CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.
Many great companies set out to transform their businesses. They come up with new strategies, they restructure, maybe even change industries, go digital. But many times, those well-thought-out efforts end up falling flat. Why? The company culture. If it doesn’t fit the new strategy, you’re toast.
So the obvious thing to do is to change the culture, right? Well, we know that’s really hard. It’s bigger than a CEO. It’s not about what is written down on paper in HR documents. It’s not easy to define, much less change.
But today’s guest has studied leaders who were able to change their culture to fit a new strategy. The takeaway is how they told stories to reinforce that shift, stories that circulated around the workplaces, because a lot of what creates a culture is the way that employees and managers talk to each other about each other, and about the company and what it does. The stories they tell.
Jay Barney is here to tell us more. He’s a professor at the Eccles School of Business at the University of Utah, my alma mater. He’s a coauthor, along with Manoel Amorim and Carlos Júlio, of the book, The Secret of Culture Change: How to Build Authentic Stories That Transform Your Organization. They also wrote the HBR article, “Create Stories That Change Your Company Culture”. Jay, glad to have you on the show.
JAY BARNEY: I’m very excited about it.
CURT NICKISCH: You spoke to dozens of CEOs, some who failed at changing their culture, those who succeeded, and it sounds like it’s more than just luck or random success.
JAY BARNEY: I wouldn’t discount that there is a little bit of luck and timing in these things. There’s always of some that goes on. But we found many of the business leaders we talked to, many of them were CEOs, some were like plant managers, or division general managers, or office managers of large offices. Some of them have a pattern of being able to change their organization’s cultures that they repeat over time, which suggests that it’s not just luck, that there’s actually a skill involved. Our task was to try to understand what those set of skills were that enabled them to make culture change happen.
CURT NICKISCH: Well, it’s really interesting because you have this very hard problem, and then you have a very simple solution. You want to change the culture, and you say create stories, which seems easy –
JAY BARNEY: Well, let me start with an example. My coauthor’s experience at Telesp, which was, as you said, a Brazilian telecom that was operating in a highly 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.
But 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 bizarre, I admit. But nevertheless, it was the symbol of just how top-down that organization had become, but successful.
CURT NICKISCH: So yeah, you’re going from a top-down culture, which makes sense in a world where you have a regulated monopoly essentially.
JAY BARNEY: Sure. That’s basically what it was.
CURT NICKISCH: You’re going to a much more, still regulated, but competitive market where faster, more innovative companies could eat your lunch, right?
JAY BARNEY: Absolutely.
CURT NICKISCH: So, what did Manoel do?
JAY BARNEY: Absolutely – not a slam dunk at all, that the monopolist would be the survivor in a much more competitive market.
CURT NICKISCH: So, what did Manoel do?
JAY BARNEY: 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 a culture that values customer service, and that values satisfying delighting customers on their telecommunications needs.
So, the specific thing that he did, that built the first story, this is only the first of several that were built by him, he bought a new technology, a new product that the company was coming out with. It was a new technology, it didn’t work very well.
So he called the helpline. 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. 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. So finally, after two hours he says, “I want to let you know I’m the CEO of the company.” Of course, the guy doesn’t believe him, so it takes a few minutes to convince him. Then what happens is, Manoel asks, “So what would you have needed to know in order for you to be able to solve my technical problem with this product?” This young man generates a list of 14 things, “This, this, this, we need this. How much of this information do you have access to at this point?” The answer was, “Two or three things.”
Then it gets interesting. Manoel 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 and he’s just flipping it.
CURT NICKISCH: This is skipping a few levels, yeah.
JAY BARNEY: Yes. Oh, just a few. This guy is not even an employee of Telesp, he’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 and give, “Here’s what we need to do. Here’s the problems. Here are the 14 things.” Manoel thanks him. They leave the room.
He turns to the people, he says, “So here’s the deal, in two weeks, we’re going to have a plan. We’re going to have it planned and ready to execute. It 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 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 that 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.”
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.
CURT NICKISCH: Gotcha. Now you have just told this story to me and to our audience. But in that story, there was no storytelling happening, right? 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?
JAY BARNEY: No, it’s interesting. What you do is, you engage in actions, and the actions create stories that other employees share. Now, 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 to break with the past, with a path to the future. This example is just a classic of this, of 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, zero, where successful culture change started with the announcement that we were going to change our culture. It’s just cheap talk. It’s just another thing, here it comes, CEO wants to change the culture. Okay. Everyone says, “Sure, we’ll change the culture, sir.” But, no one believes that it’s really a commitment 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 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 it reflect their deeply held beliefs about what the organization needs to do. Then those stories start getting shared. What happens is, those new stories that support a new culture replace the old stories that supported the old culture. Then as that diffuses throughout the organization, that’s how we see culture change.
CURT NICKISCH: 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.”
JAY BARNEY: That’s exactly right.
CURT NICKISCH: So it seems very important not to make up the story, but to make the story.
JAY BARNEY: 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. The first criteria is that the story has to be authentic to the person who’s building the story. 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.
CURT NICKISCH: Now, you mentioned personal values there. How important is it to bring the first person into it for organizational leaders?
JAY BARNEY: Oh, yeah. Our second criteria is, 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. 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 Manoel starred the story at Telesp, but the whole executive team was there. Those are the people who create the stories. They tell the stories.
CURT NICKISCH: 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.
JAY BARNEY: Absolutely.
CURT NICKISCH: Can that come off like bragging-
JAY BARNEY: Sure.
CURT NICKISCH: That is going to hurt your efforts?
JAY BARNEY: No, that’s a great question. There’s a question of, “How can I star in my story and still be humble and open?” Well, there’s a couple of 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. The second thing is, you have to also understand, 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 really radical things, then people start getting the idea. Then other people in the organization start feeling empowered by the possibility that they could build their own stories. Sometimes that happens with other senior managers and business leaders in the organization. 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 new culture.
Now, I can’t tell you what that story is because it has to be authentic to you. But, I can see that to happen. Let me give you another really great example of this. There’s a company, actually here in Utah, called Traeger. You know Traeger Grills? 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 inherited had a really toxic culture. He basically closed up the organization where it was and moved it here to Utah. Basically, built a new culture from scratch. One of the critical values of this new culture, he talked about it, he tried to show in his own behavior, build stories around, had to do with customer service. There was no limit on customer service.
He comes into work 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 is not a senior manager. He’s just a guy in the office working hard, doing his thing.”
Apparently, Rob somehow got a phone call from a customer, a Traeger customer in Seattle. The customer, his Traeger grill is not working. Now, this customer was a sales manager at a Costco up in the Seattle area. Costco, of course, is an important customer for Traeger. So 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 machine with a part, helps the guy season his brisket, gets back on the airplane, flies home.
He comes into work on Monday morning, and it’s no big deal. 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. That guy then calls the head merchant at Costco corporate, who then calls the VP of sales at Traeger, who then tells the CEO of Traeger, “Did you know what your guy did? This is awesome. This is unbelievable level of quality of service.” Jeremy Andrus’ response was, “Yes, the culture is happening.” This is a guy who is building his own stories on his own.
CURT NICKISCH: For many companies, culture is 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.
JAY BARNEY: I recently came from a meeting with a group of managers at a well-known consulting firm, and I was just listening. I was listening to the CEOs and other senior managers talk about the challenges they’re facing. I came away saying, “What these people were saying was, ‘Our organizational cultures are in tatters. They are in tatters, they’re falling apart.’” For good reasons, I’m not saying I’m not arguing against going home during COVID. Obviously, that was a requirement.
But 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. So it’s very hard to build new stories, and it’s very hard to communicate those stories.
In Zoom, and related technologies while providing a form of communication, is still a cool medium. We can’t read the body language. The picture we see is two 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. Then they’re dropping off and coming on, and the dog’s running through.
All these things make it difficult. It 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. 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 the cultures that are in tatters.
CURT NICKISCH: Now you talked about the affect 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.
JAY BARNEY: Yeah. It’s amazing, isn’t it? I think you’ve said it a little stronger than I would say it. It 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. What is theater? It 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. They discovered that they really didn’t have a strategy that was viable long-term.
He develops the new strategy in consult with the consulting firm. They put together a new strategy, and they’re going to have a big meeting among the top management team to 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 their planning people had 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.” 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 to the meeting, and they come into the dining room. It’s exactly what you’d expect, it’s all fancy China and stemware. Then they sit down for dinner, and the first course is rolls and water, bread and water. Then the second course comes out, and it’s also just bread and water. Then the third course, it’s just bread and water. 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. Talks about the strategy then, and the cost, and 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 before 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.
CURT NICKISCH: We know the old saying, hearts and minds. How do you tell stories? How do you not tell stories? How do you create stories that appeal to both? Because the stories will go on being told.
JAY BARNEY: Absolutely, and they evolve too. But we’ll start with the head. We had heads and hearts, is how we use it in the language. But ahearts and minds thing. That hearkens back to the Vietnam, so I’m a little worried about that. Show my age a little bit.
CURT NICKISCH: Right. Right. Right. No, it does have that military connotation.
JAY BARNEY: It does. Get the hearts and minds of the people, so we use heads and the hearts.
CURT NICKISCH: Heads and hearts. Okay.
JAY BARNEY: That’s okay. We start with heads. 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. Think of what you’re saying, “I want to change the culture so that everyone’s values are 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. We also see that a lot of these stories that were built also appeal to what they can call 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, 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 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.” 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.
CURT NICKISCH: Is there anything you need to do to spread the stories? It makes me think of USAA, the insurance company. They have something that they do called mission moments where, at the beginning of meetings, they will stop and talk about a customer-
JAY BARNEY: Absolutely.
CURT NICKISCH: Their history with a company that serves military family members, so they’ll talk about that person’s service, and 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. 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?
JAY BARNEY: No, we’re going to do both. In the beginning, when a story is told, they spread like wildfire through an organization. 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 these stories. They said, “Look what our CEO is doing, this is so cool. He’s actually taking our organization and moving it in the way it needs to happen.”
So in the beginning, our finding suggests that, interesting enough, don’t be too aggressive in the beginning about having a more explicit communication policy because that can be a 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. You have online magazines, and chat rooms, and those 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 diffuse on its own. By the way, shortly thereafter, build another story so you get that one backed up. 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.
CURT NICKISCH: Yeah. Well, the previous culture was made up of lots of stories too, so you have to tell –
JAY BARNEY: That’s correct. You’re going to have to deconstruct the old one. Actually, that’s the wrong language. It’s subtle because one question we’re asked, and it’s a totally legitimate question is: A lot of people join a company because they liked the old culture, they selected into it, and they’re actually really good at it.
Now you’re putting a new strategy in place that requires a new culture. Isn’t that bait and switch? Isn’t that unfair? The answer is, “Yeah, it is.” Some people who have been deeply loyal and deeply committed to the organization’s old culture can feel very much disenfranchised. 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. 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.
CURT NICKISCH: If they do, you tell those stories and celebrate them.
JAY BARNEY: Exactly. Total win.
CURT NICKISCH: Can leaders at any level do this?
JAY BARNEY: The answer is probably yes. But our experience… 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, you have an organizational culture, whether you know it or not. So you can take responsibility for changing that culture. 50 or so, because at that point people may be dispersed, they may not see each other all the time. 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. As an organization gets larger and larger, then you start seeing culture becoming more important.
CURT NICKISCH: You mentioned, over time. How do you know when you’re done? How do you know when the culture has been shifted?
JAY BARNEY: 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 change process… 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. This particular firm was known, this is in Silicon Valley, 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. This company, when the product didn’t work, they treated as an opportunity to find out who was responsible so they could fire them. Well, guess what? They weren’t innovative at all.
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-adverse culture.” Six months. This is a three-minute conversation with any employee. 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 said they were risk averse, and they said, “What we’d like you to do is 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.”
So in six weeks, they were going to be done. I distanced myself from that opportunity. The whole concept was flawed because culture change is an ongoing process that you continually build new stories. 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 of the organization. Not so much an end point.
CURT NICKISCH: Jay, this has been really fascinating. And you’ve given a path forward through a really challenging problem for many many companies in a way that might bring them to a happy ending.
JAY BARNEY: I hope so.
CURT NICKISCH: So, thanks for coming on the show to talk about it.
JAY BARNEY: Thank you very much.
CURT NICKISCH: That’s Jay Barney, professor at the Eccles School of Business at the University of Utah. He cowrote the new book, The Secret of Culture Change: How to Build Authentic Stories That Transform Your Organization, as well as the HBR article, “Create Stories That Change Your Company Culture.”
And we have more episodes and more podcasts to help you manage your team, your organization, and your career. Find them at hbr.org/podcasts or search HBR on Apple Podcasts, Spotify, or wherever you listen.
This episode was produced by Mary Dooe. We get technical help from Rob Eckhardt. Our audio product manager is Ian Fox, and Hannah Bates is our audio production assistant. Thanks for listening to the HBR IdeaCast. We’ll be back with a new episode on Tuesday. I’m Curt Nickisch.