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Developing a transformational culture

DAVID LIDDLE

Imagine working in an organization with a clearly defined purpose and set of core values which connect us with our organization, with one another, and with our customers. Where our leaders are committed to unlocking our inner brilliance and engaging with each of us as human beings — during the good times and the bad. Where each voice is heard, each contribution is valued, and our differences are a source of celebration.

Imagine our organizations where our managers value and nature our happiness, our health and our harmony. Where mistakes become opportunities to learn and grow, and where failure becomes a catalyst for insight and innovation.

Imagine our organizations thriving and growing, where boardroom executives listen and respond to the needs of our diverse stakeholders. Where investments can be made safe in the knowledge that our organizations will act responsibly and justly. Where profit and integrity go hand and hand, and where corruption, exploitation and abuse of power are challenged and resolved through fair, transparent and robust systems of governance and accountability.

Imagine all of this in an organization which recognizes it has a responsibility to our planet, and which works hard to protect the rich and diverse ecosystems within which we all live, play and work.

At a time when organizations are straining every sinew to build back better following some of the most turbulent times in the last 20 years, it is becoming increasingly clear that it is not possible to emerge with the old cultural paradigms still in play. Power, profit and process are no longer symbols of a successful organization.

If we are to build the kind of organizations imagined at the beginning of this chapter, we need a new form of organizational culture — a transformational culture which will allow organizations to continually adapt, transform and grow as they deal with the pressing challenges of today — and others that may yet be around the corner as we gradually emerge from the COVID-19 pandemic.

A new cultural paradigm

Culture is the greatest asset, or the greatest liability, an organization has. Yet, for so many, culture is barely talked about and it is the only asset, or liability, that no one has direct ownership of. It is widely misunderstood, routinely ignored; yet a potential source of riches when it is managed well.

As an asset, good company culture can drive employee experience and engender trust and respect. It can create safe and healthy workplaces and ensure customers, investors and stakeholders receive the very best that the company has to offer. In a good culture, customers and employees are naturally inclined to spread the good word and become an advocate and supporter for what you do. Conversely, when cultures go wrong, they can become a liability. They can be stifling, toxic, dysfunctional, destructive, corrosive, divisive, fear-inducing and unsafe places to work within, or to do business with.

Current cultural orthodoxies are not working, are no longer fit for purpose and are unravelling before our very eyes. We can either leave the development of our organizational culture to chance, or we can actively develop the culture in a way which ensures our organizations will be competitive and sustainable long into the future. The smart investors, the smart candidates, and the smart customers will choose the latter.

What is a transformational culture?

A transformational culture is an organizational culture which is fair, just, inclusive, sustainable and high performing. It offers a new cultural paradigm and a practical framework for organizations which are committed to putting their purpose, their people and their values first.

A transformational culture is suitable for organizations of any size and in any sector, bound by a common purpose to develop a workplace where the success of the organization and the success of its employees, customers and stakeholders are inextricably aligned.

In a transformational culture, the HR systems and management processes which promulgate mistrust, fear, injustice, exclusion, blame and retribution are supplanted with new systems and new processes which institutionalize trust, fairness, learning, growth, dialogue, inclusion, insight and collaboration. This new form of organizational culture requires a significant shift in focus and emphasis. But the rewards will be great, measured in terms of enhanced competitive advantage, attracting investment, enhanced brand values and the ability to attract and retain top talent.

The Transformational Triangle™

What does a transformational culture look like in practice?

The Transformational Triangle model above represents the three elements of a transformational culture: transformational HR, transformational leadership and transformational justice. These three elements work in harmony to influence the development of a transformational culture.

Transformational Leadership: The transformational leader demonstrates an alignment of their behavior with the purpose and values of the organization. They know it is important to walk the talk, because they understand that they are a role model — that the way they behave sets the tone for the culture of their organization. Moreover, it defines the climate and the terms of engagement (the micro-culture) within their teams, divisions and departments. Transformational leaders and managers act with courage and kindness. They listen actively, they respond constructively, and they lead with integrity. Within a transformational culture, leaders and managers possess the courage, the confidence and the competence to spot and resolve concerns, conflicts and complaints constructively. Leaders and managers must also be empowered to take action to resolve issues at work rather than subcontracting problems to the HR function, or relying on the popular management norms of extensive inaction or expensive overreaction.

Transformational Justice: A transformational culture is also about enabling a radical shift in the way that our organizations think about justice. Justice is at the heart of a civilized society, but the question begs to be asked: do our organization’s rules, procedures and policies deliver justice? I would suggest not. Transformational justice is a new model of justice which balances the rules of the organization, the rights of the employee, and the need to generate fair, just and inclusive outcomes when things go wrong. At its core, it is about reducing harm, building trust, protecting relationships, promoting psychological safety and creating opportunities for insight, reflection and learning. Transformational justice replaces the retributive models of justice which are deeply ingrained throughout organizational processes such as the traditional performance management, discipline and grievance procedures. These retributive justice processes are concerned about risk mitigation, blame and punishment. They are harmful, damaging and divisive — and worse still, their sheer existence invokes an adversarial and confrontational mindset and dynamic in teams, departments, divisions and across entire organizations.

Transformational HR: If organizations are going to adopt a transformational culture, the human resources function must take urgent action to become purpose, people and values led. HR must transform itself into an overarching people and culture function and it should act now to release itself from the burden of its perceived proximity to management. The term ‘business partner,’ so casually used, is a divisive and loaded term which results in HR being perceived by many as the ‘long arm of management.’ This perception of systemic bias impedes the effectiveness of HR and it erodes trust in its role and its systems. For HR to remain a trusted and effective function in our organizations, it must rise above the paradigms of power, hierarchy and control. It must become obsessed with delivering great employee experience (EX) and becoming a catalyst for world-class customer experience (CX). HR should be the function within our organizations that connects EX with CX.

The Transformational Culture Model

To assist with this transformation, I have created a powerful organizational change model, which is set out below.

The Transformational Culture Model™

The Transformational Culture Model offers a blueprint for a progressive, values-based and people-centered organization. It is a blend of interconnected elements which span an organization’s entire ecosystem. The model can be used to support the process of designing, deploying and sustaining the necessary changes which will deliver a fair, just, inclusive, sustainable and high-performance organizational culture. The application of the model is supported through enhanced people processes, management systems and leadership strategies and behaviors. While offering a cultural framework, it is not prescriptive. The model is designed to adapt and flex to meet the organization’s unique sector, maturity, context, geography, needs and circumstances.

The Transformational Culture Model comprises three core elements:

1. The Transformational Culture Hub: this is the cross-functional body which supports the design, deployment and evaluation of the transformational culture.

2. The eight enablers of a transformational culture: these are the elements which drive and sustain a transformational culture.

3. The measurable impact of a transformational culture: these are the 7Cs which result from a transformational culture. They also provide the fuel to turbo charge its integration across your organization.

A detailed description of the role of the hub and 7Cs can be found in my book Transformational Culture.⁵⁰

In this article, we look in detail at the eight enablers of a transformational culture. The eight enablers are the central part of the Transformational Culture Model and operate together to form a whole system.

Enabler 1: Values First

Values are the golden thread that runs through an organization. They bind a transformational culture together by aligning an organization’s purpose and strategy with its agreed behaviors and the overall customer and employee experience. Your values should reflect the kind of organization you are and the kind of organization you want to be. In other words, whether written or unwritten, the values of your organization are perhaps one of its most valuable commodities and they should be authentic and aspirational.

To define an organization’s values, one first needs to be clear about its purpose. The purpose of your organization defines the reason it exists. Leaders need to think hard about how to make purpose central to their strategy. Avoid generic-sounding purposes such as ‘making the world better’ or ‘delivering excellence’ as these are meaningless and increase suspicion that this is a corporate PR exercise.

Purpose and values provide a solid foundation to the organization’s employee value proposition (EVP). They act as a glue which galvanizes and motivates the workforce and they provide a pivot point around which changes are delivered.

Enabler 2: Evidence Based

The use of data and evidence to inform and evaluate a program of cultural change is central to its short and long term success. Without the evidence base, and the necessary data to help us plan, it is like embarking on a journey in the dead of night, in someone else’s car, not knowing where you are going, without a map and with a phone which we forgot to charge. To ensure that it has maximum impact, and can be sustained, the design and deployment of a transformational culture requires an evidence-based approach from inception.

People and culture professionals (HR), managers, leaders, employees, unions and other stakeholders generate an incredible amount of management information, much of which can be applied to a process of cultural transformation. The data gathered as part of developing a transformational culture can be used to support the development of a business case, to identify gaps, hotspots, trends and patterns in the business and to provide valuable baseline data, against which the impact of the cultural changes can be evaluated over the short, medium and long term.

Enabler 3: The People and Culture Function

Continually evolving and adapting, the HR profession is perhaps one of the most transformative of all organizational functions. The ever-changing legal landscape, digitalization and globalization, coupled with continuous pressure from leaders to recruit and retain top talent and achieve more from their ‘human capital’ has placed greater and greater pressure on the modern HR professional.

As organizations strive to build back better, HR yet again stands at a crossroads. The existing HR orthodoxies are being challenged and the meaning of HR is being hotly debated. HR policies and procedures, which once seemed so solid and reliable, are now being shown to be retributive, damaging and destructive. HR’s ability to deliver strategic value and to attract and retain talent is being weakened by persistently low levels of employee engagement and productivity, increasing levels of employee activism and rising levels of inequality. HR needs to adapt quickly to this new reality and must reject the dogmas and orthodoxies which have acted as a drag on the potential of the HR function for too many years.

Enabler 4: Leadership and Management

Our leaders are integral to the nature of the organizational culture and managers are integral to the climate within a team or department. The way in which a leader or manager behaves is perhaps the single biggest factor affecting organizational culture and climate. The way that our CEOs, executives and managers behave creates the unwritten cues and clues for the rest of the workforce. Many managers and leaders do not realize that through their actions, interactions and reactions (AIR), they are shaping the climate of their teams and the culture of their organization. A transformational culture offers them a new set of cultural norms within which they can choose to behave and by which they can be held to account for the choices that they make.

Enabler 5: The Resolution Framework

The Resolution Framework⁵¹ epitomizes transformational justice. It replaces an organization’s retributive justice systems, including performance, discipline and grievance procedures, with a single, fully integrated structure for handling and resolving concerns, conduct, complaints and conflicts.

The Resolution Framework comprises several elements which make it a highly effective policy in a contemporary and progressive employee handbook:

• It is values based and person centered.
• Dialogue has primacy.
• Retributive justice has been replaced. Restorative justice and procedural justice have been combined to create a powerful model of transformational justice.
• A new triage process and resolution index are used for assessing the most appropriate route to resolution in each case.
• There is increased use of restorative justice processes, such as facilitation, mediation, coaching and team conferences.

Enabler 6: Well-being, Engagement and Inclusion

Employee well-being, engagement and inclusion are now so interwoven and so interconnected that I believe they should now be considered as a single discipline. These three elements are central to overall EX and as a result they hold the key to delivering great CX. I have been involved in the areas of well-being, engagement and inclusion all my working life. I have seen policies, strategies and programs come and go, yet the ability to deliver a happy, healthy and harmonious workforce still eludes a great many organizations.

Why is this? One of the key issues is that the systematic failure by a great many organizations to treat conflict as a strategic priority is a direct cause of low engagement, poor mental health and exclusion at work. Engagement programs, well-being initiatives, HR procedures and zero tolerance policies will not work until the issue of how we handle differences, disputes and dissent effectively is resolved. The irony is that the processes and the initiatives that our organizations deploy exacerbate stress, worsen fear and deepen anxiety. These major issues which can be resolved by implementing a transformational culture and by aligning well-being, engagement and inclusion.

Enabler 7: Sustainability and Social Justice

Sustainability and social justice are pressures which have barely appeared on the risk register of most organizations. Virtually overnight, that has all changed — to the extent that these two imperatives will become the defining characteristics of the 21st century.

The pressure on organizations to respond to the threats of climate change is great. In an attempt to secure a position of leadership in the area of climate action, more and more investors are investing in companies which are working to achieve net zero carbon emissions and are committed to environment, social and corporate governance (ESG).

Social justice and the development of an inclusive economy is another imperative which has moved off the streets and into our boardrooms and offices. Historically, our workplace cultures have been influenced by forces from within the organization or from a well-managed group of external stakeholders. However, through long-term lockdowns we saw a profound shift in society in terms of expectations around justice (witness the Black Lives Matter and #MeToo movements).

The widespread reorientation of the employee’s relationship with the employer, and with society at large, is profoundly changing company culture. The successful CEOs and executives will recognize that the culture of their organizations must align with the growing wave of employee and social activism, whether that comes from within or without.

Enabler 8: Brand, Reputation and Risk

Open any newspaper or visit any newsfeed and it is plain to see that the culture of our organizations, the behavior of our leaders and the way we treat our employees have a significant impact on the reputation of our companies. Reputation is based on the behaviors, competencies, values and communications exhibited by a company. As Ed Coke, director at Repute Associates in London explains, if organizations underperform against expectation in any one of these areas, the ultimate outcome — the trust that stakeholders place in a company — can be compromised.

The relationship between leadership and culture is central to an organization’s brand and reputation. It follows therefore that clarity, consistency and appropriateness of communication have important roles to play in employees’ and stakeholders’ assessments of leadership. Taking each of these attributes of leadership and codifying them, whether formally or informally, within a workplace, and — critically — actively and consistently demonstrating these attributes, establishes company culture.

At this time of great uncertainty, and with the need for something solid and tangible to work with, the Transformational Culture Model and the eight enablers of a transformational culture offer a flexible blueprint for a modern and progressive organization. But for it to deliver maximum and sustained impact, the model requires fresh thinking on the part of our leaders, managers, unions and other key stakeholders. This is a model that drives a new mindset, a new working paradigm and a new set of behaviors. It requires courage and a commitment to change. Rising above the challenges that are being thrust upon us, whether they are coming from COVID-19, the resulting economic shock, geopolitical changes, or social and employee activism, will require our organizations to be ever more fleet of foot, predictive and proactive.

About the author

David Liddle is CEO of the transformational culture consultancy, The TCM Group and founding president of the Institute of Organizational Dynamics. He is the author of two books Managing Conflict (Kogan Page/CIPD) and Transformational Culture: Develop a People-Centred Organization for Improved Performance (Kogan Page, 2021).

Footnotes

50   David Liddle, Transformational Culture, Kogan Page, 2021.

51   Liddle, D. (2021) The Resolution Framework. A fully integrated approach for resolving concerns, complaints and conflicts at work, www.resolutionframework.com