benefits of its turnaround efforts, BT is once
again focusing on the broader elements of its HR strategy.

Nine
months ago, it embarked on a major corporate strategy and HR programme that saw
it defining and aligning its strategy with overall corporate goals, agreeing
what leadership qualities were required to take it forward, canvassing employee
opinions and, more recently, reflecting on its corporate values.

Margaret
Savage, BT’s group HR director for HR strategy, policies and organisational
development, isn’t keen on the word ‘culture’ itself – she prefers to use terms
like ‘characteristics’, ‘personality’, ‘people engagement’ or ‘behaviour’.

While
she believes that culture incorporates intangible factors like the ‘feel’ and
ethos of a company – "customers sense it, they recognise companies that
have got it together," she says – she also believes that it’s as a
reflection of more fundamental business issues.

"You
can’t impose a culture," she says. "It grows up around you, and it’s
manifested in the way leaders behave, how well personal and organisational
values align and the operating environment. Culture is an output – the product
of collective behaviour."

In
Savage’s eyes, BT’s culture reflects two fundamental business drivers that
characterise the restructured organisation. Like many other organisations, the
first is a concerted focus on the client base – what Savage describes as a
"passion for customers". The second is the need for financial
discipline – incorporating not just cost control, but also revenue growth. In
addition, she points to a third, tactical element – the company’s stated
commitment to broadband.

While
these components – the three ‘cornerstones’ of BT’s culture – underpin every
part of the organisation, they manifest themselves in different ways through
BT’s separate operating divisions, and this is now the subject of intense
debate within the group. Before the telecoms and internet bubbles burst,
several BT divisions were being prepared for flotation, and were given a large
degree of autonomy in the way they were run. Following the reorganisation,
which saw a number of disposals, the remaining divisions are now being pulled
back into the heart of the BT fold.

The
question facing the company is how to retain the best aspects of independence
while ensuring cohesion across the group. That debate is being driven by senior
management, drawing in data from every layer of BT, including material from an
extensive employee census and focus groups.

"You
can have subcultures within a big organisation," says Savage. "We
have different lines of business that square off to different customer bases,
with different expectations, values, price sensitivities and so forth. But
together, they make one BT culture.

"Some
businesses were effectively ‘gone’, becoming independent businesses," she
adds.

"We
lost some of the integrated, cohesive culture. Now we have to get back to one
company. To me, the challenge is getting that back without it being centrally
dominated. It’s a big challenge – people like the taste of freedom."

Savage
acknowledges that the overall process of cultural change will take time.
"To change a culture, I think you’re talking two, perhaps three
years," she concludes.

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