What is organizational culture?
Organizational culture is a collection of an organization’s values, beliefs, behaviors, and norms that employees follow. These values and norms might be decided and written down, or they just form over time and people adopt them. In most cases, leaders in an organization form them with their behavior and reactions without even realizing it. The rest of the company just accepts the leader’s behavior as a norm, how everyone and everything in the company should be.
OKRs and organizational culture
Organizational culture plays a significant role in OKR implementation but also in the company’s general success. But “why” culture is so important is not the focus of this article; we will be talking about the “how” of organizational change and the step-by-step transformation of values and behaviors. This method is applicable to all kinds of bigger changes in the company but we will be using OKR implementation as an example.
If you are not sure why this topic is important, I suggest you read this article on how culture is connected to an organization’s success.
Implementing OKRs is a good example of changing organizational culture or, in other words, a change in management. OKR goal-setting methodology implementation requires a certain readiness to fail and learn. For that, the culture needs to be psychologically safe – so no bullies! Managers and leaders have to be ready to trust their employees, give them autonomy and support them on the way. OKRs don’t fit organizations with very strict power and decision hierarchy where new ideas and innovation don’t have their place. OKRs are not to micromanage and control every small step your people do. OKRs are to inspire and drive meaningful improvements.
Have you ever seen the social behaviour test where everyone in the elevator stands facing the mirror instead of the doors? The people standing this way are part of the test and this is what they are supposed to do. If a random person enters the elevator, they feel uncomfortable facing the doors like they usually do and almost every person decides to follow the group and turns around and faces the mirror. It’s not their normal behaviour but people are more comfortable if we fit in and follow the norms around us.
If things in your company just aren’t working out, you need to think if an unfit culture might be behind it. Maybe the examples set and followed are not the best ones. If the current norms and behaviors do not bring desired results, it’s time to change.
As the elevator example showed, the majority wins. This means a company needs to approach this strategically and continuously work towards change. Just sending out some emails won’t work.
How to understand where your organizational culture is right now
There are many different ways to map your current organizational culture. It also depends on how much in-depth analysis you are willing to do. It’s not a place to start inventing something new. Even though every company is different, different types of organizational culture have been very successfully defined by different theories and those models are applicable to every organization.
For example, we recommend using the “Organizational culture in Competing Values Framework” created by Cameron & Quinn. The framework has been identified as one of the 40 most important frameworks in business history and has proven its benefits in many areas.
The framework works on two dimensions. One is measuring whether the company is rather on the side of flexibility and discretion, or stability and control. The second is measuring if the focus is rather external or internal. Based on the results, the company can fall into 4 categories:
Let’s discuss what each of these categories represents.
Collaborate (Clan)
A do things together type of mentality. Companies that are flexible but rather internally focused. It’s good for talent management, collaboration in teams, and long-term development but it’s hard to stay alive in competitive environments and grow rapidly. Having flexibility is a good start but still implementing OKRs will be a bit difficult in this type of organization. OKRs require fast decision-making and also focusing not just on internal but also external circumstances.
Control (Hierarchy)
A do things right type of mentality. This kind of organization management spends a lot of time planning everything out and keeping a close eye on how people do things. It’s more about stability control than really going to new heights. This type of culture emerges in organizations where the purpose is not so much to grow or improve but just to do the things they do in a standardized way. OKRs will fail here fast. With OKRs, you need to give the teams a rather free choice on how they do things and what they see will help move the company forward.
Compete (Market)
A do things fast type of mentality. It’s good for short-term performance. Focus is external as the goal is to be better than others on the market but there is not much flexibility. Those companies are competing aggressively and there is not much room for innovation and making mistakes. OKRs like fast and OKRs like to help companies compete but they do not work well if innovation doesn’t have its place. If everything is set in stone and it’s just about trying harder than implementing OKRs will be a struggle.
Create (Adhocracy)
A do things first type of mentality. This is the sweet spot for implementing OKRs, and it applies to environments facilitating innovation, and people transforming their company into a learning organization. It’s about taking more risks and having a breakthrough as a company. This type of organization has a lot of flexibility and its focus is external. People are encouraged to think outside the box and they have room to make some mistakes to learn from them. Companies with an Adhocracy organizational culture are associated with high-profit margins and prestige. We would say, that this is where you want to be! Especially when you are implementing OKRs.
OKRs are like a tool in a toolbox. The tool itself is useless if the owner doesn’t know how to use it or is not capable of following its instructions.
How to change organizational culture?
As organizational culture should be measured using tested and approved methodologies, then changing it should be also done by following the best practices. We have seen companies just skipping the actual important steps and jumping to changes they think are important at that moment. Almost every time it means the people in the company end up being confused and are against changes taking place. First learn which is the right process to follow and then also trust the process!
One of the most common methodologies to change organizational culture is this 8 step model created by Kotter (1998). His model is applicable not only to organizational culture but basically to most of the bigger changes a company wants to go through. This model might come in handy in many situations.
1. Establish a sense of urgency
To have a successful change in the organization people really need to want it. Especially management. They are the leaders and they make important decisions daily which affect how well the change is going through.
Establishing a sense of urgency means analyzing the market, identifying crises or challenges, and mapping major opportunities. It’s like a list of business-related reasons which clearly prove and help people understand why this change is needed. If they understand the WHY, motivation to go along with it comes too.
If your company is implementing OKRs you can see the most common benefits here. Don’t just send this article to your people and ask them to read it. Read it thoughtfully and think about what your company needs but is missing from this list. Start a conversation with other people in your organization to make them see OKRs as an opportunity to solve problems.
2. Form a powerful guiding coalition
Unfortunately, motivation alone doesn’t get things done. People need to know how and what needs to be done and for that you need charismatic leaders. Remember, a manager and a leader are different things even though one person can represent both. A manager is a position in a company that follows the hierarchy. A leader can be anyone who people like to listen to, who has the right personal traits and capability to lead people. It’s the strongest combination when the managers are the leaders as well.
Find a group of leaders in your company who are ready to lead this change. In the OKR world, we like to call them OKR champions. They are the people who have the right motivation, they know best how this change should happen and they should also be people who others listen to willingly. It will be their job to make sure everyone knows what they need to do to make this change happen.
It is best if the coalition group consists of people from management who have more credibility and decision making power and people who have time and motivation to learn OKRs and best practice processes. They should take into account the time and dedication needed to drive this change. Also, they need to be ready to push people and give out different tasks and responsibilities. It’s crucial that this coalition is a group of innovative and open-minded people who are ready to think outside the box. If you pick the wrong people with the wrong motivation you will get bad results and change won’t happen.
3. Create a vision
To know where you want to go you need a vision and later a strategy to act on the vision. For example, if your goal is to become an organization with proactive organizational culture, your goals (and possibly even your overarching Objectives for the company) could be to become more transparent, give more flexibility to teams, trust employees to make decisions, take failures as opportunities to learn, become more data-driven, and so on.
Once you know what you want, you need to think about how to get it. It’s good if you have mapped your organization’s culture before and you have some feedback from the teams. This helps you compare where you are and where you want to be so that you can build bridges between these two places – the starting point and the destination. The strategy should be something really concrete, giving people good directions. It’s not enough for a leader to say to management that they need to trust their people more as they might not know how to change their behavior. Strategy means having a step-by-step idea on how to get to that trust.
For example, organization A has currently a really strong power hierarchy when it comes to decision-making. The people on top make the decisions for the rest of the company and they can easily overrule decisions made in teams. There isn’t much room for discussions. This makes the teams feel that they are not trusted with their expertise to make the right choices. To change that management needs to decide what kind of decisions they should let the teams do themselves. They might decide that they decide the expected targets, and overall directions and goals for the company but the teams can decide how they are going to fulfil those goals. Management stops micromanaging and trust teams that they know the best way to work and perform well in their area of expertise. If this is too big of a step, they can start by just inviting team managers to the meetings and let them present their ideas. The goal here is to really listen and try to find common ground. After management feels a bit more confident around the ideas the teams have, they can start stepping out of this decision process and just review and confirm the decisions made.
Keep in mind that transparency and trusting the people you have hired should also be a part of how you create the strategy. Their input is really valuable.
4. Communication the vision
A powerful plan won’t work if people don’t know about it and don’t breathe it every day. Good communication isn’t one email. The best way to go is to have an announcement event where details and expectations are communicated and explained. Changes are always a bit confusing and there will be many questions. Make sure you encourage people to ask questions and discuss their concerns and worries to find solutions.
One event is good for the start but you are trying to create a new way of working and it needs consistency. That means you need to communicate the vision and steps of the strategy again and again until it’s achieved. That’s where the group of leaders (the guiding coalition) comes into play. It’s their sworn duty to make sure people don’t forget the change they are trying to pursue. And the best way to lead others is by giving them a good example to follow.
When implementing OKRs, we recommend you use the best practice retrospective meetings process as an example to follow. It really does work but not if you just pick small pieces from this process and don’t follow it properly.
5. Empower others to act on the vision
You need everyone onboard. The more people are empowered to help fulfill the vision the easier it will be. For example, imagine that you are trying to expand to new markets but the marketing team is still marketing to a different country, the sales team is still contacting people only from current markets and the product team is not doing anything to get the product ready for the new market. And so no one is driving their focus to making the vision of expanding to a new market happening. It just wouldn’t work.
Remind employees the vision you have and empower people to act towards achieving it! It might mean that they need guidance and explanation now and then. Don’t just boss people around but co-create the best ways to move towards the vision. Empowering means making your people feel confident and giving them authority or power to do what’s needed. If something doesn’t work for people, try to understand what is wrong and what you could do differently. Don’t forget to recognize and award people who are making a difference and helping the vision to come true.
If there are people who are really resistant to change, take time to understand what might be the problem. It can be because something in the previous steps wasn’t done well enough or might mean that just this new type of organizational culture and way of being is not for them. Normally people come along after they understand the why (step 1) and how (step 2). If there are some who are fundamentally against those changes then sometimes hard decisions have to be made. Either processes or people in the organization that work against the necessary change, eventually need to be replaced.
To have more creative and out-of-the-box solutions, you need to encourage people to not think traditionally and have the courage to speak up. You are in the middle of change because the old ways were not serving the company anymore and to have a different outcome this time you need to also change the ideas and approaches you were used to.
6. Plan and create short-term wins
Organizational change takes time and even though it’s really tempting to write highly ambitious goals, you shouldn’t have too many at once because people will feel overwhelmed. Having small wins regularly motivates more than anything else. Here, a well-thought-through and planned strategy plays an important role as well. If the steps in the strategy are too big and too vague, people might not see the progress soon enough before they run out of motivation. Make sure you make steps achievable and noticeable, the best is if you can make them measurable!
When you are implementing OKRs, you shouldn’t expect to be completely successful within the first quarter. Before even writing any OKRs, people need to learn the principles of the OKR methodology and understand how to create good OKRs. With Weekdone, you get a free OKR coaching program to help your teams learn and understand OKRs.
After people have more knowledge, they can move to drafting their first Team OKRs. Start by having one per team. Have regular retrospective meetings to share what teams have achieved and learned. Focus on one step at a time and don’t forget to celebrate the wins. Remember, a win isn’t always just a high percentage achieved. All the new knowledge that you can leverage in the future is also a win!
7. Consolidate improvements and produce more change
We don’t learn if we don’t take the time to learn. That means after every battle you win, take time to analyze what went well and what you could do better. Share the learning across the company so others can learn from your mistakes and use the approaches that brought success. But don’t get too comfortable after the first win, there’s still a lot to do. Take the learnings and adapt those to your next steps to achieve better results.
Use increased credibility of the new processes to change the systems, structures, and policies that don’t fit your new vision. Promote and develop the employees who are successful in fulfilling the vision. A new vision might mean that there are now new roles that need to be filled. If you don’t have those people right now, that means you might need to hire them or bring some temporary people onboard.
While implementing OKRs, you will need an OKR coach who knows the methodology and can offer guidelines to set up the right processes. With Weekdone subscription, you will get your own experienced OKR coach for free.
A new way of working also means new opportunities. Use the change to create projects and themes that match how your organization now functions. This helps to assure that the change is rather permanent and you really leverage the benefits.
8. Institutionalize new approaches
You have made it! Now you have to make sure you won’t fall back to old habits.
What motivates everyone in the organization to stick to new ways is showing them the success the changes bring. If the change has been successful it means company performance in different areas should improve along with it. Use different metrics or KPIs to show that this change really matters and brings benefits for everyone. For example, there might be an increase in the popularity of the brand, revenue numbers, employees, or customer happiness, fewer people might be leaving or your company is more attractive to potential employees.
With OKRs you can also use the OKR progress achieved as something to show off. At the end of the day, OKRs should increase company performance as well!
Develop the means to ensure leadership development and success. They need to keep supporting the change and working towards being in this new position. For example, you have just started to see the benefits of OKR implementation. One quarter the management just stops setting the overarching Objectives which give the direction for the company. Teams will not have guidance anymore and as the leaders are showing an example of giving up, soon the team will do the same. After all that hard work it just dies off because people didn’t stick to the new ways of setting goals.
As a reminder
Organizational change isn’t easy, and isn’t something that happens overnight. It will take time. But if you stick to it, eventually you will see the large ship that is your company start to turn to the direction you want to go. Just remember to establish a sense of urgency, find your powerful collation, create a vision, communicate the vision, empower others to act on the vision, create short term wins, consolidate improvements and institutionalize your new approaches.