Shaping a Culture that Drives Agility and Innovation

“To prosper, companies need to do four things well,” former P&G CEO A.G. Lafley once observed. “Develop leaders of the future, improve productivity, execute strategy and create innovation.” Straightforward enough advice—but what single force binds these four together like no other?

The answer is culture, agreed CEOs gathered for a roundtable discussion held in partnership with Senn Delaney, a consultancy recently acquired by Heidrick and Struggles. Difficult to measure and tricky to shape, culture is an intangible asset that can make or break an organization’s future. A strong culture can give a company the agility to move quickly and more efficiently around strategic initiatives and to be more responsive to both its customers and market shifts, as well as to attract and retain top talent. In fact, a recent study on core beliefs and culture by Deloitte reported that 84 percent of employees and 83 percent of executives believe that having engaged and motivated employees is a top factor contributing to company success.

Yet, developing an effective organizational culture is a formidable task—and attempting to transform an existing one or meld two cultures after a merger can be even more challenging. So what can leaders do to foster the kind of culture that aligns with their goals and enables them to drive agility and innovation?

First and foremost is the need to understand and embrace the fundamental fact that shaping company culture is ultimately a CEO challenge. “It’s a leadership issue,” noted Carla Cooper, CEO of Daymon Worldwide. “I’ve worked with a cultural anthropologist and he always says, ‘Passengers don’t crash airplanes. Pilots crash airplanes.’ Every time I engage him with a different organization—this is my fifth—I’ll say, ‘This time, it’s not me.’ An hour later, it’s always me.”

“You can’t delegate this stuff,” agreed Jim Hart, CEO of Senn Delaney. “You’ve got to lead it. You don’t have to carry the ball solely yourself, but the leadership has to be committed to it because it will get resistance.”

Accept the Inevitability of Opposition

Even successful cultural transformations often take place in spite of opposition, rather than without it, noted Shelly Lazarus, chairman emeritus of Ogilvy & Mather, who pointed to Lou Gerstner’s Herculean effort at IBM. “When Lou Gerstner wrote about his experience changing IBM’s culture, he said that he felt he only had 25 percent of the people with him, but it was enough,” she said. “It worked.”

“Generally, you have 15 percent of your folks, who are early adopters and who want to grab the flag and run, and 15 percent at the other end of the spectrum, who are digging the foxhole really deep,” concurred Hart. “The real key is the battle for the other 70 percent.”

While building momentum around a cultural transition is critical, CEOs should expect—and possibly even embrace—some degree of ongoing opposition, asserted Nicholas Pinchuk, CEO of Snap-on Tools. “I actually believe that on my best day, 40 percent of the people think I’m wrong,” he said. “And if you think otherwise, you’re probably deluding yourself.”

Pinchuk, however, views some degree of dissension as potentially positive. “The idea that everyone has got to be in your boat, in my opinion, is fallacy,” he said. “You have to be able to accept the fact that if they’re smart, your people will sometimes have a different opinion and that—unless you’re the origin of all good ideas—sometimes the naysayers will be right. So you may need to adopt some of what they say to what you’re trying to get done.”

The ideal corporate culture is one that encourages some degree of pushback and questioning. “It’s not about getting people lined up to be a bunch of yes-men,” Hart said. “It’s about having a culture that learns from failures and—rather than demonstrating that risk-taking is career-limiting—moves forward and disseminates that information out into the organization as learning that it can grow from.”

Managing Millennials

Several CEOs expressed concern about where younger workers, who are generally viewed as demanding more from employers than previous generations, will fit into their organizational cultures. “Millennials are very focused on whether your company has a purpose beyond making money,” asserted Tom Harrison, chairman of Diversified Agency Services, a unit of Omnicom. “They want an organization with values, with integrity and transparency—and one where there will be boundary-less collaboration. If you can harness that in an effective way, that’s great, but it can run contrary to established organizational structures and reporting lines.”

Millennials also approach work differently, noted Rajiv Tandon, CEO of Technosoft, who suggests that difference requires a corresponding change from management that may, over time, demand a cultural shift. “They have an impressive ability to multi-process,” he points out. “Their productivity is much better if you put them on multiple projects at once, [rather] than if you give them one at a time. That’s the key to making them more productive.”

Omnicom’s Harrison acknowledged that multi-tasking or serial-tasking capability and adds that Millennials’ very irreverence for traditional hierarchies can enliven brainstorming sessions—something he seeks to leverage when holding four- to five-hour Imagine Sessions in which his clients present a challenge to between 10 and 15 of his employees. “I pepper that group with Millennials, who think differently and usually have a point of view they want to voice,” he said. “That gives the session more energy and creates a more collaborative environment.”

Harrison has also sought to gain a better understanding of the values and working methods of Millennials through a reciprocal mentorship. “A few years ago, I went around our companies and found a young associate, who serves as my mentor, and who I also mentor,” he recounted. “That’s been tremendously helpful for me personally. I think that morphing our world into their world is important for [today’s leaders] because these are the people who are going to be taking over the company from us some day.”

Committing to Consistency

Ironically, even as organizations strive to create an agile culture that is able to adapt to rapidly evolving competitive forces and global economies, consistency is at the core of most successful corporate cultures. Ogilvy and Mather, for example, has had to adapt to the disruptive changes digital media brought to the advertising industry, yet the company’s core values remain fundamentally the same, said Lazarus.

“We’ve been organized from the start around a client perspective,” she explained. “A favorite David Ogilvie-ism is, ‘Everything we do we do in the service of a brand and in the service of a client.’ When you start there, even when the whole world changes, it’s not so hard to adapt because your lens is the same. [The issue is] how it’s played out, how it’s expressed. David Ogilvy would be shocked if he walked into Ogilvy today; but I think [that] after a few hours, he would see that the values and core beliefs are the same.”

“Consistency of profile and philosophy is especially important under duress,” agreed Pinchuk. “I learned this in Vietnam. When debris approached the proverbial fan, people look for guidance and consistency. If you veer from your [core values] in a recession or a difficulty, which is very easy to do when you’re under pressure and your board is screaming at you, then you interrupt your cultural leadership.”

While adhering to core values is critical to maintaining a strong culture, holding the course is even more essential when steering an organization through cultural transformation. “If you embark on change and stressful times come—which they usually do—and you pull back, you’ve just educated your organization to be more anchored into the safe or old way of doing things,” said Hart. “The next time you try something, their attitude will be, ‘This, too, shall pass.’”

Engrained processes are often the biggest obstacles to cultural transformation, he added. “Golf is a great example. You can take a lesson and know exactly what you’re supposed to do; but the minute you’re under stress on a shot, there’s an automatic tendency to go back to your old habits. As a leader, you have to be aware of that tendency, work through that and not pull back.”

Recognition and Rewards

Finally, recognition and rewards can play a pivotal role in transforming a company’s culture, said Hart, who noted that companies should be very clear about defining the criteria for recognition. “Let’s say you have pinpointed agility as a value. You need to have a clear behavioral definition of what that means,” he explained. “It can’t be fuzzy and hazy. “

While rewards can range from verbal acknowledgement in a public forum to formal and extrinsic, such as compensation or promotions, they should be frequent and highly visible. “It’s about catching people doing the right things and giving them feedback on a daily or weekly basis,” he said. “It should be bold and obvious: Fred got a bonus because he did this.”

Often, the most effective rewards are not necessarily compensation-related, noted Lazarus, who pointed out that companies should consider what will be most visible to employees. “The next assignment has always worked best in our organization,” she said. “We need to be more thoughtful about putting the people who are really driving change forward for the next new thing, the next sexy assignment. I don’t think anything will inform the organization about our values as [much as] who’s getting the plum assignments.”

CEO Roundtable Participants

Carla Cooper, President & CEO, Daymon Worldwide • J.P. Donlon, Editor-in-Chief, Chief Executive • Mark Dorman, CEO, Wolters Kluwer Law & Business North America • Thomas L. Harrison, Chairman, Diversified Agency Services • Jim Hart, President & CEO, Senn Delaney • Bill Hewitt, CEO Kalido • Surya Kant, President, TCS North America • Shelly Lazarus, Chairman Emeritus, Ogilvy & Mather • Joel Lehman, President, Global Services – Climate Solutions, Ingersoll Rand • Nicholas Pinchuk, Chairman & CEO, Snap-on Tools • Ralph Scozzafava, Chairman & CEO, Furniture Brands International • Rajiv Tandon, CEO, Technosoft Corporation

Jennifer Pellet :As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.