STRATEGIC LEADERSHIP ISSUES

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1 STRATEGIC LEADERSHIP ISSUES Culture and Leadership Cheryl L. Thomas Managing Director Impacting People, LLC Wadsworth, IL July 31, 2018

2 Culture and Leadership Graduate School of Banking July/August 2018 IMPACTING PEOPLE LLC 1

3 Agenda Why Culture Matters What is Culture? Culture and Change Strategic Leadership IMPACTING PEOPLE LLC 2

4 Leadership Questions 1. Do you know your organization s current culture? 2. How do you know? Observation, Feedback Formal Assessments 3. Is it enhancing success, or a barrier to success? IMPACTING PEOPLE LLC 3

5 Why Culture Matters 1. Better financial performance 2. Positive customer experience 3. Greater employee engagement 4. Higher levels of productivity IMPACTING PEOPLE LLC 4

6 Why Now 1. Economic Recovery 2. Leadership and Management revolution 3. Creating Value for customers and employees 4. Software/technology has reshaped how people engage with each other. 5. Workplaces and spaces are changing Remote work is becoming a viable option for more people. Some companies re-thinking work-at-home IMPACTING PEOPLE LLC 5

7 Re-establishing Trust IMPACTING PEOPLE LLC 6

8 Success and Culture Overwhelming research correlates strong culture to: Intention to Stay Cooperation/Teamwork Quality Adaptability Satisfaction Turnover Stress Source: Correlations from Szumal, J.L IMPACTING PEOPLE LLC 7

9 What Is Culture? The shared values, beliefs, and behaviors that underscore: how things get done, how decisions get made how people interact Edgar Shein, Organzational Culture and Leadership IMPACTING PEOPLE LLC 8

10 Organizational Culture The way we are expected to do things around here. Culture is cognitive: what people believe and know. It reflects shared values (what is important) and beliefs (how things work). It encompasses norms and expectations that influence the way members of the organization think and behave. However, norms and expectations (Current Culture) are not always in alignment with shared values (Ideal Culture). Copyright 2015 by Human Synergistics International. All Rights Reserved. IMPACTING PEOPLE LLC 9

11 Values - Exercise 1. What are your institution s stated values? IMPACTING PEOPLE LLC 10

12 Financial Institutions Values IMPACTING PEOPLE LLC 11

13 Values - Exercise 1. What are your institution s stated values? 2. What does your institution value? Why is there a difference? IMPACTING PEOPLE LLC 12

14 The Elements of Culture Business Environment Artifacts, Physical Settings, Work Environment Values and Beliefs Heros, Standard Bearers, Influencers Rituals, Traditions, Known History The Cultural Network Source: Deal, T.E. and Kennedy, A.A., Corporate Cultures, 2000 IMPACTING PEOPLE LLC 13

15 Culture and Engagement Relationship IMPACTING PEOPLE LLC 14

16 Assessing Your Culture Organizational Culture Inventory (OCI) IMPACTING PEOPLE LLC 15

OCI -Cultural Norms Research and development by Robert A. Cooke, Ph.D.

Cultural Style Clusters Constructive Passive/Defensive Aggressive/Defensive Characterizes behavior that

people and accomplish tasks Represent self-protecting behavior that promote the fulfillment of security needs

Reflects self-promoting behavior used to maintain one s status/position and fulfill security needs through

18 Cultural Style Clusters Constructive Passive/Defensive Aggressive/Defensive Characterizes behavior that contribute to one s level of satisfaction, ability to develop healthy relationships and work effectively with people and accomplish tasks Represent self-protecting behavior that promote the fulfillment of security needs through interaction with people. Reflects self-promoting behavior used to maintain one s status/position and fulfill security needs through task-related activities Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright by Human Synergistics International. All Rights Reserved. IMPACTING PEOPLE LLC 17

20 Constructive Cultures Behavioral norms contribute to high levels of satisfaction, ability to develop healthy relationships, work effectively with people and accomplishment of tasks. Examples: 1. Establishes challenging and realistic goals 2. Employees develop themselves 3. Employees are supportive and open to influence in working with each other 4. Cooperative 5. Sensitive to each others needs. IMPACTING PEOPLE LLC 19

21 Characteristics of Constructive Culture Humanistic Affiliative Achievement Self-Actualizing Employees share a set of relatively consistent values and methods of doing business New employees adopt values quickly Seen by outsiders as having a certain style Strong alignment among strategy, goals, values, and behaviors IMPACTING PEOPLE LLC 20

22 Constructive Cultures Impact on Performance Goal alignment Increased motivation and engagement Structure and controls without having to rely on bureaucracy Efficiency and fewer mistakes/risks IMPACTING PEOPLE LLC 21

23 Defensive Cultures Behavioral norms are self-protecting or selfpromoting in order to maintain one s status or position. Behaviors meet security needs, focused either on the interaction with people, or accomplishment of tasks. Examples: 1. Employees are expected to agree and be liked 2. Employees do what they are told 3. Clear all decisions with superiors 4. Avoid being blamed for mistakes 5. Oppose new ideas 6. Operate in a win-lose with colleagues. IMPACTING PEOPLE LLC 22

24 Characteristics of Defensive Culture Oppositional, Competitive Power, Perfectionistic Avoidance, Dependent Conventional, Approval Employees focused inwardly (focus on self-protection, promotion) Many beliefs but no agreement about what is important Behaviors that are disruptive or destructive High degree of fear ; little innovation; resistance to change IMPACTING PEOPLE LLC 23

25 Signs of a Culture in Trouble 1. No clear values or beliefs about how to succeed; many beliefs but no agreement on which is most important; different beliefs in different areas 2. Behaviors that are destructive or disruptive; emotional outbursts 3. Short-term focus; morale problems 4. Fragmentation/Inconsistency 5. Subculture values preempt shared company values Source: Deal, T.E. and Kennedy, A.A., Corporate Cultures, 2000 IMPACTING PEOPLE LLC 24

Constructive Cultures Matter Better Financial Performance Positive Customer Experience Greater Employee Engagement Higher Productivity Research and

26 Constructive Cultures Matter Better Financial Performance Positive Customer Experience Greater Employee Engagement Higher Productivity Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright by Human Synergistics International. All Rights Reserved. IMPACTING PEOPLE LLC 25

27 In a study of 69 companies across a variety of industries there were positive correlations between Constructive Cultures and profitability and Defensive Cultures and sales volatility. Profitability (Over 3-Year Period) 1 Strength of Cultural Norms 2 Earnings/Sales Ratio (n=69) Earnings/Sales Volatility (n=60) Constructive + 0 Passive/Defensive 0 0 Aggressive/Defensive /- signifies positive or negative correlation significant at p< /-- signifies positive or negative correlation significant at p< signifies relationship is not statistically significant. 1 Financial data for the three-year period provided by Towers Perrin for 69 companies in various industries. Ratios are averages for the three-year period; volatility scores are standard deviations. 2 Organizational culture data provided by Human Synergistics, based on factor scores. Research conducted by Robert A. Cooke, Ph.D. Copyright 2003 by Human Synergistics International. Copyright 2012 by Human Synergistics International. IMPACTING PEOPLE LLC 26

28 Discussion 1. Pair up 2 or 3 nearest people 2. Share your OCI results: Is it Constructive, Passive/Defensive or Aggressive/Defensive? What is the primary style? Secondary? Share 1 or 2 experiences that illustrate your OCI results Identify 1 or 2 styles to change IMPACTING PEOPLE LLC 27

29 How Culture Is Supposed to Work What should be expected here How we re doing here Assumptions Espoused Values Philosophy Mission Goals Strategy The way we are expected to do things around here Individual Level Group Level Organizational Level Focus Measuring Ideal Culture Current Culture Outcomes Values and Beliefs Norms and Expectations Effectiveness Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright by Human Synergistics International. All Rights Reserved. IMPACTING PEOPLE LLC 28

30 Organizational Factors Structures Assumptions Espoused Values Philosophy Mission Goals Strategy Systems Technology/ Processes The way we are expected to do things around here Individual Level Group Level Organizational Level Skills/Qualities Focus Measuring Ideal Culture Casual Factors Current Culture Outcomes Values and Beliefs Levers for Change Norms and Expectations Effectiveness Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright by Human Synergistics International. All Rights Reserved. IMPACTING PEOPLE LLC 29

31 Leadership Responsibility. Culture happens. Leaders and managers can let it happen or they can manage what happens. It is a choice! IMPACTING PEOPLE LLC 30

32 Wells Fargo Culture or Strategy? Leadership Impact? IMPACTING PEOPLE LLC 31

33 Organizational Change Model McKinsey 7 S model IMPACTING PEOPLE LLC 32

34 Transformational Leadership... Leadership in which the leader identifies the needed change, creates a vision to guide the change through inspiration, and executes the change with the commitment of the members of the group The non-quantitative stuff ultimately is the real driver of sustained bottom line profitability... the numbers are not the plan! IMPACTING PEOPLE LLC 33

35 Culture and Strategy Strategy alone is not sufficient. Culture eats strategy for breakfast - Peter Drucker Organizations must have a strong culture that aligns with the strategy and is supported by structure, leadership, management systems, processes, and people. Edgar Shein IMPACTING PEOPLE LLC 34

36 Current Issues Impacting Strategy Non-traditional competitors disrupting the industry Need for competitive differentiation Cyber-security Technology to transform core business activity Technology to enhance customer experience Integration of Risk Management and Compliance Big-data Advanced Analytics Succession/Talent Management Mergers/Acquisitions Diversity and Inclusion IMPACTING PEOPLE LLC 35

37 Why Strategy Fails Cultural Barriers Strategy Turf issues Blame Bureaucracy Hierarchy Self-Interest Poor Communication Lack of... Agility Bias for Action Openness and Trust External Focus Alignment at the Top Success IMPACTING PEOPLE LLC 36

38 Culture and Leadership Top Ten Practices 1. Define the desired culture Values described in terms of behaviors 2. Make the Mission/Vision/Values known 3. Hire for fit Consider behavioral assessments; screen for values and competencies 4. Best Practices in Performance Management Clarity of roles and responsibilities (Job descriptions) SMART goals/clear objectives Regular feedback Coaching/training Rewards tied to performance IMPACTING PEOPLE LLC 37

39 Culture and Leadership Top Ten Practices 5. Establish and align incentives and rewards Performance driven rewards 6. Best practices in Staff Development 7. Establish effective lines of defense Staff and Management attend to the desired behaviors Human Resources on the Executive Team Ability to monitor; report issues IMPACTING PEOPLE LLC 38

40 Culture and Leadership Top Ten Practices 8. Assess and measure Culture Intentional management 9. Establish shared responsibilities for culture Executives Managers All employees 10. It starts at the top Board Governance Own the issue; Lead by example; Cascade culture from the top; Define cultural leadership attributes; Monitor progress IMPACTING PEOPLE LLC 39

41 Leadership Questions 1. What habits in our culture will get in the way of achieving our strategy? 2. What qualities do we need to add or strengthen in our culture to support our strategic goals? 3. Do we have the necessary alignment between our strategy, structure, systems and behaviors to execute? 4. What behavioral shifts are needed to align our culture? IMPACTING PEOPLE LLC 40

42 Final Thought Corporate culture is the only sustainable competitive advantage that is completely within the control of the leader. David Cummings, Co-Founder, Pardot IMPACTING PEOPLE LLC 41

43 QUESTIONS? IMPACTING PEOPLE LLC 42

Climate and Culture Definitions

Climate and Culture Definitions Climate PERCEPTIONS Observations Subjective, filtered Sensory Culture VALUES and BELIEFS What s important What works What s related ATTITUDES Feelings Evaluations Predisposition