Culture and Transformation

Culture and Transformation
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When I ask business and IT leaders what the biggest obstacle to change is in their organization, the answer is invariably the same – culture. We’re all very aware that the changes needed to survive and thrive in 2021 and beyond will be impossible without evolving our organization’s culture. And we all know the famous Peter Drucker quote “culture eats strategy for breakfast.” So how do business and IT leaders support the cultural changes that will be needed to increase agility and resilience in the digital age? Culture shapes how an organization responds to problems and challenges. When it comes to digital transformation and evolution, this is not a one-off change from one state to another – it’s about embracing relentless change as the new permanent reality. It requires a sustained, incremental approach to change that is embraced and practiced by everyone. To help, this article examines culture and transformation.

How can business and IT leaders support the cultural changes that will be needed to increase agility and resilience in the digital age? Here @Veridity explores. #ITSM #leadership Click To Tweet

Culture is Not a Silo

Every organization is a system made up of interdependent components, working in an integrated way, to create and protect value. One of these components might be described as the operating model or organizational architecture, including business units, functions and disciplines, and decision models. This defines where work happens and by whom. Another might be described as the organization’s practices, which define what we need to do in a consistent way. These practices would include the minimum set of mandatory things we must do consistently, such as policies and requirements, as well as processes and guidelines. A third component would be tools, including applications, dashboards and analytics, automation, artificial intelligence (AI), information repositories, etc. These allow us to work efficiently; facilitate decision making, prioritization, and the management of risk; and support knowledge and continual improvement.

Culture describes how we work, and includes things like the vision, values, and behaviors of the organization. To achieve organizational transformation, acceleration, and evolution, people need to be not only engaged participants, but they also need a clear, shared sense of purpose. Success in the digital age requires a clear vision of what the organization is trying to evolve into, that everyone can visualize and participate in achieving. You say that you’re transforming? Into what? Why? How? It needs to be compelling and it needs to be about creating value for the organization, its employees, its customers, and other stakeholders.

Culture is not separate from the other components that make up the organization’s system. We can even easily argue that it’s by far the most important component – organizational transformation and evolution is not possible without the determined and sustained efforts of people. It’s therefore essential that we understand and leverage the interdependencies and how the organization’s operating model, practices, and tools support and enable culture, and how to optimize these purposefully and in an integrated way.

To state the obvious, culture – how we work – determines much of what we do, where it is done, and by whom. It’s not separate and cannot be addressed in isolation – culture permeates everything.

To state the obvious, culture – how we work – determines much of what we do, where it is done, and by whom. It’s not separate and cannot be addressed in isolation – culture permeates everything – @Veridity #ITSM Click To Tweet

Culture and Transformation: Organizational Structure

Let us consider how an organization’s operating model supports the culture. We know that to succeed with digital transformation, acceleration, and evolution, we need to consider and incorporate new concepts about organizational structure, leadership, and decision-making. This is because digital is more than digitization. It’s a fundamental shift in the ways an organization delivers value to the market, encompassing a revolutionary rethinking of how to manage information, technology, people, relationships, and practices to significantly transform execution and business performance across the entire enterprise.

In the digital age, agility and velocity are increasingly essential. With speed of the essence, command and control leadership is being increasingly supplemented or replaced by leadership that can come from anywhere; is emergent, interactive, and dynamic; and produces adaptive outcomes.

The degree to which an organization’s leadership is willing to adapt to and adopt these new ways of working has a significant impact on its transformation, acceleration, and evolution. In light of this, we need to rethink the idea of leaders simply mandating changes to the culture and the rest of the organization simply adopting those changes. In many ways it may be the leaders who have the most difficult time with such a transition – this will need to be recognized and addressed urgently.

How do we influence the culture of the organization to successfully adapt to these changes? For many organizations today, this includes adapting the governance model to one that allows more and better decision making at lower levels of the organization while remaining traceable to the organization’s priorities and objectives.

Organizations often assume that they must decide between agility and stability – that these two states are in opposition. However, stability – having the right capabilities and resources and the right level of maturity to work effectively, efficiently, and at an agreed level of quality – is required to support organizational agility.  Organizational agility and velocity requires clearly defining the criteria for determining which decisions are made where in the organization and by whom. Having the right policies and mandatory requirements in place, for example, can clarify where and how decisions should be made consistently across the organization without requiring the top leadership to make all those decisions directly.

A number of agile organizations today maintain a stable top-level structure while replacing much of the remaining traditional hierarchy with a flexible, scalable network of teams. Depending on the specific organization, decisions should be categorized based on, for example, risk profile and the degree of cross-functional impact or collaboration required, and wherever possible made by those with direct responsibility. Committees and individuals given authority for certain decisions should have clear charters and clear roles and responsibilities, and results of decisions should be regularly measured and evaluated to see how well they’re supporting the organization’s vision and strategic direction. This can allow the organization to be far more responsive and give those closest to the operations and risks the ability to own significantly more of the decisions.

The organization’s operating model can be optimized to better facilitate the balance between stable and dynamic. For example, some organizations have moved from a more business unit-centric model (where each business unit has dedicated resources and capabilities, often working in a siloed way) to a more function-centric or capability-centric model, with functions owning all resources and capabilities. These can then be allocated and reallocated rapidly to respond to opportunities, risks, and changing circumstances. In this example, the functions own the resources (stability) and allocate these to temporary cross-functional teams, whose performance is regularly reviewed, and decisions made about whether to add, remove, or swap resources (adaptability) to continually deliver the desired outcomes.

Culture and Transformation: Leadership

R Westrum, in “A typology of organizational cultures,” describes three dominant types of organizational cultures – pathological, bureaucratic, and generative – which are shaped by the preoccupations of the organization’s leaders. “Through their symbolic actions, as well as rewards and punishments, leaders communicate what they feel is important. These preferences then become the preoccupation of the organization’s workforce because rewards, punishments, and resources follow the leader’s preferences. Those who align with the preferences will be rewarded, and those who do not will be set aside.”  Leadership makes such a profound impact on digital transformation, acceleration, and evolution that for many organizations today it’s considered increasingly unfeasible to rely exclusively on traditional senior management roles to deliver it. A lot of focus needs to be directed at supporting leaders, adding new competencies, and in many cases adding new roles.

The digital age has embraced the concept of leadership as an emergent, interactive dynamic that generates adaptive outcomes for the organization and its stakeholders. These organization’s leadersare not determined based on a hierarchy, but because they are individuals who act in ways that influence both this dynamic and the outcomes. These leaders play an integrating role across the organization, bringing coherence and providing clear, actionable, strategic guidance around priorities and the outcomes expected at both the whole organization and individual team levels. Rather than managing separate, siloed functions, they can support cross-functional teams and pools of workers who can be allocated rapidly where demand is greatest. They also ensure everyone is focused on delivering tangible value to the organization, its customers, and other stakeholders by providing frequent feedback and coaching, and rewarding staff based on achievement against outcomes rather than simply time in the job or experience.

Starting with broad goals (rather than overly detailed plans), providing opportunities for self-organization, and focusing on value will plant seeds in the organization that create the conditions for growth and ongoing transformation –… Click To Tweet

The organization needs to determine whether or to what degree it will be governed and managed using a traditional ‘command and control’ leadership approach and to what degree, or under what circumstances, it will embrace newer concepts of collaborative cross-functional and self-managing teams. It’s possible to achieve a balance here to support both emergent culture and the need for the organization to keep the lights on and maintain the business-as-usual activities that are needed to stay in business.

The leadership of an organization as a complex adaptive system recognizes that leadership is too complex to be attributed to the acts of only an individual/individuals and is instead a complex relationship of many interacting forces. These need to be understood and optimized.

As an example of adaptive leadership, some organizations have been able to restructure their leadership model itself to changing circumstances – working collaboratively and cooperatively using the reconfigurable teams described earlier, but then in specific circumstances, such as a crisis, adopting a command-and-control model with a smaller team of executive managers for decisions until the crisis has been addressed.

Here an organization’s governance, policies, and operating model provide a foundational support. If each person and team is responsible for contributing to shared organizational objectives and allowed to identify and action improvements in a prioritized way as part of business-as-usual, this helps to build the culture of engagement and participation necessary for adaptive and agile leadership. Starting with broad goals (rather than overly detailed plans), providing opportunities for self-organization, and focusing on value will plant seeds in the organization that create the conditions for growth and ongoing transformation. As we say, farmers do not grow wheat. They create the conditions for wheat to grow.

Hierarchic to Holocratic

Frédéric Laloux, in his book “Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness,” points out that every time humanity has shifted to a new stage of consciousness in the past, it has invented a whole new way to structure and run organizations. This is exactly what we’re seeing happen as part of the Fourth Industrial Revolution. Laloux describes a series of different stages of evolution for organizations, each allocated a specific color. He also makes the important point that even as organizations evolve, they often retain the remnants and capabilities of previous stages. As he says, “every paradigm includes and transcends the previous.” Most organizations are a blend of practices from these different evolutionary stages. The organizational evolution he describes progresses from impulsive and dictatorial through to command and control, followed by predict and control, and ultimately holocracy.

What is holocracy? A holacracy is a governance/operating model where an organization forms distinct, autonomous, yet symbiotic, teams to accomplish tasks and deliver organizational objectives. The concept of a corporate hierarchy is discarded in favor of a flat organizational structure where all workers have an equal voice while simultaneously answering to the direction of their shared authority. Such a model is increasingly attractive to organizations wishing to achieve competitive advantage and other benefits in the digital age because it better facilitates the ability to embrace relentless change and to be more agile and resilient.

One thing that makes the Teal organizations Laloux describes so successful is that they’ve tapped into the individual energies that have been boosted and the motivation generated when people identify with a purpose greater than themselves. All the energy that has gone into trying to fit in, please the boss, fight turf wars, and tick various performance boxes can be re-directed toward making decisions with clarity and wisdom, and alignment with the organization’s evolutionary purpose. The benefits of these changes both to the organization and to individuals can become an important lever to support adoption.

For an organization to move from a command-and-control leadership model to one based on distributed power, experimentation and trust generally can require starting small and working incrementally over time to embrace new ways of working – it’s not something to be achieved overnight. The degree to which it’s achieved is also always dependent on both the organizational context as well as external factors.

For organizations where there’s a lack of standardized practices, established policies, and clear accountabilities, it can be more difficult to move beyond command-and-control leadership. This is because the organization often needs to define basic parameters and minimum specifications for adaptation to work within.

For an organization to move from a command-and-control #leadership model to one based on distributed power, experimentation and trust generally can require starting small and working incrementally over time to embrace new ways of… Click To Tweet

Culture and Transformation: Practices

It’s important, particularly where decisions are made in a distributed rather than a centralized model, to have a set of guiding principles that can be used as guard rails and a means of prioritizing and keeping everyone on the same page. As an example, have a look at the Guiding Principles in ITIL 4, although your organization may have its own. Having a shared set of principles can help the organization make decisions and prioritize consistently.

It’s important to remember that agility requires stability. Keeping focused on a set of common goals and priorities is stabilizing. Guiding principles, right-size policies, and some standardized ways of working are stabilizing. Being honest and transparent can be stabilizing, while ambiguous or inadequate communication can leave people disengaged or assuming the worst. 

Organizations operate through many formal or informal arrangements that are interlinked to achieve their objectives. In a systems approach, the components that make up the business architecture, including the practices, are not siloed or independent.  Rather, they’re linked, measured, and should be providing feedback to continually evaluate performance and prioritize improvement.

Documenting and communicating standardized workflows, roles, the parties involved, and interfaces can make it easier to better integrate and coordinate activities across the organization and to ensure they’re measurable and achievable. This is not about bureaucratic death by documentation. It’s about empowering participants with the right information in the right format or media, that is accessible and user friendly and allows visibility and measurement of the end-to-end process or value stream. When individuals and teams have clarity about why key activities are performed, by whom, and how, the organization can adapt much more quickly and easily and action opportunities for improvement.

Standardizing activities into easily reconfigurable components also makes it much easier to reuse capabilities and resources in an optimized way – like reusing the same ingredient to make multiple dishes. Minimizing multiple variants of the same task across different business units, functions, or geographies can become much more significant where the goal is increased organizational agility. Measurement and evaluation can help ensure that over time, variants do not begin to reduce speed or limit the ability to reconfigure capabilities and resources.

Culture Hacking

Darwin’s theory said that evolution happens in a continuous, gradual way. Incremental change can be a very powerful and often underestimated force. This brings us to the concept of culture hacking.

What is culture hacking? All organizations are systems. All systems have vulnerabilities. Hacking is about finding vulnerabilities and exploiting them. Tiny tweaks can yield big results. Rather than big, enterprise-wide organizational change programs that take months or years and are driven from the top-down, culture hacking is about finding little things individuals and teams can do every day to create positive, iterative change. Think of it as the difference between a tightly coupled, monolithic architecture and self-contained, loosely coupled components that can be modified and deployed independently. For example, if you want the organization to be more customer-centric, make explaining the value to the customer a mandatory aspect of every meeting, or every decision. If you want to make the organization more safety conscious, include a safety moment in every team meeting. If you want to embed continual improvement and innovation? Bake it into day-to-day working.

Recently for an organization, I developed a set of cards in a deck that was handed out to team leaders across the enterprise with scenarios, questions, and statements on each card designed to stimulate discussion and engage everyone in establishing a culture of continual improvement and innovation. Everyone in each team was responsible for taking turns to lead these discussions and “bake it in” to everyday work practices. We built an improvement register and an innovation register and started documenting, prioritizing, and actioning the ideas people came up with each week. We then communicated the progress and the success of those ideas, which in turn generated more ideas, more participation, and more enthusiasm.

Culture hacking is a bit like a software development team on a sprint. The idea is to focus on small things more frequently, rather than only trying to tackle and change a whole bunch of big things all in one go. Rather than being driven top-down, it’s more about culture co-creation within the organization, with everyone focused on the same set of goals and embedding improvement into processes, projects, and performance measurement. And as a tangible manifestation of organizational agility, organizations and teams should build in constant feedback loops that enable ongoing change and culture building. Culture hacking is one means to facilitate relentless improvement and innovation, which facilitates agility and will allow an organization to identify and action new value propositions and new ways of working.

A shared understanding of value for the organization and its stakeholders becomes a powerful means to ensure shared direction, as well as the key measure of success.

Culture and Transformation: Resources

Having insufficient resources (people, technical, financial, information) is destabilizing to the culture and impedes agility. Business and IT leaders have always had the challenge of balancing demand with available resources, and resource issues are often cited as a primary obstacle to change.

One of the priorities for successful digital transformation is people with the right skills and competencies. In many cases, these need to be new people brought into the organization to fill a skills gap. But many roles and tasks can be filled by existing personnel with the right training, mentoring, and the support of well-designed practices and tools. Technology also plays an essential role in supporting culture – the ability of the organization to respond to problems and challenges.

One of the priorities for successful #digitaltransformation is people with the right skills and competencies – @Veridity Click To Tweet

Machine learning and AI provide opportunities to automate tasks that can free up personnel to focus on higher-value activities. Better prioritization of demand, cross-skilling, allocating resources in more agile ways, and better leveraging the organization’s ecosystem are additional ways to address resource issues. An organization-wide focus on value creation that considers IT an integrated part of the organization as opposed to merely a servant “service provider” is the best way to prevent being overwhelmed with disproportionate demand compared to resources and has a potent impact on culture. The whole organization should have the same set of objectives and achievement against those objectives should be communicated and celebrated often.

Conclusion

Digital transformation, acceleration, and evolution is fundamentally about transforming the way an organization and its ecosystem work, so that it can be resilient, and even flourish, in the face of the continual, rapid, and disruptive change we face today. 

There are many things every organization can do to embrace relentless change and progress toward increased agility and resilience. Here @Veridity explores. #digitaltransformation Click To Tweet

This transformation and evolution is enterprise-wide and impacts all aspects of the organization. It’s not something that can be relegated to a few teams or limited to technology – it will impact every aspect of the organization’s culture. Culture is not something that can be addressed as a silo – it needs to be considered in an integrated way with the organizational structure, governance, leadership, practices, and tools. There needs to be a compelling vision, a strong sense of purpose, and real ownership of outcomes by all the people in the organization.

There are many things every organization can do to embrace relentless change and progress toward increased agility and resilience. One way to approach beginning this journey is for business and IT leaders to ask what are we willing and able to do now, what could we potentially do in the next 6-12 months, and what are we not prepared to do at all? It’s better to be honest about what will and can be done than to either promise too much or to become paralyzed and fail to act.

To evolve an existing organization from a more traditional model into one adapted for the digital age is a serious undertaking, not one that can be addressed with technology alone, or with simply adopting a methodology or particular practices. This kind of change is not something an organization will go through and achieve as a project – the continual change itself is the point. 

Why is it essential for all the aspects of an organizational system to work together in an integrated way to be successful with digital business transformation and evolution? What do we mean by “organizational system? This article provides the answers: Why Organizational Integration is Essential to Digital Transformation.

What are the core capabilities every organization needs to be successful with digital transformation, acceleration, and evolution? Read my article on: Digital Transformation Core Capabilities: Navigational Aids for a VUCA World.

Managing Director at Veridity Pty Ltd

Erin Casteel is a strategic advisor, governance and management system expert, and business architect, helping organizations transform and thrive at velocity in the digital age. She works with organizations to design, implement, run, and improve whole organization governance and management systems to create and protect value.

Erin is a lead architect and author of ITIL 4 and an editor of/contributor to a number of international (ISO) management system standards, including the ISO/IEC 27000 family of standards for information security management and the ISO/IEC 20000 series for service management.

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