6. The Unseen Hand That Propels Organizational Action—Business Practices
Chapter Contents
How We “Discovered” Business Practices
How “New” Are Business Practices?
Overview
This chapter describes the overarching concept of Business Practices and how we came to recognize it as a surrogate for culture. It provides a definition of Business Practices and how they apply in various settings, along with examples and a discussion about related thought leadership. This is a core chapter and may be valuable for future reference.
Introduction
In applying Outcome Narratives and Right vs. Right, we realized we were overlooking a concept—the one that made culture tangible and actionable. Business Practices are not anything new per se; they have been lurking around the edges of culture transformation all along, and enable us to describe the unseen hand [1] (that is, organizational expectations and habits—the autopilot) that propels people to act in certain ways. They also make culture accessible and relevant to business people and give us a new lens for peering at it.
What’s the Problem?
One of the biggest issues with culture is definition. A group of 10 people may give 12 different definitions! In fact, as early as 1952, two anthropologists from Berkeley, Alfred Kroeber and Clyde Kluckhorn, identified nearly 200 different culture definitions.
Organizational culture is a complex subject. In Chapter 1, “Introduction—An Overview of Tangible Culture,” we included a list of 11 culture categories from Schein’s book Organizational Culture and Leadership. The topics again are as follows:
Observed behavioral regularities when people interact
Group norms
Espoused values
Rules of the game
Climate
Embedded skills
Habits of thinking, mental models, and linguistic paradigms
Shared meanings
“Root metaphors” or integrating symbols
Formal rituals and celebrations
“Corporate culture plays a huge role in a company’s success or failure. But as a practical matter, you cannot run a business by examining culture every day. That’s where business practices come in. Business practices are the fundamentals of how work gets done. Focusing on them provides a level of clarity that drives results—and at the same time strengthens the culture.”
Bob Moffat
Senior Vice President, Integrated Operations
IBM Corporation
The culture definition we most often hear in business is “the way we do things around here” (according to Deal and Kennedy, this is attributable to Marvin Bower—the man referred to as the “father” of modern management consulting). Interestingly, in Schein’s list, this definition is associated only with rules of the game. Also interesting is that many culture transformation efforts concentrate on what (that is, priorities through values and principles) and not how (specific actions people are to take)—despite the focus on how in their definition.
Schein provides an elegant definition of culture:
... a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.
That’s a mouthful, but elegant because it brings the relevant dimensions, and indicates how culture develops and is sustained over time. We might humbly suggest expanding the definition a bit into notions such as tacit culture development, creativity and innovation (rather than just problem solving), and “catching” the culture (because it is often learned from participating rather than through explicit teaching activities). However, these additions would make the definition more complex and harder to apply.
In simplifying these complexities for business, the iceberg analogy is often used. As with the iceberg, only small parts of culture are visible, such as behaviors, norms, and cultural artifacts (for example, dress, office structures, and artwork). The majority—such as beliefs, assumptions, shared values (as opposed to stated values), and expectations—are important but harder to see and more difficult to act on directly.
For business people, this is often confusing and even frustrating. They know culture is important. They may have joined, or left, a company based on “cultural fit.” They may remember a project failure where culture was a villain. They may think that culture is a current barrier to business performance.
How We “Discovered” Business Practices
We uncovered the power of Business Practices as a surrogate for culture as we wrestled with our integration challenge. In Chapter 2, “We Can’t Do This the Traditional Way—IBM’s Acquisition of PricewaterhouseCoopers Consulting,” we mentioned a debate about the cultural alignment between BIS and PwCC.[2] The assessment data told us that we had work to do, but common elements indicated to some that we had the same cultures.
One exchange was fateful. It went something like this:
“The Operating Committee has asked for some culture information. I think we should remind them of the operating principles they have developed. Agree?”
“Well, we really want to tell them about our culture assessment and make sure that they understand we have some work to do.”
“We don’t all agree with those assessment results. Don’t forget—we had the same value statements. Our organization structures were almost identical, and the Operating Committee quickly agreed to the operating principles—all strong indications we have the same cultures. No need to concern them unnecessarily.”
“Could we set aside the C word for a minute? I am beginning to think that calling it culture is part of the problem. Let’s take a look at one operating principle. How about, ‘We execute with speed.’ They’re agreed on it, right?”
“Yes.”
“Here’s our concern: BIS has historically executed via process. They have a process for everything and make sure everyone knows his or her role—then they do-it-as-fast-as-they-can. Here’s PwCC’s approach: They may or may not have a process, and if they have one, partners can go around it if they need to.”
“You mean we have to fix that?”
“Well, I don’t know how to honor process and go around it at the same time—at least not unless we clarify when each applies. And we need the top leaders to make this kind of decision.”
“Well, I agree we need to work on that. But I wouldn’t call it culture.”
“What would you call it?”
“Business Practices.”
Eureka! We found terminology we could agree on—and simply using Business Practices rather than culture changed our interactions. The Culture team saw Business Practices as a good representation of what needed to be addressed (even though a subset of the overall topic of culture). Others on the Integration team thought we were finally getting to some real business issues, not soft, squishy, feel-good stuff.
This was a pivotal moment—one that addressed an important and frustrating issue.
“The culture you have results from what you do. Therefore, what you do—Business Practices—determines your culture (and your culture determines your Business Practices). Not to knock books, articles, training on culture—they are of some value. But everything I’ve learned really worthwhile about anything—including culture—was learned by doing. No different: It is culture by doing.”
Jack Grayson
Chairman, APQC
Co-author of If Only We Knew What We Know
Definitions
Business Practices are the rarely documented how that propels what people do. They are patterns of behavior and action—an inertial guidance system, so to speak—shared across the organization. They are often communicated to new people by someone “showing them the ropes.” They are truly what make organizations unique. This is what Lou Gerstner referred to in Chapter 1. Even though companies may describe themselves in similar ways to other companies, what they actually do will differ because the people are responding to distinct sets of unwritten rules.
Business Practices exist everywhere—for every type of work the company does, from establishing strategy, to executing processes, to using technology, to applying policies, to leading people, to identifying what achievements will result in what rewards, and on and on. They represent expected actions in certain situations, although not necessarily because they are the best or “official” answer (in fact, some are practiced despite the fact they cause problems). For example:
The Business Practices for processes often tell people
Who should get involved in what specific work steps and in what ways.
How certain decisions are made.
When escalations should occur and why, and how they are to be handled.
What mindsets people are to hold when making key decisions.
How mistakes and problems are to be handled.
The Business Practices for policies often include
Expected degree of adherence.
When and how policy exceptions will be entertained.
Who decides what to do for exceptions.
When we ask people how their company handles certain things, they readily highlight the Business Practices through statements such as
“Our senior leaders often get involved in operating-level decisions—it’s the quickest way to get the help we need as we grow rapidly.”
“We’re expected to resolve things at this level and ask for senior leader help only if we can’t decide what to do.”
“We work to cultivate relationships with our customers, so we assign people to an account and leave them there for years.”
“We concentrate our attention on the biggest deals, which means we’ll change sales assignments fairly frequently.”
“Leaders at all levels need to focus first on making sure we meet our business commitments.”
“Leaders need to balance their attention on achieving business results and making sure people feel they are adequately supported and morale is strong.”
You probably recognized some Right vs. Rights—and they often are. And you may have found yourself asking a few questions—which is part of understanding Business Practices.
Business people easily tell you these things about their businesses, although they probably do not call them Business Practices. What the definition of Business Practices does is simply put a label on business dialogue and knowledge that already exists.
Here are some questions that will solicit the Business Practices statements previously mentioned:
How do you prefer to make decisions within your organization?
How do you handle problems and disagreements?
How do you prioritize competing requirements?
Now compare those questions to these:
What are the values around here? And I don’t mean the ones on that poster over there—rather, what are your real values?
What are your company’s norms?
Are there any important assumptions and beliefs we need to consider?
What are your mental models?
You get the picture.
“It is very difficult to ‘show’ the tangible culture levers that drive companies’ transformation. The concept of ‘Business Practices’ comes as a lifesaver to demonstrate how important is this force that, rightly applied, propels business ideas and projects into success.”
J. Randall MacDonald
Senior Vice President, Human Resources
IBM Corporation
The primary benefit we get from Business Practices is tangibility to business people. And they are flexible enough to incorporate other important considerations such as mindsets and different expectations for certain circumstances. For example:
“We believe the best way to motivate our workforce is through work-life balance.”
“The contract is for five years, but we think about it as a permanent partnership between our companies.”
“Generally, we expect Finance and Legal to advise on decisions, but when compliance or significant business risks are involved, they are decision makers.”
Business Practices are a new lens to use for identifying areas to improve and for ensuring that planned changes will work well. They shine a spotlight on important drivers of action. Like flying over a city, you can see the smog that you could not see while you were on the ground—perspective allows you to see it clearly. The definition of Business Practices helps people to see and discuss things that have been around them all the time.
Business Practices are also complementary to other techniques, such as values, principles, or behavior statements. In fact, we would say these other techniques provide direction, and Business Practices help people apply them to daily action.
Without considering the Business Practices, it is too easy to assume agreement when it does not actually exist. Remember our integration effort? Agreement on key priorities led to the assumption there was agreement on how to fulfill those priorities. With Business Practices, it is easy to probe deeper.
Here’s one discussion we facilitated that proves the point:
“So, we’ve agreed to create and sustain trust through keeping our commitments, valuing our differences, admitting mistakes, and apologizing and accepting responsibility while avoiding blame. Great decisions so far. Let’s take it to the next level and consider the Business Practices we expect to see.”
“Well, this is great for me because now I can quit giving everybody status on everything. I waste a lot of time keeping people informed, especially when I’m on track with everything. I’m glad we’ve finally agreed to trust each other.”
“Now wait a minute. Status is still important. Remember that I get questions from my leadership team. And if I’m not close to the details and can’t tell them the latest—well, you know what happens....”
Without a discussion of Business Practices, these assumptions would not have surfaced—at least not until they had caused problems. And that would have been a double whammy—remember these people were working on trust! Discussing how people should fulfill these agreements helped to surface disconnects before they caused trouble.
Examples
Business Practices are both common across an organization and somewhat different among the organization’s business units, often based on charters. For instance, Business Practices for decision making may differ significantly between Finance and Marketing. Creative decisions are often expected in Marketing, but because of compliance requirements they cause much trouble in Finance and Accounting.
Table 6-1 shows some example Business Practices. To demonstrate variance between organizations, we show some contrasting examples on the same subjects (which could become Right vs. Rights if these organizations needed to work together).
Table 6-1. Example Business Practices
Another way to surface Business Practices is to consider how stated expectations are to be acted out within the organization. In this way, Business Practices can support principles, values, and behavior statements. Table 6-2 shows some examples.
Table 6-2. Questions to Surface Business Practices
How “New” Are Business Practices?
Well, a strong case could be made that Business Practices are not new at all. In fact, we recognize that the term does come up periodically, although without consistent meaning. Our confidence that Business Practices are a helpful proxy for culture has grown since we first began to use the term in 2002.
As with Outcome Narratives and Right vs. Right, there are connections to thought leadership. For example:
1. Business Practices are a reflection of what actually occurs within organizations.
A study area in business ethnography is work practices—what people actually do. Work practices consider influences on how work gets done and what happens while work is being done—beyond what people say about it. Several thought leaders are important here, including Julian Orr, Harold Garfinkel, and Harvey Sacks, as well as IBM Researchers Jeanette Blomberg, a founding member of the Work Practice and Technology Area at the Xerox Palo Alto Research Center, and Melissa Cefkin, formerly of the Institute for Research on Learning. We consider Business Practices to be collective work practices that have bubbled up to a level of conscious awareness (if the right question is asked).
Communities of practice also reflect the significant role of practice for businesses. Communities of practice were first identified by Jean Lave and Etienne Wenger in Situated Learning, and have been encouraged through the Institute for Research on Learning and by John Seely Brown and others. Although often implicit, an important aspect is how practices become shared among people, which connects with our notion of Business Practices.
Carleton and Lineberry mention types of practices: organizational practices, leadership/management practices, supervisory practices, and work practices. In their examples, the relevant questions frequently begin with “how.” All of these practices are covered within our definition of Business Practices.
2. Business Practices are a manifestation of what people believe will work best given a context and set of circumstances.
Chris Argyris and Donald Schön developed an approach called Theory in Action, which “is founded upon the importance of programs stored in our heads that are activated by human beings as they are needed.” (Argyris) The associated concept of theory-in-use is a set of governing variables or values. Clearly Business Practices represent these kinds of “programs” and are learned over time on the basis of what has been successful.
In their book The Shape of Actions, Harry Collins and Martin Kusch look at variations that do and do not matter in different contexts. They have developed a framework for determining whether variations matter, and if so, to whom and in what context. Business Practices are adapted to contexts over time, which helps to explain differences across the same company.
3. Business Practices are a norm—a mode of action shared by many people.
Internally, IBM uses a framework called the Business Leadership Model, which focuses attention on strategic and execution elements to address performance and opportunity gaps. The execution element is adapted from the work of Michael Tushman and Charles A. O’Reilly III in Winning Through Innovation. Within execution exists a component called Climate and Culture where the primary focus is on norms. Business Practices are a type of norms, and we believe, a more tangible business expression of the idea.
Terrence Deal and Allan Kennedy, in Corporate Cultures, validate the importance of Business Practices by describing the manner in which strong culture companies communicate how they expect people to behave, handle procedures, and even have fun. They call these rites and rituals of behavior.
You may see additional connections not identified here.
We hope Business Practices will soon be discussed as frequently and as knowledgeably as business processes are today, and that business leaders will better recognize what actions to take because of this more tangible definition of business culture.
Benefits
A number of the benefits derive from surfacing and considering Business Practices.
Business Practices raise the collective awareness of how people actually do their work. Often, the things that are assumed and not discussed cause the problems (Rubin, Fry, and Plovnick). Talking about Business Practices can identify risks early and enable constructive discussions.
Business Practices provide a common, relevant definition of culture. Certainly culture is much bigger and broader than our definition of Business Practices, but it is a nice surrogate because it reflects what business leaders typically care about when they talk of culture. And they can be phrased to include some of the “below-the-water” culture elements such as mindsets.
Business Practices help people to recognize whether planned changes will work within the culture. Specifically considering the existing Business Practices can uncover important risks early—when they can be most easily addressed and/or the decision reconsidered.
Business Practices, when communicated, can help new members become self-sufficient more rapidly. Without this, they learn the organization’s expectations by trial, error, and observation, which takes longer and is more frustrating.
Business Practices can help you collaborate more effectively across organizations. Business Practices are automatic and can be the source of conflict. By knowing their Business Practices, organizations can highlight expectations and begin to address differences.
Application
The concept of Business Practices is foundational, so there are many ways to apply it, each depending on the ultimate use of the information.
If you ask the right questions, it is relatively easy to surface Business Practices. People may even tell you the difference between what should happen in certain instances and what actually does happen.
Table 6-3 documents some business topics and questions to uncover the associated Business Practices.
Table 6-3. Questions to Identify Business Practices
Finally, recognize there may be “blind spots”—areas where people will tell you things happen one way, but they don’t. There are a number of reasons, including workarounds and inconsistencies between stated expectations and what the organization rewards. For example, the values may say one thing, but recognition says something else, as it did in one company with a stated value of operational excellence yet with frequent recognition and rewards to “heroes”—those who went around the processes and standards. In other cases, “it depends” may muddy the picture. Two techniques to help: direct observation and outside, objective project resources.
Conclusion
Business Practices are a tangible representation of culture. They tell members how work should be carried out. However, because they are rarely documented, people must learn them on the job. Making Business Practices more visible can help explain what makes a company unique and effective, and even identify what gets in the way. Business Practices have a variety of uses, such as clarifying the meaning of principles, values, and behavior statements, and helping to surface conflicting expectations before they become problems.
Now we have all the elements: Business Practices, Right vs. Right, and Outcome Narratives. Let’s bring them together and show how they can be applied.
References
Argyris, C. Reasons and Rationalizations: The Limits to Organizational Knowledge. Oxford: Oxford University Press, 2004, p. 8.
Carlton, J. R., and C. S. Lineberry. Achieving Post-Merger Success: A Stakeholder’s Guide to Cultural Due Diligence, Assessment, and Integration. San Francisco: John Wiley & Sons, Inc., 2004, pp. 72–73.
Collins, H., and M. Kusch. The Shape of Actions: What Humans and Machines Can Do. Cambridge, Massachusetts: MIT Press, 1999.
Deal, T. E., and A. A. Kennedy. Corporate Cultures: The Rites and Rituals of Corporate Life. New York: Basic Books, 2000, pp. 4, 59–60.
Kroeber, A. L., and C. Kluckhohn. “Culture; a critical review of concepts and definitions.” Papers of the Peabody Museum of Archaeology and Ethnology, Harvard University, 1952, 47(1):1–123.
Lave, J., and E. Wenger. Situated Learning: Legitimate Peripheral Participation (Learning in Doing: Social, Cognitive & Computational Perspectives). Cambridge, New York: Cambridge University Press, 1991.
O’Reilly, C. A., and M. L. Tushman. Winning Through Innovation: A Practical Guide to Leading Organizational Change and Renewal. Boston: Harvard Business School Press, 2002.
Rubin, I. M., R. E. Fry, and M. N. Plovnick. Managing Human Resources in Health Care Organizations: An Applied Approach. Virginia: Reston Publishing Company, 1978.
Schein, E. H. Organizational Culture and Leadership. San Francisco: Jossey-Bass, 2004, p. 17.