Changing company culture – practical steps for HR

The HR department is central to change management of organisational culture – or at least it should be. It’s essential to first understand that culture change starts with leaders https://tpcleadership.com/2020/03/13/leaders-as-culture-carriers-why-the-problem-lies-with-you/ , but now we have acknowledged that, we can explore how HR has the capacity to facilitate powerful culture change to elevate performance across the entire organisation.

Make consistent, clear communication your priority

“We often spend so much time coping with problems along our path that we only have a dim or even inaccurate view of what’s really important to us.” – Peter Senge

Communication is everything when it comes to change management. Too often during a culture change, what is communicated is conflicting, with a disconnect between what is said, what is rewarded and what is practised.

A Watson Wyatt survey of 1,000 organisations revealed that fewer than 33% of companies achieved their profit goals post-merger. A similar study conducted by KPMG discovered that 83% of mergers and acquisitions did not increase shareholder value. The reason behind it? The reports say poor communication is to blame.

Communication goes both ways. It’s not just what is being said top-down that matters. Throughout any process of change, HR need to listen to what staff are saying about what is and isn’t working. Those on the lowest pay-grade will have valuable insights into processes that executives may not have considered. And when people feel heard, understood and valued, they are much more likely to embrace culture change.

View your role as an agent of culture

“If you expect employees to embrace change, they must understand management’s vision and, more importantly, how change will benefit the organisation. Absent that, you will end up with unmotivated employees that resist change rather than embrace it.”Carl H. Kleimann, President of Odyssey OneSource.

In That Will Never Work, Marc Randolph, co-founder and former CEO of Netflix, writes about how their HR department was transformed into a proactive agent for culture, by the efforts of a woman named Patty McCord:

“She dismantled all the systems we had in place that limited the amount of freedom we granted our employees, and designed systems that were almost totally on the side of employee freedom.”

Netflix’s Head of HR did not only view the role as a means of promoting culture top-down, but she “held everyone, including senior leadership, accountable” to the culture they were meant to be upholding. Summarising her work, Marc Randolph says, “She knew how to do something rare: scale up culture.”

HR can act as a gatekeeper for culture. This means evaluating processes, hiring those who carry and support the culture, working to retain those who uphold it. It means changing the way that employees are rewarded and how senior leaders, managers and even interns interact. HR need to create structures that make clear to employees what is expected of them, while ensuring that executives don’t inadvertently undermine the process by introducing ways of working that don’t fit the culture.

Confront the uncomfortable barriers (mergers and acquisitions)

“For acquiring companies, the excitement is almost always about where they are going – that is, their strategy for gaining greater growth and productivity. But when mergers fail, it’s often because no one focused on who they are – that is, their culture, which is critical to successfully bringing different groups of people together.” – Punit Renjen, Deloitte Global CEO

HR’s role in change management comes to the fore during mergers and acquisitions. Christian Scholtes, Managing Partner at TPCL Romania, consulted during two very different mergers, one which failed and one that succeeded.

The first occurred when two large multinationals in professional services merged. TPC’s recommendations on how to create a new culture were requested, but Christian witnessed how these recommendations were ignored. The companies instead tried to manage the merger by organising traditional get-togethers, celebration events and company parties. But even at the events, the employees from each company were split, socialising only with those from their own original organisation, forming two camps on different sides of the room. Not long after, the majority of the talent left the company, seeking a better culture elsewhere.

By contrast, Christian consulted on a program developed by a European company that brought the operations of two countries together – one from Northern Europe, one from Eastern Europe. They each operated within the cultural framework of very different nations.

But after the initial consultancy – which involved interviews, focus groups, discussions with senior leaders – some potential hazards were identified. Challenging meetings were held in which employees from both countries voiced their distrust and what they disliked about the other culture. They said these things in front of one another, with the help of skilled facilitators from TPCL.

It was a turning point for the organisation. They were able to identify what their new culture meant, what values they would continue to cherish and which they needed to let go of. They were able to plan new behavioural strategies, reinforced by training, mentoring and coaching. HR were then able to discern who would and who would not fit in the new culture.

It took between three and five years to implement these changes. But the company and its employees consider it successful.

Whether it’s a M&A or a different cross-cultural situation, HR managers play a vital role in ensuring that both cultures are properly respected while enabling a new culture to emerge. It requires sensitivity and conviction, clear communication and effective listening. Heads of HR are facilitators of change, agents of culture, and creators of processes that will sustain a positive culture for years to come.

Culture change management is complicated. It requires incredible insight and experience to make a corporate culture successful. But mobilising a positive organisational culture is necessary for growth, if we want to future-proof our companies. We don’t have to do it alone, though. Check out TPCL’s leadership consultancy services or contact your country TPCL branch to exploit further.

Original by Christian Scholtes, Managing Partner, TPCL Romania (2020)