Guest post by Rob Peters
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A 2013 Booz & Company study, Culture’s Role in Enabling Organizational Change by DeAnne Aguirre, Rutger von Post, and Micah Alpern analyzes the results of a survey of 2,200 executives, managers, and employees from a broad range of companies across the world. This research sheds light on current perceptions of organizational culture.
This study shows a widespread belief that organizational culture is a key element of company success. For example, as the authors report, Eighty-six percent of C-level executives and 84 percent of all managers and employees say culture is critical to their organizations’ success, and 60 percent see it as a bigger success factor than either their strategy or their operating model. Business leaders require a framework for assessing and transforming their organizational culture for success. Business culture happens at the intersections of where people interact.
The Standards of Culture Maturity Matrix has been developed for that purpose.
There are four levels of business organizations have culture mindsets from:
- Level Zero Community Mindset: “Chaotic”
- Level One Community Mindset: “Conformity”
- Level Two Community Mindset: “Acquiesce”
- Level Three Community Mindset: “Do-The-Right-Thing”
Most organizations are in level one and two. Very few firms sustain at level zero and leaders are just beginning to understand the benefits of nurturing a level three “Do-The-Right-Thing” Culture.
The Five Standard Dimensions of Culture are:
- Standard of Knowledge
- Standard of Behavior
- Standard of Relationships
- Standard of Acknowledgement
- Standard of Striving
The first thing that differentiates the maturity of an organization’s culture is how it generates, communicates, and consumes information. This factor is foundational to our maturity matrix. Level one communities of conformity mindset and behavior store-way information in the hands of the privileged. Workers are primarily task-focused. Bosses issue orders from above with no clarification and nothing strategic can be added from letting others in on your confidences.
As organizations and groups grow in complexity, Level two cultures of “Acquiesce” or informed acceptance require systems to transmit information in an efficient and organized manner. These companies go to unusual measures to share necessary information. Group members are well trained and can freely access the rules of conduct, but management keeps tight controls on other types of information and releases it on a need to know basis. Now, juxtapose this with Do The Right Thing Cultures, which require transparency to flourish. If these autonomous or self-governing cultures of individuals inspired by purpose and core values are to keep their commitments, they must have free and unrestricted access to the information they need to make sensible decisions.
An example of a Do The Right Thing Community is Valve Corporation. Founded in 1996 by Gabe Newell and Mike Harrington as a gaming company, adapted and diversified into an entertainment, software, and technology. In addition to creating several of the world’s most award-winning games, Valve is also a developer of leading-edge technologies including the Source® game engine and Steam®, the premier online gaming platform.
The company has a reputation for creating a dynamic culture like no other. Before it started creating games, it decided to design a culture of greatness.
The Handbook for New Employees provides simple straightforward knowledge on getting started. Valve did not want hierarchy and top down control for predictability or repeatability. It wants innovation; that is why they spend so much time seeking the most “intelligent”, innovative”, and talented people on earth”. Sustaining an environment where they will “flourish”. Telling them to sit at a desk and do what they are told destroys 99% of their value.
They have a founder/president, but nobody reports to anyone at Valve.
Employees pick their own projects. That is the hardest part of the job. No one tells you what to do. The percentage of self-directed projects is 100%. If you are good at what you do, you will be busy. Individuals tend to gravitate toward projects that have high, measurable, and predictable returns. Just like they were the CEO of their company.
How does a Valve Employee decide what to work on?
The same way they make other decision; by waiting for someone to decide that it’s the right thing to do, and then letting them recruit other people to work on it with them. But rather than just trusting each other to just be smart, they constantly test their own decisions. Accepted views of sales, marketing, seasonality, regionality, the Internet, purchasing behavior, game design, economics, and recruiting, etc. have proven wrong.
How to get started on Project X at Valve
All you have to do is either (1) Start working on it, or (2) Start talking to all the people who you think might be working on it already and find out how to best be valuable.
Peers and Performance
There are two formal methods for evaluating performance at Valve:
- Peer Reviews – There is a framework by which Valve gives feedback to each other. A set of people (this set changes each time) interviews everyone in the company, asking whom each person has worked with since the last round of peer reviews and how the experience of working with each person was. The purpose of the feedback is to provide people with information that will support their growth. The highest quality feedback is directive and prescriptive; designed to be put to use by the person your talking about. The feedback is gathered, collated, anonymized, and delivered to each reviewee.
- Stack Ranking (and compensation) – Valve ranks each other against their peers. Stack ranking is in order gain insight into who is providing the most value to the company. Valve has high profitability per employee than Google, Amazon, and Microsoft. A core belief is to do the right thing by putting the maximum amount of money back into the pockets of the employees. The flat organizational structure of Valve eliminates some of the bias that would show up in a peer-ranking system in other firms.
It is pretty obvious that the roles at Valve are dynamic. Traditionally, nobody at Valve has an actual title. This is not an accident, but by design, in order for them to remove organizational restrictions. People have things they call themselves for expediency. People who interact externally from the company call themselves by assorted titles because doing so makes it easier in getting their work done.
Inside Valve, everyone takes on a role for the work that is in front of him or her. Everyone is a designer. Everyone can question each other’s work. Anyone can recruit someone onto his or her project. Everyone has to function as a “strategist”. In other words, everyone has to figure out how to do the right thing for the customer. All Valve people engage in analysis, measurement, predictions, and evaluations. The company expresses these values by the list of credits they put in their games. It is simply a list of names by alphabetical order. This is a standard of acknowledgment that Valve has be performing since they shipped the blockbuster game “Half-Life”.
No Formal Employee Development
For senior people it has not proven very effective. Valve believes that high performance people are generally self-improving.
Skills of Successful Valve People
The most successful people at Valve are both highly skilled at a broad set of things and world-class experts within a narrow discipline. Because of the diversity of talented individuals at company, it is easier to become more proficient at things that are not part of your core skill set.
“Intrapreneurship is the use of entrepreneurial techniques within an enlightened corporation or organization, which allow employees to become Intrapreneurs (or corporate entrepreneurs) within the firm.” –Dr. Howard Haller
There are a number of methods that people use to force action in others. First, they can coerce them, intimidate them, threaten them, or entice them to do something against their will. Second, they can induce them through promises of reward or fear and threats of consequence to freely decide that the desired action is in their best interest. Third, they can inspire them, relate with that individual in a way that the desired action becomes a common objective. This second standard of culture is largely the reason for individual and group behavior.
In level-one compliance cultures, people conform and obey. Autocratic leaders require people to “comply or else”. To enforce this compliance, organizations have vertical management structures with the power of authority focused in just a few individuals. These autocratic leaders operate much like an overlord from the age of feudalism. The autocratic leader issues commands to be executed without question. The employee complies because of fear and threat yielded by the origination of this behavior. Who gets to decide or source of authority lies in the power figure that can make independent decisions without the recourse over those people below.
Now in level-two community cultures of “go-along” or informed acceptance, people accede to the rules instead of the boss. Rules attempt to present impartial standards that direct behavior. This standard of culture is typically organized around hierarchies of functional knowledge. Managers attempt to behave in accordance with the rules. The responsibility of monitoring trustworthy rules behavior is assigned to a specific internal group, which could be the compliance officer or legal counsel. The rationalization for behavior in go-along cultures is individual self-interest. That self-interest interest is motivated by personal success. Informed acceptance depends on a reward and punishment process to motivate people. Also known as management by “carrots and sticks”. This works because people believe that acceptance is in their best interest. The source of authority is still a power figure. The decision-making has matured from random or arbitrary decisions to decisions based on rules. No longer are decisions made without recourse but through a defined series of top to down decisions.
Now in level three do the right thing cultures, the origination of behavior are values and principles. It is these values and principles that are foundational to inspiration. When they direct us, our belief in what we are doing gets elevated to a purpose and mission. Authority increases to those individuals who are aligned with the group’s core values. Self-governance thrives because of the focus on individual empowerment and accountability. People are inspired to interlock by common purpose and commitment. This level of commitment is much stronger than the qualified promises of the reward and punishment cultures. The do the right thing organizational structure is flatter and deeply integrated. The quality of the connections between individuals and teams execute in a state of high Relationship Capital (RC) trust.
- Being inspired by new challenges
- Cultivating openness and debate
- Diversity and the creation of a democratized environment in which the greatest ideas win.
Cirque’s demonstrated success since it was founded in 1982 has to do with its foundational belief that innovation is more a matter of culture than just process.
Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow. –William Pollard
The third standard of culture explains the attributes that oversee and effect the social interactions between members of a group. The roles and types of skills that each individual demonstrates, the standard for developing those skills, the level of trust within the group’s management process, the group’s affiliation to rules versus values, and the quality of the relationships with employees, customers, and third-parties.
Autocratic leaders, who share little power, lead cultures of conformity and compliance. Employees comply & conform to the orders they receive. The “stick” or penalty is the driver or “whip” to keep employees moving. As a result, quality control is highly leveraged by the supervisors in this culture, which demonstrates to the rank and file that they are not to be trusted. This low-trust leaves the employee feeling insecure in their jobs. Doubt about peers motivations and intent towards them only feeds the fire of distrust. This distrust also is directed outside the company at customers and suppliers. Customers are closely monitored and distrusted as well. Suppliers are kept at arm’s length. Partnering in these cultures is criticized, so people tend to be transactional and time focused for the short-term.
Cultures of “acquiesce” create manager roles for individuals by detailed job description and consistently applied within the hierarchical organizational structure. The focus is on performance execution. To develop your skills, you would read training materials that would be specify the rules of success or the next steps to follow for achievement. These cultures are noted for creating standard operating procedures (SOP) that managers must follow for reward recognition and for penalties & discipline. The level of Trust is credited to those individuals who have earned it and is constrained by a process of checks & balances. This culture rewards respectable work that is accomplished and which aligns with organizational success. This trust process keeps managers accountable for their direct reports. The quality of relationship between customer and company is typically “price-driven” based on market-based capitalism. The business between these organizational entities is characterized by the traditional “RFP” or request for proposal process. The vendor presents equitable pricing to the customer and gets paid in return (typically 30 to 90 days). Contracts are the “norm” for customer as well as third party supplier and partner relationships. Typically. Customers practice strict sourcing & contractual procedures even for those existing and proven supplier relationships.
In level three do-the-right-thing communities, every one’s role is to be a leader and lead by example. These individuals take the initiative to renew their skills as well as the groups. Lower community levels of learning and training programs fall short of their requirements. The level of trust is of high relationship capital self-governance. These individuals on the team have earned credibility and influence through their consistent high performance. These communities guide their decisions by what is the right thing to do for the mission and inspire greater levels of performance from their peers. Values not rules are the compass for their performance. There is a social contract with all peers within the group that commits to growth. The quality of relationships with customers is to add value beyond expectation. Relationships with third party partners and suppliers; is marked by mutual collaboration based on the core belief of making each other better. These relationship capital leaders are the personification of what it means to be a standard of trust.
The fourth standard of culture is basically the rewards & recognition and the penalties & discipline we use to acknowledge people. Level Zero cultures have an arbitrary rewards & recognition based on the whims of the dictatorial power. Penalties and punishment directed at an individual can come unexpectedly from different levels of power from the firm. So fear is chronically high in a chaotic culture. Level one communities of conformity differ in that it is the supervisor who arbitrarily determines most penalty & punishment and whom the fear is generated from in the minds of those reporting to them.
In a culture of acquiesce, functional managers follow the company guidelines to reward the personal success of individuals in their units as long as it correlates with stated organizational success metrics. On the other hand, penalties & discipline are applied based on those standard operating procedures (SOP) of which level two communities are known for. In level two cultures, the focus is on execution that achieves personal and organizational success. Mistakes are tolerated, but they are not endorsed.
In level three cultures of do-the-right-thing, leaders receive intrinsic satisfaction from achieving the mission. As a result of team’s success, they are recognized by their peers as being “significant” contributors to the common mission and purpose of the group. Mistakes are viewed as being instrumental to innovative growth for the individual. The lesson learned from a mistake can be leveraged by the group as part of continuous improvement program that helps others in their execution and which saves time & cost. Discipline is enforced with a combination of the individual and peer pressure. Depending on the transgression in a level three culture, no penalty or punishment can be doled out that is greater in the minds of accountable individual then being sanctioned by your peers.
Motorola – Culture of Engineering
The boom times at Motorola lasted through 1995, a year in which the company posted profits of $1.78 billion on sales of $27.04 billion. The latter figure was nearly triple the company’s 1989 revenue figure. Then, seemingly, Motorola took a sudden downturn. Revenue growth slowed dramatically and profits fell. In 1997 the company reported net income of $1.18 billion on sales of $29.79 billion. There were reasons for the downturn were many, including price wars in and declining sales of cellular phones, slumps in the semiconductor and paging industries, troubles at Apple Computer which impacted sales of the PowerPC chip, and the Asian economic crisis which began in 1997.
Perhaps most importantly, however, Motorola seemed to have lost its capability to stay on the cutting edge of technology, principally in the wireless telephone field. Motorola had ruled the wireless world in the analog era, but it was not fully prepared when the switch to digital technologies began in the mid-1990s. Because it hung onto its cellular technology for too long, its share of the U.S. wireless phone market plunged from 60 percent in 1994 to 34 percent in early 1998.
In the midst of these challenges came another leadership change. In January 1997, Chris Galvin took over as CEO. His background was in marketing and management rather than engineering, was well timed. Many industry analysts had determined that Motorola’s troubles were part a result of its inability to listen to its customers. The company’s autonomous divisions were creating products; many of them innovative without first determining if the market desired them. The autonomous structure created further problems. Motorola’s paging, cellular, two-way radio, and satellite communications units operated as separate divisions, and in the company’s decentralized structure did not collaborate with each other, despite the increasing amount of overlap in these technologies.
In October of 2010, I was speaking about relationship capital leadership and open standards at the Business Innovation Conference at the Illinois Institute of Technology in the Chicagoland area. Chris Galvin, the former CEO of Motorola was the keynote speaker and shared a story about innovation, culture, and how Motorola created the multibillion cable-modem industry.
As a CEO of Motorola, I was well aware of the “engineering” culture of the company that my grandfather Paul Galvin, founded as the Galvin Manufacturing Corporation in 1928 and my father Robert Galvin, who served as CEO of Motorola from 1959 to 1990. Motorola’s driving cultural mindset was that of “engineering” whose motivation is to build things. Now, being of marketing background, I was concerned that we were innovating without purpose or a compelling business case. Our decentralized organizational structure was causing us to execute in a risk mode of READYàSHOOTàAIM. Our innovations would launch in search of a market to serve. I was in a meeting in which a group of Motorola R&D managers were seeking a favorable decision from me to continue investing in the development of this “cable-modem” device. Based on the market data and the limited demand that I could see for the device, I made the business decision to kill the project.
Now, fast-forward into the future, my friend Reed Hundt, Chairman of the U.S. Federal Communications Commission under President Clinton was visiting me at my office in Schaumburg, IL. He was on a global tour of communications technologies in Germany, Japan, and other countries. Reed had just come from the Motorola R&D Lab in Arlington Heights, IL, a 10-minute drive from my office just bursting with enthusiasm over Motorola leading the world in this cable-modem technology. “I remember thinking to myself I killed that project, didn’t I? I had found out later that despite my decision to defund the cable-modem project, the Motorola engineers believed in it so much that they continued to work on it in a skunkworks project sort of way. “That cable-modem innovation became a multi-billion dollar market that Motorola engineers created. The cable-modem business became one the biggest successes in Motorola history. Now, if anyone tells you that the leader at the top knows which innovations will succeed and which will fail, they do not!”
The last and maybe the most foundational of all five of the standards of culture is Striving. The Why of what we do. The first attribute of why we strive is time. Level zero cultures of chaotic mindset are focused on the task of the moment, hour, or day. The level of trust is nonexistent so they do not reflect on the long-term reasons they do what they do. Fear is so pervasive so this is a culture of do now or else. Dictatorial power is not interested in the long-term implications of their actions on capital (human, relationship, intellectual, etc.) but on dominating and directing. Dictators do not pay attention to market issues or how their organization relates to it. Workers do or else. This short-term orientation eliminates any consideration of human as “individual”, but as asset to execute or do. There are many examples of this race to capture market opportunities that eliminate the human consideration such as technology start-ups.
When market issues, in which level one cultures of conformity have paid little attention to, disrupt their business, the first lever autocratic leadership pulls is massive layoffs. This further reinforces this cultural cycle of a short-term time focus mindset of low trust, and consolidates power with the few at the top. If the autocratic leadership does not swiftly deal with the financial problems, this level two culture of conformity will most likely drop to the level of chaos and survival.
Acquiesce or informed acceptance cultures try to balance short-term focus with long-term goals. Their long-term goals orient them with market and other public issues. It is this alignment with the market, which makes these cultures very responsive to changing customer’s wants and needs. The standard operating procedures change to meet the new requirements of the market. Managers willingly accept the new rules in order to focus their team’s tasks on gaining the most rewards for personal and organizational success and for avoiding the penalties and discipline. Functional compliance to external regulatory entities is put into the hands of dedicated units led by chief risk & compliance officers.
Do-The-Right-Thing Cultures are driven to realizing an enduring legacy for the enterprise and greater ecosystem. These high performing teams of purpose, mastery, and relationship capital are duty-bound to fulfill their important mission. This naturally requires these leaders to have a long-term bent or focus on the long-term. One example is that do-the-right-thing cultures master new skills that enable breakthrough performance to fulfill their group’s journey of purpose and mission and that again requires them to be focused on the future. This is a great strategic asset of cultures of do-the-right-thing that lower level cultures do not have. Thus cultures of chaos, conformity, and acquiesce are more vulnerable to do-the-right-thing competitors who enter and disrupt their business in this hyper-connected and technology-enabled world. A great example is Apple disrupting Blackberry.
The Standards of Culture Maturity Matrix is a foundational exercise for assessing your organization’s culture across these five standards. The ability to leverage your culture for competitive success is critical in a marketplace where strategy and technology does not provide a long-term advantage anymore.
Copyright Rob Peters
Rob is a recognized leadership advisor, trust strategist and organizational culture driver to business and technology services firms.
Author of the 2013 Book: “Standard of Trust Leadership: Transforming Business Cultures Through Purpose, Performance, and Relationship Capital”
The Standard of Trust Group has developed a breakthrough methodology called the Standard of Culture Maturity Matrix. We also provide an end-to-end solution for assessing, capturing, analyzing, and utilizing Relationship Capital (RC) that is earned by your star performers and your highest performing teams.
TIGERS is a researched-based group development model that helps leaders build teams of employees who love coming to work on Monday morning. TIGERS is based on six principles that build high performance teams. These principles are trust, interdependence, genuineness, empathy, risk and success.