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The Cultured Organisation

Saturday, September 1, 2007 - 11:26

As business undergoes rapid transformation in the global era, organisational culture is more than ever the key to long-term success. By Cameron Cooper

For Ann Herrmann-Nehdi, memories of her childhood are a far cry from the usual ice-creams, soft drinks, playing and games after school.
Her father Ned, a celebrated physicist, would often hook up electrodes to Ann’s head for an electroencephalograph, or EEG, to measure her brainwaves as part of his research.

“When you grow up with a physicist, life is an experiment,” says Herrmann-Nehdi, now the CEO of corporate training company Herrmann International.

The company carries on the work of Ned Herrmann, who pioneered research 30 years ago into whole-of-brain thinking with General Electric in the US. Through the use of the Herrmann Brain Dominance Instrument – a tool to assess people’s approach to emotional, analytical, structural and strategic thinking – the company has helped reshape the organisational culture of corporate leaders such as IBM, Victoria’s Secret, PricewaterhouseCoopers and Coca-Cola.

Brain power

Not all that surprisingly given her familial ties, Herrmann-Nehdi believes the key to business success is unlocking the brain power of employees.

“There’s a wide range of institutions across many different sectors that are beginning to wake up to the fact that a big part of their asset is truly the mental asset residing within; and it’s critical to their ability to succeed,” she says.

Herrmann-Nehdi laments, however, that in her discussions with CEOs around the world, she feels that there is frustration over the fact that businesses cannot get staff to use anything approaching their full mental capacity.

“When asked ‘how much of your organisation’s brain power is actually used’, a typical answer was, ‘I never get anything over 50 per cent’. The more senior the group the more cynical they are; they tend to top out at 35 per cent.”

With most organisations seeking a competitive advantage, Herrmann-Nehdi advises corporations to build a culture that raises expectations of mental performance. “If you can just get that extra 5 or 10 per cent, that could be what makes the difference between you and your competitor.”

A beliefs system

Just what is organisational culture? Consensus suggests it is a consequence of the values and beliefs of employees in a corporation. It can also be an intangible phenomenon reflecting rules and expectations of behaviour, even if those guidelines are not written in stone. Simply put, employees know how to act and what is expected of them.

The term organisational culture gained popular usage in the early 1980s, and its most famous advocate is, arguably, Tom Peters, the author of management books, and once dubbed the “uber-guru” by The Economist magazine. Others credit Massachusetts Institute of Technology Professor Edgar Schein as the man who inspired the concept.

In the modern era, entrepreneurs such as Jack Welch (GE), Richard Branson (Virgin), Steve Jobs (Apple) and Larry Page and Sergey Brin (Google) have won plaudits for creating distinctive workplace cultures.

Yet Gabriele Lakomski, a professor of organisational learning at the University of Melbourne, says when assessing and implementing business culture, too much emphasis is often placed on the role of chief executives. She stresses that leadership is required at “key nodes” across a company so it filters across the organisation.

“That means culture has to be grown from the bottom up, not to be imposed from the top down.”

Lakomski says too great a reliance on CEOs can disenfranchise employees and block knowledge flows. She recommends training programs for all – but particularly middle-level – managers, for a universal understanding of and commitment to cultural transformations. People must be free to explore their capabilities and go beyond departmental borders.

The Deloitte way

Few businesses have a better grasp of the importance of organisational culture than professional services firm Deloitte Touche Tohmatsu.
Over the past decade, the Australian arm of the firm has undergone a cultural transformation under the reins of former CEO Lynn Odland and his successor Giam Swiegers. With a platform built on people management and culture, Deloitte has sought to offer clients a unique product and service proposition. For those who think that culture is not relevant, or is a too time-consuming and expensive intangible to change, Swiegers has a blunt reply.

“I’m an accountant. I’m all about making money,” he says. “If you want to make money, get your culture right first. Don’t waste your time on the other stuff.”

Deloitte places great store in being inspirational: for staff, for clients and when bringing new products to market. Such a culture must be built around people, according to Swiegers. “We focus on people who are good with people when we recruit and promote.”

One of the key cultural changes at Deloitte has been the creation of a workplace that empowers women. Boasting a string of awards as an employer of choice for women, the business logic is simple: Deloitte wants to be the first choice for female candidates, who represent 50 per cent of potential recruits.

“If you have the talent, you are going to win the game,” Swiegers explains.

He points to other initiatives that have helped reshape the culture at Deloitte. There is a heavy investment in training at the firm. And once a year he asks all staff to vote for the firm’s most inspirational partners through an anonymous electronic poll. The traits of winners over the years are illuminating.

“When you look at the top partners there are very few common denominators, which just proves that there is no such thing as the ideal partner or the ideal leader in today’s environment.”

One of the characteristics of the winners, however, is that they challenge staff and allow them to “stretch goals”. They are tough but fair.

Understanding culture

The internationalisation of business is shaping some trends around organisational culture. As many companies move components of their businesses to cheap offshore locations, they run the risk of poor morale. To counter this, some are eschewing staff cuts and instead redeploying talent in other revenue-generating areas of the business – a tactic that can lead to more satisfied employees and higher revenue.
Strategy is also a point of discussion. Some analysts believe a fixation with strategy has come at the cost of implementation. The argument goes that there is a lot of talk – much of it by consultants – and not action.

With the rise of the Asian economies, and particularly that of China, the focus on organisational culture is moving beyond just the Western powers like the US, Europe and Britain.

Peter Lok, a professor and organisational change expert at the University of South Australia, says understanding Asian corporate cultures represents a significant challenge.

“The rules apply to a certain extent, but in Asia it’s even more important to look at the sensitivities of some specific cultural traits,” he says.
For example, bosses reign supreme in Asian workplaces. Negotiation and persuasion often occurs through third parties rather than the direct style that is typical of Western businesses. With markets becoming global and engaging in Asia, understanding such nuances will become more and more important.

“There have been major blunders, not just by Australian companies,” Lok says. “A lot of companies have not done their homework in China identifying and nurturing the right connections and understanding which are the right markets.”

One Australian business helping companies identify cultural shortfalls is Keystone Management Services, whose head Steve Simpson has developed a system called UGRs, or Unwritten Ground Rules, being used in companies in South Africa, the US, the UK and Australia.
In essence, UGRs map perceptions that employees have of their workplace: for instance, the boss only speaks to us when there is a crisis; complaints are always ignored; customer service is a shambles.

Simpson says such perceptions – real or not – are rarely ever talked about openly but constitute an organisation’s culture. Without real knowledge about how an organisation is functioning, he says workers are left with myths or mission statements.

“Most senior executives recognise the importance of their culture but few understand it in simple terms,” Simpson says. “And you can’t manage what you don’t understand.”

His blueprint for implementing change starts with a stocktake of prevailing UGRs, most of which are negative. Then discussions are held with staff to determine the new culture they wish to characterise the company. Introducing positive UGRs empowers staff and gives them ownership of those ideas. “Staff keep each other honest,” Simpson says. “This isn’t entirely a management job. Employees are calling behaviour. And it’s big when that starts happening.”

Try it smarter

A new study from consulting firm Grant Thornton points to Australians working longer hours. The International Business Report, a survey of 7200 business owners in 32 countries, reveals that Australian owners work 56 hours a week – longer than the global average and just an hour less than the world’s busiest workers in India and Argentina.

This is a trend that worries Gabriele Lakomski, who argues that Australian businesses should be developing a culture in which they work more efficiently, not longer. “We should learn to work much smarter,” she says.

Lakomski says that within good businesses there has been a shift to knowledge management. Every person in an organisation possesses some knowledge; the key is how to create it, manage it, share it and keep it.

She argues that creating spaces for people to interact is one of the keys to ensuring that a culture can take hold in a workplace.
“You allow people to talk – you allow people for instance to have morning tea, the old-fashioned morning tea.”

Ann Herrmann-Nehdi agrees that working more and more is counterproductive. She fears working hours will only blow out further as people become more attached to technological tools such as email and personal digital assistants (PDAs). “I had a guy say to me the other day that he had his Blackberry with him at church.”

Talent is a precious commodity, Herrmann-Nehdi says, and it is incumbent on businesses to create a culture that respects staff and leverages their ability.

“In many instances we can hire the right people, we onboard them and then the way we do things inside our organisations can actually limit the way they are leveraging their own brain power,” she explains.

She says organisational culture is all about a mindset that involves people following rules that are often unarticulated. At its best, it enables staff to execute strategies and foster innovation. At its worst, it can destroy morale and the business. The role of leaders is to set a tone that gives “permission” for people to bring their thinking to the table.

Embracing new ideas

At Deloitte, Swiegers is listening to his workforce very carefully and seriously. Three years ago, the firm introduced an Innovation Zone to act as a net for staff-generated ideas.

“It’s brought energy to the place and people have created things that we never ever thought would happen,” says Swiegers.
Swiegers has advice for other leaders grappling with changes to their organisational culture. First, you must give people direction and challenge them. Second, you must pick the right people to lead projects. “And third, if you get out of the way (things) normally happen,” he says.

Persistence is required to change culture. “Make sure, if you are the owner or the CEO, that the new culture is one that you are comfortable with. But also don’t try to implement it until you have road-tested it with people to see how they respond. And then have the courage to stay the course.”

Courage aside, Ann Herrmann-Nehdi is convinced that brain power is the key to creating an organisational culture that fosters success.
She says getting inside the head of staff, and customers, is the best way to succeed.

“The brain is something that we take for granted,” she says. “And it’s probably one of the most critical pieces of equipment that we have available to us – both as individuals and as teams and organisations.”