I once met a CEO of a company in India that produced automotive components. He told me about a particular problem he had.
The CEO had invested over US$150mil in a fully-automated plant that converted raw metal into the finished product in a matter of minutes with very little manual intervention. Yet, although the plant was just over a year old, it was only running at 25 to 30% capacity. The plant was not covering its costs, and it was also making him a thumping loss and pulling the overall business down.
He had a team of highly-qualified electrical and mechanical engineers. So, he could not fathom why the plant was performing so poorly.
We agreed to do a diagnostic. After a few weeks, my colleagues and I discovered that there was nothing wrong with the plant. Instead, the problem was the company’s culture.
The CEO had the habit of touring the plant a few times a day, always on the lookout for anything not working. The engineering team, eager to please him, would keep the machines running to give him the impression that all was well.
However, this was all window dressing. Their answer to any breakdown was to fix the problem just enough to get the plant running. Here’s what I mean: As I walked around the plant, I spotted an aerial fashioned from a wire hanger!
The “solutions” were not just half-baked; they masked the real issues.
“This is how we’ve always done things around here”
Business owners often start a company with a certain culture in mind. However, as the business grows, the culture evolves – sometimes to one that they had not envisioned. Or, a new CEO comes onboard only to find out that the current company culture is standing in the way of the organisation’s progress and future.
I’ve seen leaders let things remain the way they are. I’ve seen some relegate the job of fixing things to Human Resources.
Both are bad solutions. Ignoring bad culture is not a good idea and change that comes from the top has a better chance of succeeding.
Fortunately, the CEO of the automotive parts company was happy to own the problem and fix it.
For months, we worked to gradually change the legacy culture and behaviours. We enforced a system where engineers had to analyse the reasons for recurring problems and put in permanent solutions instead of band aid fixes.
In a matter of weeks, we increased plant utilisation to over 50%. In the next few months, it shot up to 75%.
This may sound easy in writing, but believe me, it was hard work. But success breeds success.
Once employees saw the improved results, their attitudes changed and they were driven to improve the efficiency of the plant.
Today, the plants’ performance has helped the company to become one of the most successful in the world in its sector.
Confronting and transforming culture
The CEO’s idea was a good one – he hired employees who were technically competent. However, as they were not given clear expectations of how to achieve results, they behaved in line with the company’s traditional culture, which resulted in the plant failing to perform.
As this case demonstrates, culture plays an important part in a company’s performance.
“Culture” is the organisation’s value system and personality. These are the mindsets, habits and behaviours that employees share. It will attract talent that shares the same values and repels those who do not.
There’s no one type of culture that is considered perfect. But as you can see from this case, trouble comes when it ends up working against the company.
When this happens, it’s time to course correct. It can be challenging to transform something as abstract as culture, but it can be done.
First, survey the cultural landscape
A company’s strategy and its alignment to structure and design, workflow and processes, policies, technologies and reward system play a big part in driving the culture. So, the first step is to determine how these are driving behaviours, decisions and actions in the company.
Define the mission and values
Don’t be too surprised if an employee can’t explain the company mission and values. Many companies don’t have them written down, or if they do, they are poorly defined. Having them clearly spelled out ensures that every member of the organisation knows how to behave.
Communicate and ensure adoption
Companies with great cultures communicate their mission and values so clearly that every employee knows what is expected of them. Leadership must also live and broadcast them continuously and employees should be appraised against the mission and values, not just in annual performance reviews but in day-to-day activities and decision making.
Adopt a top-down, bottom-up approach
Top-down, “do it my way” approaches rarely work. If people’s behaviours, habits, attitudes and mindset form part of the culture, it makes sense to involve everyone in the organisation in the transformation effort. This way, not only do we get ownership and buy-in, but we get to work on matters that will impact all levels of the organisation.
Friction will be inevitable when we change “how things are usually done around here” – even if one applies the steps above to the letter. No friction doesn’t mean good news – sometimes it may indicate that nothing is changing! The challenge is to manage this friction effectively.
Resist the temptation to impose authority to stomp out the friction to accelerate the change. When transformation is done from a top-down, bottom-up approach, the entire organisation will be inspired to work towards a common vision, making the change sustainable.
Krishna Paupamah has worked with companies globally to transform their business for over 35 years. He is the Founder and Group CEO of Renoir Consulting.
This column was first published in Business Today.