The Chinese company had big plans to turn itself into a massive global business. Aetna had always had a strong record of responding to natural disasters (including the Great Chicago Fire of 1871 and the 1906 San Francisco earthquake). So you need to choose your battles. Below are the available bulk discount rates for each individual item when you purchase a certain amount, Publication Date: These discussions not only gave him insights about the staff but created a rapport between him and a respected group that disseminated his message both formally and informally. In fact, its fall stemmed from a creeping cultural erosion that had begun decades before the Enron debacle. After one colleague complimented another on his performance in a meeting, their team lightheartedly began a practice of handing out “gold star” stickers to recognize colleagues exhibiting strong character and candor. Culture trumps strategy every time, no matter how brilliant the plan, so the two need to be in alignment. Separate nonhierarchical forums among peers and colleagues were also held across the company to discuss Aetna’s values—what they were, what they should be, why many of them were no longer being “lived,” what needed to happen to resurrect them, and what leadership behaviors would ensure the right employee behaviors. CulturAl ChAnge thAt StiCkS Google is a good example of a company that makes the most of its informal organization. These interventions led to small but significant behavioral changes that, in turn, revitalized Aetnas culture while preserving and championing its strengths. Every culture is the product of good intentions and has strengths; put them to use. They adjust reporting lines, decision rights, processes, and IT systems at the outset but overlook informal mechanisms, such as networking, communities of interest, ad hoc conversations, and peer interactions. Honor the Strengths of Your Existing Culture Use Your Employees Don't be a Hater Back to the Story ... Aetna's pride Chose to highlight existing strengths Be Positive We tend to accentuate the negative traits of our culture. When Aetna merged with U.S. Healthcare, a lower-cost health care provider, in 1996, a major culture clash ensued. 5) Measure and monitor cultural evolution. Copyright © 2020 Harvard Business School Publishing. Happily, it’s also possible for a culture to move in the right direction, as we saw at Aetna. This approach makes change far easier to implement. When a major change initiative runs aground, leaders often blame their company’s culture for pushing it off course. At the time, many believed that a single client relationship had brought the firm down for largely legal or regulatory reasons. For instance, the New Aetna was specifically designed to reinforce employees commitment to customersreflected in the firms history of res… At Aetna a major turning point came during one question-and-answer session, when a longtime employee said, “Dr. Can you tell me what it means for someone like me?”. The list is too vague and too long to tackle. After all, cultures do evolve over time—sometimes slipping backward, sometimes progressing—and the best you can do is work with and within them, rather than fight them. In some cases, it may also be worth focusing on interactions within key subpopulations—such as midlevel managers or those in business-critical functions—whose own behaviors have a disproportionate impact on the experiences of others or on business success. Wholesale change is hard; choose your battles wisely. What kinds of interactions would be visible in any new offices you opened? Abstract When a major change initiative runs aground, leaders often blame their company's culture for pushing it off course. The retailer’s leaders enlisted the help of internal “exemplars”—people who were known for motivating their teams effectively. After a thoughtful pause, Rowe replied, “Well, I guess it is all about restoring the Aetna pride.” As we noted earlier, he got a spontaneous standing ovation from the hundreds of attendees. Step 2: Engage Your Team. Indeed, during the next few years it became clear, from surveys, conversations, and observation, that a majority of Aetna’s employees felt reinvigorated, enthusiastic, and genuinely proud of the company. Otherwise you can't identify backsliding or correct course. Are key cultural attitudes moving in the right direction, as indicated by the results of employee surveys? At the same time, they surfaced Aetna’s significant cultural strengths: a deep-seated concern about patients, providers, and employers; underlying pride in the history and purpose of the company; widespread respect for peers; and a large group of dedicated professionals. At Aetna, Rowe explicitly sought out informal interactions with employees. If not approached correctly, measurement efforts can quickly become cumbersome, time-consuming, and expensive. World renowned for its ability to bring together specialists across a range of medical fields to diagnose and effectively treat the most complex diseases, the clinic promotes unusually high levels of collaboration and teamwork, reinforcing those traits through formal and informal mechanisms. Ellis traces the firm’s decline to the 1950s, when its leaders shifted their focus from quality and integrity to beating other firms’ revenue numbers and market position. AETNA CULTURE – When Aetna merged with U.S. Healthcare lower-cost health care provider, in 1996, a major culture clash ensued – However, instead of adapting to U.S. Healthcare’s more-aggressive ways, the conservative Aetna culture only became more intransigent – Aetna’s leaders could make little headway against it, and one CEO was forced out after failing to change it. Some corporate leaders struggle with cultural intransigence for years, without ever fully focusing on the question: Why do we want to change our culture? Measure and monitor cultural evolution. Second of two parts Editor’s note: If you missed Part 1, see New Study: 96% Think Culture Change is Needed in Their Organization The bottom line from the Booz & Company culture study is this: 96 percent said culture change is needed. Coherence among your culture, your strategic intent, and your performance priorities can make your whole organization more attractive to both employees and customers. Rowe, I really appreciate your taking the time to explain your new strategy. But this time, without ever describing their efforts as “cultural change,” top management began with a few interventions. and pay only $8.00 each. Don’t just implement new rules and processes; identify “influencers” who can bring other employees along. Getting your team eagerly bought into culture shift is the first step to lasting change. That shift was reflected in the business results, as Aetna went from a $300 million loss to a $1.7 billion gain. This is what Aetna did. It’s better to include a few carefully designed, specific behavioral measurements in existing scorecards and reporting mechanisms, rather than invent extensive new systems and surveys. As a result of this straightforward question, colleagues began to share constructive criticisms with one another more often, resulting in fewer demotivating surprises and a better dialogue about performance. Cultural Change That Sticks 3. As GM was emerging from bankruptcy, the company decided to spur innovation by placing a renewed emphasis on risk taking and the open exchange of ideas. The survey revealed a number of serious cultural challenges, including passive-aggressive behavior, inconclusive decision making, and pervasive organizational silos. This is a copyrighted PDF. The practice soon began to spread. Finally, it’s essential to measure and monitor cultural progress at each stage of your effort, just as you would with any other priority business initiative. The following are illustrative examples of culture change. “Arthur Andersen, once the world’s most admired auditing and professional services firm, descended through level after level of self-destructive decline to its ultimate death,” he says. All too often, leaders see cultural initiatives as a last resort, except for top-down exhortations to change. Begin implementing little changes that fall in line with the stated values and fill the … When that’s the case, an organization with an old, powerful culture can devolve into disaster. Honor the strengths of the existing culture. Google is a good example of a company that makes the most of its informal organization. Such companies see culture as a competitive advantage—an accelerator of change, not an impediment. Where do you start? Rowe began interacting with a cadre of about 25 influencers and within a few months expanded the group to include close to 100. Integrate formal and informal interventions. All rights reserved. Instead, right from the start, he, along with Ron Williams (who joined Aetna in 2001 and became its president in 2002), took time to visit the troops, understand their perspective, and involve them in the planning. Employees skeptically prepared for yet another exhausting effort to transform the company into an efficient growth engine. Its operating income recovered from a $300 million loss to a $1.7 billion gain. These conversations helped Rowe and his team identify Aetna’s biggest problem: A strategy that focused narrowly on managing medical expenses to reduce the cost of claims while alienating the patients and physicians that were key to Aetna’s long-term success. Culture Change that Sticks. “At cocktail parties,” said one longtime Aetna staffer, “I really dreaded the question, Who do you work for?” When Rowe and Williams made “restoring the pride” the core of their message, they touched the hearts of many employees and helped them believe Aetna could regain its former glory. Start small first. With other members of the senior team, they sought out employees at all levels—those who were well connected, sensitive to the company culture, and widely respected—to get their input on the strategy as well as their views on both the design and execution of intended process changes. Whether formal or informal, interventions should do two things: reach people at an emotional level (invoking altruism, pride, and how they feel about the work itself) and tap rational self-interest (providing money, position, and external recognition to those who come on board). He is the coauthor, with Douglas K. Smith, of, Training, leadership, and organizational development programs, Peer-to-peer interactions and storytelling, Engagement of exemplars and motivational leaders, Changes to physical plant, resources, and aesthetics. 5. Today's best-performing companies, such as Southwest Airlines, Apple, and the Four Seasons, understand this, say the authors, three consultants from Booz & Company. We’ve known for a long time that it takes years to alter how people think, feel, and behave, and even then, the differences may not be meaningful. While on the surface revenues remained strong, its rapport with customers and physicians was rapidly eroding, and its reputation was being bludgeoned by lawsuits and a national backlash against health maintenance organizations and managed care (which Aetna had championed). In our experience, most corporate leaders favor formal, rational moves and neglect the informal, more emotional side of the organization. Aetna’s business model was under attack going through law-suits and its economy was declining. If we can demonstrate A few modest interventions might have preserved the firm’s commitment to integrity and avoided a very public and embarrassing demise. Targeted and integrated cultural interventions, designed around changing a few critical behaviors at a time, can also energize and engage your most talented people and enable them to collaborate more effectively and efficiently. As you promote critical new behaviors, making people aware of how they affect the company’s strategic performance, be sure to integrate formal approaches—like new rules, metrics, and incentives—with informal interactions. One early and important networking effort by Rowe was to identify a core group of “key influencers”—potential leaders who could offer invaluable perspectives on the cultural situation, regardless of their level in the hierarchy. Contrast such nebulous aspirations with those in an organization in which a few cultural traits truly do match and support the strategy, like the Mayo Clinic. But it also showed that staff members were unusually willing to commit time and effort toward the strategy; they really wanted to help. Most cultures are too well entrenched to be jettisoned. They might include a deep commitment to customer service (which could manifest itself as a reluctance to cut costs) or a predisposition toward innovation (which sometimes leads to “not invented here” syndrome). This last area is usually the slowest to show improvement. We don’t alter our behavior even in the face of overwhelming evidence that we should. In our research we’ve found that almost every enterprise that has attained peak performance—including the Four Seasons, Apple, Microsoft, and Southwest Airlines—got there by applying five principles. By the time they get around to culture, they’re convinced that a comprehensive overhaul of the culture is the only way to overcome the company’s resistance to major change. Are relevant growth targets being reached more frequently? When a few key behaviors are emphasized heavily, employees will often develop additional ways to reinforce them. How would they raise difficult issues or bring potential problems to others’ attention? By the mid-2000s, the company was earning close to $5 million a day. It is worth spending time to build this picture with the senior group to avoid ambiguity and create the ‘North Star’ against which to guide change. Consider the response one company had to the discovery that a major source of employee frustration was its performance-review process. Inspiring new skills and habits. CULTURE CHANGE THAT STICKS Scott Cook, Intuit Founder and Chairman of the Executive Committee 2018 CEO Summit “In 2007, we kicked off a major initiative called Design for Delight, to basically teach the organization the fundamentals of design thinking. And if a company, in an effort to become more customer-centric, defines “engage with your client more often” as a critical behavior and measures it in number of calls per week, its staff may make lots of phone calls without increasing business. (For a menu of tools, see the exhibit “Mechanisms for Getting the Most from Your Culture.”) Only a few companies understand how to do this well. Another way to harness the cultural elements you want to support is by acknowledging them. These organizations follow five principles for making the most of their cultures: 1. Rigorous measurement allows executives to identify backsliding, correct course where needed, and demonstrate tangible evidence of improvement—which can help to maintain positive momentum over the long haul. What is happening with less obvious indicators, such as local sales improvements or decreases in customer complaints? Some organizations send out a five- or 10-question survey every other week, asking how often particular behaviors have been exhibited. He and Williams focused on getting cross-sections of people to reflect on how they were feeling and on identifying their sources of anxiety and concern. But cultural intervention can and should be an early priority—a way to clarify what your company is capable of, even as you refine your strategy. Harvard Business Publishing is an affiliate of Harvard Business School. One of the best-known, and yet most misunderstood, examples of cultural backsliding took place at the Arthur Andersen accounting firm. It was also the approach taken by a national retailer that was looking to build a culture with a strong customer focus. From May 2001 to January 2006, its stock price rose steadily, from $5.84 (split adjusted) to $48.40 a share. This time, however, they were in for a surprise. If they look hard enough, most firms will find they already have pockets of people who practice the behaviors they desire. If it excelled at service, how would people treat customers differently? The goal? So while the plan for change challenged long-held assumptions (among other things, it would require the elimination of 5,000 jobs, with more cuts likely to come), it was embraced by employees. Not an easy question. As Andersen expanded around the world, it abandoned practices geared toward professional excellence, such as a rule that all accountants had to spend two years in auditing and the use of a global profit pool that ensured that all partners had a stake in one another’s success. Say your organization is a former utility or government agency interested in becoming a better service business. Ask the people in your leadership groups, “If we had the kind of culture we aspire to, in pursuit of the strategy we have chosen, what kinds of new behaviors would be common? When the leaders of Aetna applied these rules while implementing a new strategy in the early 2000s, they reinvigorated the company’s ailing culture and restored employee pride. This emerges with the experiences of a society, traditional culture, organization, super culture or subculture. Rowe didn’t walk in with a new strategy and try to force a cultural shift to achieve it. Studies show that only 10% of people who have had heart bypass surgery or an angioplasty make major modifications to their diets and lifestyles afterward. Acknowledging the existing culture’s assets will also make major change feel less like a top-down imposition and more like a shared evolution. Executives at one financial services firm, for example, conducted a survey to test employees’ readiness to follow a strategy that involved going head-to-head with a new, aggressive set of competitors. and pay only $8.50 each, Buy 50 - 499 The stores that have introduced the new behaviors are already beginning to see results, including improved same-store sales in key product areas and fewer customer complaints. 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