B (3:53)

Well, it's really interesting because you have this very hard problem and then you have a very simple solution. Yes, you want to change the culture and you say create stories, which seems easy.

C (4:05)

Well, let me start with an example and my co author's experience at telsp, which was a Brazilian telecom that was operating in a highly recognized regulated environment, was about to move into a deregulated environment, facing whole new competitors and whole new technologies at the same time. Also, all that was going to happen at once. They had developed a very, very top down culture, aggressively top down culture. So much so for example, that one of the cultural values was that no one in the organization could ride with the CEO in the same elevator car. Which is like sort of bizarre, I admit. But nevertheless, that was sort of the symbol of just how top down that organization had become, but successful.

B (4:49)

So yeah, you're going from a top down culture, which makes sense in a world where, you know, you kind of have a regulated monopoly essentially.

C (4:58)

Sure, that's basically what it was.

B (4:59)

And you're going to a much more still regulated but competitive market where, you know, faster, more innovative companies could eat your lunch. Right.

C (5:08)

Absolutely. Not a slam dunk at all that you would be the monopolist, would be the survivor in a much more competitive market.

B (5:17)

Yeah. So what did Manuel do?

C (5:19)

Well, the first thing is you have to change your strategy. You can't be just worried about addressing government defined goals. You basically have to go to a culture that values customer service and that values satisfying, delighting customers on their telecommunications needs. So the specific thing that he did, he bought a new technology, new product that the company was coming out with and it was a new technology, it didn't work very well. And so he called the helpline. So he got on the line with a part time worker at the helpline. Now previously, by the way, consistent with the old culture, there had been two helplines, one for senior managers in the firm and one for everyone else. Well, consumers. And so the first thing he did is he eliminated the one for senior managers and said, hey, we got problems with technology, we have to go to the helpline that everyone else has to go to. So then he is in this two hour conversation with this young man and they're still not having success. And so finally after two hours, he says, I want to let you know I'm the CEO of the company. And of course the guy doesn't believe him. So it takes a few minutes to convince him. And then what happens is he asks, Emmanuel asks, so what would you needed to know in order for you to be able to solve my technical problem with this product? And this young man generates a list of 14 things. This, this, this, we need this. And how much of this information do you have access to at this point? And the answer was two or three. And then it gets interesting. And then Manuel says, would you be willing with a couple of your colleagues to come to our next executive committee meeting? This is a senior group in the organization and explain what those 14 things are and what needs to be done in order for us to support this new product technology. Remember, this is deeply hierarchical organization.

B (7:07)

And he says, yeah, this is skipping a few levels. Yeah.

C (7:11)

Yes. Oh, just a few. This guy is not even an employee of tsb. It's an outsourced employee. He's a part time. It turns out he's a college student. Anyway, he and his colleagues come to this meeting, sort of, here's what we need to do. Here are the problems. Here are the 14 things. Manuel thanks him. They leave the room. He turns to the people, he says, okay, so here's the deal. In two weeks, we're going to have a plan. We're going to have a plan and ready to execute that will help us collect all 14 bits of information we need to support this product. Until we have that plan, we're going to suspend sales of this product because that's a customer oriented company, doesn't sell a product they can't support. And then you're going to present a plan for us about how we're going to get this information we need. You're not going to present it to us. You're going to present it to these people from the call center we just talked to. So you're going to be reporting to the call center employees and two weeks later, sure enough, it happens, they get the information and the product turns out to be very, very successful. So it's all good news. But from A cultural point of view. It just literally is a revolution in the way of thinking about organizational culture, about who's in charge, about what we value in this company. It's about valuing customers and customer relationships. It's not about hierarchy and bowing to the boss and doing whatever the boss has to say. So.

B (8:32)

Gotcha. Now, you have just told this story to me and to our audience. But in that story, there was no storytelling happening. Right. Like those Jones. That's correct. There was action. There was something that was done, maybe differently. It was effective because it was strategic. But where does the storytelling part of it come in? Where does that.

C (8:54)

It's interesting. Yeah. So what you do is you engage in actions, and the actions create stories that other employees share.

B (9:03)

Aha.

C (9:04)

Over time, you may come back and actually tell the story again and again. So that may happen later on. But when you're in the process of creating the story in the first place, you act, you do things that are inconsistent with the old culture but are consistent with some new culture. That's one of our criteria for being a successful story. It's got a break with the past, with a path to the future. And this example is just a classic of this. A clear break with the past. We saw no examples. We interviewed 60 or so business leaders across multiple industries, multiple firms, et cetera. We saw no examples. 0. Where successful culture change started with the announcement that we were going to change our culture. It's just cheap talk. It's just like. Just another thing. Here it comes. CEO wants to change the culture. Okay. And everyone says, sure, we'll change the culture, sir. But no one believes that it's really a commitment. No one. Because it's cheap talk, it's easy to back off of it, but action is much harder to back down, back off of, walk back, than words. So, yeah, you act first. The stories then follow. But these business leaders don't write down the stories. They don't plan them out in detail or anything like that. They emerge in an authentic way because they reflect their deeply held beliefs about what the organization needs to do. And then those stories start getting shared. And what happens is those new stories that support a new culture replace the old stories that supported the old culture. And then as that diffuses out the organization, that's how we see culture change.

B (10:41)

Yeah. I mean, if you want to change the story of. That's not how we do things around here. You do it differently. And then people say, this is how you do things around here.

C (10:49)

That's exactly right.

B (10:50)

So it seems very important not to make up the story, but to make the story.

C (10:54)

Yeah, it's got to be one of our first criteria. We studied enough of these so we could actually describe stories that seem to actually facilitate cultural change and those that don't. And the first criteria is that the story has to be authentic to the person who's building the story. So, for example, if your values as a business leader are not customer oriented, and you say, we're going to build a customer oriented culture, no one's going to believe you. Employees can smell hypocrisy from miles away. The first criteria for this is that these stories have to be really authentic both to your personal values and also to your understanding of the strategic challenges facing the organization.

B (11:37)

Now, you mentioned personal values there. Like, how important is it to bring, like, the first person into it for organizational leaders?

C (11:47)

Oh, yeah. So our second criteria is they have to. The business leader has to star in the story. I know there's a lot of discussion in the management organizational change literature about top down versus bottom up. And I just want to say again, we saw no examples, zero examples of successful culture change that did not start at the top. That doesn't mean that these leaders don't engage the rest of the organization. They clearly do. But it starts at the top. And it starts when that's authentic. When a business leader behaves in ways that break with the past and give guidance to a new culture and that individual stars in their story. Now, other people will be there. So Manuel starred in the story at tailsp, but the whole executive team was there. Those are the people who create the stories. They tell the stories.

B (12:37)

Now, if you are supposed to feature yourself in your stories, like it or not, as an organizational leader, you are a character in the story.

C (12:47)

Absolutely.

B (12:47)

Can that come off like bragging that is going to hurt your efforts?

C (12:53)

No. That's a great question. And so there's a question of how can I star in my story and still be humble and open? Well, there's a couple things to realize this. The first is you're a business leader. People are watching what you do in depth, and they do that whether you want them to or not. So you are already starring in the story. The question is, what story are you going to build? Right. The second thing is you have to also understand while the culture change process starts at the top, it's important that they diffuse throughout the organization. The way that happens is a business leader builds a couple more stories. Because one story, people are still cautious. Is this real or not? But you do two or Three of these kinds of really radical things. And people start getting the idea. And then other people in the organization start feeling empowered by the possibility of that they could build their own stories. Sometimes that happens with other senior managers, business leaders in the organization. And by the way, as a business leader, you can see that you can go to another business leader and say, listen, I'd like you to do something that builds a story that is consistent with the news culture. Now, I can't tell you what that story is because it has to be authentic to you, but I can sort of see that happen. Let me give you another really great example of this. There's a company actually here in Utah called Traeger. You know Traeger Grill? I'm sure you do. The person who was running Traeger, Jeremy Andrus, was an investor in Traeger for a while, became convinced that Traeger had the potential for disrupting what was actually a very mature market, which is the outdoor cooking market, barbecues and smokers and things. But the organization that he sort of inherited had a really toxic culture. He basically closed up, put the organization where it was, and moved it here to Utah. Basically built a new culture from scratch. And one of the critical values of this new culture that he talked about, that he tried to show in his own behavior, built stories around, had to do with customer service. There was no limit on customer service. He comes in work on a Monday, and his sales VP comes in and says, did you hear what Rob did over the weekend? Who's Rob? Well, Rob's this first line employee. He has some responsibilities, but he's not a senior manager. He's just a guy in the office working hard, doing his thing. And apparently Rob somehow got. Got a phone call from a customer, a Traeger customer in Seattle. His Traeger Grill is not working. Now, this customer was a manager, sales manager at a Costco up in the Seattle area. And Costco, of course, is an important customer for Traeger. So this Rob listens to the phone call and diagnoses the problem, goes to the office, picks up the part that's needed, gets on an airplane, flies to Seattle, fixes the part, fixes the machine with the part, helps the guy season his brisket, gets back on the airplane, flies home. And then he comes in work on Monday morning. And it's no big deal. It's like he's just sitting at his computer doing his work. Well, of course, the sales manager at that Costco tells his boss, who is the Costco store manager, what Traeger did what Rob did. And that guy then calls the head merchant at Costco Corporate who then calls the VP of sales at Traeger who then tells the CEO at Traeger, did you know what your guy did? This is awesome. This is unbelievable. Level of quality of service. And Jeremy Anderson's response was, yes, the culture is happening. This is a guy who is building his own stories on his own.

A (16:33)

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B (17:09)

For many companies, culture is, you know, where they are, how people work together. And if you're talking about stories circulating at the water cooler and people passing these stories on, I wonder in a post Covid world and where there's much more working remotely, working from home, much more virtual work, how that affects the efficacy of these stories and just the distribution of these stories.

C (17:34)

So I recently came from a meeting with a group of managers at a well known consulting firm and I was just listening and I was listening to these CEOs and other senior managers talk about the challenges they're facing. And I came away saying what these people were saying was our organizational cultures are in tatters. They are in tatters. They're falling apart. We have for good reasons. I'm not saying, I'm not arguing against going home during COVID Obviously that was a requirement. But it's very difficult. Two things are very difficult where everyone's working from home. The first thing is it's very hard to build new stories because new stories are created when groups of individuals confront situations that actually test their old values. And so it's very hard to build new stories and it's very hard to communicate those stories. And Zoom and related Technologies is still a cool medium. We can't read the body language. The picture we see is 2 inches square. In a large meeting, we don't know the context. People are interrupting each other because they can't read the body language. And then they're dropping off and coming on and the dog's running through. I mean, all these things make it difficult, makes It a cool medium, makes it difficult to get the really emotion and affect that has to be associated with telling these stories that are really profound in many ways. And so between those two things, I think a lot of firms now are calling people back in, saying it's time to get back together. And there's resistance to do that. But one of the reasons to think about how to bring them in is to recreate these culture, the cultures that are in tatters now.

B (19:17)

You talked about the affect, right? Not coming across in video conference calls, for instance. One of the recommendations that came from your research is that organizational leaders need to be theatrical. What do you mean by that?

C (19:31)

Yeah, it's amazing, isn't it? I think you said it a little too. A little stronger than I would say. Turns out that many of the culture change stories that were created had a very theatrical element to them. That's how I would say it. Not all of them. And what is theater varies a lot. But let me give you a really short example of one. This is one of my very favorite stories in the book. This is by a friend of mine named Jeff Rodek, who was the CEO of Hyperion a few years ago. This is during a time when the company had been doing fairly well and there was a big downturn in the market. And he develops the new strategy in consult with a consulting firm. They put together a new strategy and they're going to have a big meeting among the top management team to sort of talk about the strategy and its implications, one of which is going to be a pretty significant layoff. So they're getting ready to do that meeting. And it turns out that they had already. Their planning people had already already booked a meeting room at a very, very fancy hotel in San Francisco. And Jeff says, we cannot have a meeting to decide to lay off a very large percentage of our employees at that hotel. It's just not right. And his assistant says, yeah, we've already paid for the hotel. So he says, we're going to change the meeting. So everyone shows up at the meeting and they come into the dining room and it's exactly what you'd expect. It's all fancy china and stemware and. And then they sit down for dinner. And the first course is rolls and water, bread and water. And then the second course comes out and it's also just bread and water. And then the third course, it's just bread and water. And then he stands up and says, listen, we don't deserve to celebrate with a fancy dinner here. We only deserve bread and water. That is so theatrical. It's amazing.

B (21:25)

Right?

C (21:26)

And talks about the strategy then and the cost. And it says, ends the meeting by saying, I'm going to schedule this meeting room for one year from now, and we're going to have a real celebratory dinner. We're going to deserve it, because tonight all we deserve is bread and water. I guarantee there's not a person in that room who forgets that experience because of the theatricality.

B (21:47)

We know the old saying, hearts and minds.

C (21:50)

Right.

B (21:50)

How do you create stories that appeal to both? Because the stories will go on being told.

C (21:57)

Absolutely. And they evolved, too. But we'll start with the head. We had heads and hearts is how we use it in languages. But you're about hearts and minds thing that harkens back to Vietnam. So I'm a little worried about that. So show my age.

B (22:09)

Right, Right, right. No, it does have that military connotation.

C (22:11)

It does get the hearts and minds of the people. So we use heads and hearts.

B (22:14)

Heads and hearts. Okay.

C (22:15)

And we start with heads. And the reason we say that is that if there's not a business case for culture change, then you should not engage in culture change. If a business leader engages in culture change without a strong business case, without the notion that you need to change your culture to implement your strategy, then it's an ego trip. Then, you know, think what you're saying. I want to change the culture so that everyone's values are kind of like my values. Seriously, that's the most egotistical thing imaginable. That's not going to work. So you have to start with a business case, and it has to be very tight. And it has to be. Our old strategy was X. Our new strategy is Y, and our culture needs to change to Y or we're not going to be successful. And the economics need to be compelling. However, culture change is about changing people's sense of purpose at work, their direction, their sense of identity, how they interact with each other. Very, very personal stuff. One reason culture change is so hard is because it requires us to change some basic assumptions about who we are at work and how we work with each other. It's like change resistance on steroids. And so we've also seen that a lot of these stories that were built also appeal to what Lincoln called the better angels of our nature. They went beyond just, yeah, we're here to make more money and drive these other people away. Although that's part of it is to beat the competition. I got it. But it's also. And in doing so we're going to satisfy our customers. We're going to delight our customers more than they have been delighted in the past. We're going to give our employees an experience that they've never had before of being involved in creating this new business and on and on. So those kinds of things appeal to the heart. If it's just heart, we didn't see any examples of successful culture change that was just about, let's just be better towards each other. Sort of Bill and Ted. Let's just be excellent towards each other. It turns out not to be a compelling organizational change story, but if you have head and heart, then there's a good chance you'll be successful.

B (24:29)

Is there anything you need to do to spread the stories? It makes me think of usaa, the insurance company.

C (24:35)

Sure.

B (24:36)

They have something that they do called mission moments, where at the beginning of meetings they will stop and talk about a customer.

C (24:43)

Absolutely.

B (24:44)

Their history with a company. This serves military family members. So they'll talk about that person's service and then sometimes tell stories of solving that customer's needs. You know, talk about a great way to keep telling stories and then stay grounded in what you do as a company.

C (25:02)

That's right.

B (25:03)

But what do you recommend for telling the stories in informal ways or do you just let stories take on the life of their own?

C (25:10)

No, we're going to do both. In the beginning, when a story is told, they spread like wildfire through an organization. I mean, within a day, everyone in the company knows what's going on. Interestingly enough, for those who understand why we need to change the culture to align with the strategy, these employees take pride in this, these stories, they said, look what our CEO is doing. This is so cool. He is actually taking our organization and moving it in a way that needs to happen. So in the beginning, our findings suggest that. Interesting enough, don't be too aggressive in the beginning about taking having a more explicit communication policy because that can be a little self serving, a little marketing going on. That said, at some point you have to start saying okay. Usually it's when some other stories are also being built in the organization that are also culture changing in nature, you start looking for ways to communicate those through formal channels. And that's you have online magazines and chat rooms and those kinds of things. It's great if you can get the press involved. Again, that's not to talk about you as the business leader, but to talk about the culture change. So let it sort of diffuse on its own and then by the way, shortly thereafter build Another story. So you get that one backed up. And after two or three of those stories that you've built, you continue to build them as well over time, then others will start building, and then you can go to a more formal communication model.

B (26:42)

Yeah, well, the previous culture was made up of lots of stories, too. So you have to.

C (26:46)

That's correct. You're going to have to deconstruct the old one. It's not actually. That's the wrong language. It's kind of subtle. Because one question we're asked, and it's a totally legitimate question, is a lot of people join a company because they like the old culture they selected into it, and they're actually really good at it. And now you're putting a new strategy in place that requires a new culture. Isn't that bait and switch? Isn't that unfair? And the answer is, yeah, it is. And some people who have been deeply loyal and deeply committed to the organization's old culture can feel very much disenfranchised. And you know why? Because they are being disenfranchised. That's just it. And some of those can be a business leader's good friends. They can be functionally very competent. But if the strategic analysis is correct that we have to change the strategy, then it follows that we have to change the culture. And the failure to do that can be deeply problematic. So as a business leader, I don't want to lose that functional expertise. I don't want to lose that loyalty. I'm going to go to those people and try to bring them into the fold. But if they cannot or will not make the transition to the new culture, they may have to be let go.

B (28:00)

And if they do, you tell those stories and celebrate them.

C (28:04)

Exactly. Total win.

B (28:06)

Can leaders at any level do this?

C (28:09)

So, you know, the answer is probably yes. But our experience. I'm not going to go. I don't want to go too far beyond the data. Our estimate is that if you have 50 or so people who are working for you, that you have an organizational culture, whether you know it or not, and so you can take responsibility for changing that culture. We 50 or so, because at that point, people may be dispersed, they may not see each other all the time. And what happens is culture is the control mechanism that fills in the blanks when policies and procedures don't talk about what needs to be done. And as the organization gets larger and larger, then you start seeing culture becoming more important.

B (28:50)

You mentioned over time, the new stories sort of replace the old stories. How do you know when you're done. How do you know when the culture has been shifted?

C (29:00)

So in an important sense, you're not ever done? Because cultures, you either invest in a culture or it drifts and dissipates. People think, well, maybe this culture is not that important. So there is a sense in which you have to continually invest in stories that build your culture, that continue to reinforce the strategy. Besides that, strategies also change over time. Context shifts. So you may have to change your culture. Fine tune it a little bit if you begin a culture chain process. And I've seen this, I won't name companies, but many years ago I was contacted by a firm that was competing against a very innovative competitor. And this particular firm was known, this is Silicon Valley. It was known throughout the Valley as being risk averse. Its competitor. When they came up with new technology that didn't work, they saw that as an opportunity to learn. And this company, when the product didn't work, they treated it as an opportunity to find out who was responsible so they could fire them. Well, guess what? They weren't innovative at all. And so they came to me and said, we'd like you to help us change our organizational culture from being. It starts with we did a six month study and we found out we have a risk first culture. Six months. This is like a three minute conversation with any employee. Okay. It's not a very complicated problem. Another side note, we saw no zero successful culture change efforts that began with a study of the current culture. None. That's a way of usually avoiding culture change. So they did this study for six months. They decided they were risk averse and they said, what we like to do is you to come in here and we'd like you to help us get rid of our old culture and build this new culture. And we'd like this done in six weeks. I distanced myself from that opportunity. The whole concept was flawed because culture change is an ongoing process that you continually build new stories. And it's not just you that builds the new stories. Employees throughout the organization build their own stories and they continue to strengthen and rejuvenate the culture that the organization.

A (31:17)

That was. Jay Barney, professor at the Eccles School of Business at the University of Utah, Speaking with HBR IdeaCast host Kurt Nickish, Barney wrote the book the Secret of Culture how to Build Authentic Stories that Transform youm Organization, as well as the HBR article Create Stories that Change youe Company Culture. HBR on Leadership will be back next Wednesday with another handpicked conversation from Harvard Business Review. If this episode helped you. Please share it with your friends and colleagues and follow the show on Apple Podcasts, Spotify, or wherever you listen while you're there. Consider leaving us a review when you're ready for more podcasts, articles, case studies, books and videos with the world's top business and management experts, find it all@hbr.org this episode was produced by Mary du OnLeadership's team includes Maureen Hoch, Rob Eckhardt, Erica Trucksler, Ramsey Kabaz, and Bartholomew and Nicole Smith. Music is by Coma Media. If you've ever hired for your small business, you know how important it is to find the right person. That's why LinkedIn Jobs is stepping things up with their new AI assistant, so you can feel confident you're finding top talent that you can't find anywhere else. Hire right the first time. Post your job for free@LinkedIn.com onleadership. Then promote it to use LinkedIn jobs new AI assistant, making it easier and faster to find top candidates. That's LinkedIn.com onleadership to post your job for free. Terms and conditions apply.