Whether you’re managing a small team or a large organization, changing the status quo is hard. Adaptability is vital for any leader in today’s rapidly evolving business landscape—from unexpected fluctuations to industry-altering digital disruptions.
One of the most successful ways to enact change is through cultural transformation.
“Most leaders focus on structure, systems, processes, metrics, and rewards,” says Stanford Graduate School of Business Professor Charles O’Reilly in the online course Leading Change and Organizational Renewal, which he co-teaches with Harvard Business School Professor Michael Tushman. “But culture often spells the difference between success and failure.”
By understanding the core strategies that support organizational culture and transformation, you can foster a dynamic business that’s flexible and sustainable.
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DOWNLOAD NOWWhat Is Organizational Transformation?
Organizational transformation is the comprehensive process of realigning your business’s structure, culture, and operations to adapt to internal or external changes.
To break down these three pillars of organizational transformation:
- Structure: Refers to how your company is built, including its internal hierarchy and team composition
- Culture: Your company’s unique social makeup
- Operations: The processes that must be conducted for your business to function properly
Structure and operations are concrete and measurable, while culture is far less tangible—but just as important.
“Cultures differ across organizations,” says O’Reilly in Leading Change and Organizational Renewal. “If you ask yourself, ‘Well, why do they differ?’ The answer is there’s nothing objective. They differ because people agree this is the right way to behave. So, as a leader, you have the ability to shape the culture by managing the norms that define the behaviors you need.”
So, how do you begin to change your company’s status quo? You can start by defining it.
Related: 3 Common Barriers to Organizational Change & Tips to Overcome Them
The Role of Organizational Culture
Before engaging in cultural transformation, it’s essential to understand your company’s current culture. It can be found anywhere there are groups of people, whether a business, team, or entire nation. While cultures can vary widely, they’re all comprised of three core principles:
- Values: These define what your company believes to be important and include your organization’s ideologies and the principles by which employees conduct themselves
- Norms: The expectations of what is—and isn’t—appropriate behavior, which can be used as a filter to assess workplace actions
- Behaviors: How individuals execute an organization’s norms to fit in and be successful
These components can be found in healthy and unhealthy cultures, as O’Reilly points out in Leading Change and Organizational Renewal while discussing the real-world example of auto manufacturer General Motors (GM).
In the mid-2000s, over 100 people were killed due to faulty GM ignition switches spontaneously turning off while people were driving. To make matters worse, numerous individuals within GM knew about the problem but didn’t do anything to address it.
Once this news surfaced, GM leadership was fired and lawsuits and investigations ensued, revealing company culture as the main culprit. Because GM had valued short-term profits over customer safety, they had made silence and non-reporting company norms.
“Norms drive a lot of our behavior in organizations,” O’Reilly says in Leading Change and Organizational Renewal, “and they’re something that can really be managed by leaders within organizations.”
Norms and behaviors often influence company culture most. After the GM scandal, the new CEO, Mary Barra, focused on establishing new company behaviors, which, in turn, redefined the norms. Like all effective leaders, Barra understood that to change company culture, she had to start by redefining behavior.
Transform Organizational Culture with the LEASH Model
Once you properly identify your company’s behaviors, norms, and values, you can begin reshaping them.
So, how do you start that process? In Leading Change and Organizational Renewal, O’Reilly recommends a framework he developed: the LEASH Model. It consists of five “levers” he observed throughout his research as consistent across strong cultures:
- Leader actions: The managerial directives you set for employees that define goals, focus attention, and help them interpret events and information. The leadership team—not just one leader—must consistently communicate effective leadership signals.
- Employee involvement: This comprises everything from company-wide events to internal groups. People are more likely to feel accountable when they choose their involvement.
- Aligned rewards: These include status, recognition, approval, and promotions that encourage desired behaviors but exclude money.
- Signals, stories, and symbols: These include slogans, logos, group titles, and employee or team spotlights.
- HR system alignment: The process of how your company recruits, onboards, and trains employees.
Related: Understanding the Congruence Model: Aligning Strategy, Structure, & People
The Leash Model in Action
The LEASH Model is explored in Leading Change and Organizational Renewal through the real-world example of how Japanese industrial glassmaker Asahi Glass Company (AGC) experienced cultural changes under CEO Takuya Shimamura.
When Shimamura became CEO in 2015, AGC’s global competition narrowed, and sales in its flagship flat-panel division lagged. He determined they needed to expand into new products. In addition to redirecting operations and structures toward prioritizing this expansion, Shimamura found transforming AGC’s culture particularly challenging. While the company needed innovation, leadership had stifled creativity by exclusively prioritizing efficiency.
In his first move as CEO, Shimamura implemented strong leadership directives. He wrote a company-wide memo to his 60,000-person workforce stating, “It is the role of the leader to switch the light on inside all employees,” according to Leading Change and Organizational Renewal, followed by a list of bad leadership habits the company would no longer tolerate.
Shimamura increased employee involvement by encouraging his staff not to fear failure and discouraging behavior that punished out-of-the-box thinking. He also utilized aligned rewards to reduce managerial resistance to change. While many managers supported it, some long-time leaders within the company didn’t. Rather than fire them, Shimamura moved them into new roles where they couldn’t impede major change to disincentivize resistance.
He cemented his new strategy by shifting the HR team’s hiring process to prioritize these new values, rather than hire exclusively based on skill, and invested in new employee training. Finally, he embodied the cultural shift by changing the business’s biggest symbol: its name. While they remained AGC, Shimamura changed “Asahi Glass Company” to “Advanced Glass, Chemicals and Ceramics” to reflect their operations’ breadth and expansion into new markets.
Through thoughtful handling of all LEASH model levers, Shimamura pushed through AGC’s cultural inertia and transformed it into an industry leader focused on innovation.
Transforming Your Culture
Transforming company culture requires more than shuffling organizational charts. By systematically redefining your business’s behaviors, norms, and values, you can enact major cultural change throughout your entire organization. With a thoughtful utilization of the LEASH model, you can embody this change through every aspect of your company, from the individual employee to your business.
You can learn more about how to apply the LEASH Model to drive change in your company’s culture in Leading Change and Organizational Renewal. The certificate course features interactive learning exercises and in-depth case studies from top global companies, like AGC, that bring the material to life.
Do you want to enhance your leadership skills and drive organizational change? Explore Leading Change and Organizational Renewal—one of our online leadership and management courses. You can also download our e-book on becoming a more effective leader to get started today.
