Benchmarking Cultural Transition
 Journal of Business Strategy, May/June 2000
Many operating managers view culture and culture change as something "soft" or "squishy" and remote form day-to-day concerns. They're worried about "making their numbers" and say they haven't got time to think about organizational culture.
But, for these mangers, culture should be their chief concern because the culture determines the results their people are producing. If a company has the right culture, managers can make their numbers without worrying about them.
Consider these results, which were achieved through culture change:
 A manufacturer of medical devices increased annual sales from $300 million to more than $1 billion in five years.
Another medical devices firm achieved record sales each year for three consecutive years, form existing product lines.
A major retail firm reduced out-of-stock situations form 3,500 a night to 20 a night.
A Fortune 1000 company implemented a highly complex SAP enterprise computing system, on time and on budget.
How are improved results linked to culture change? Culture is the sum total of people's beliefs and behaviors in an organization. Their beliefs and behaviors, thoughts and actions, determine the results the organization achieves. Change the culture- the way people think and act- and you change the results those people produce.
Unfortunately, efforts to benchmark culture change rarely on internal surveys, anecdotal evidence, and observable shifts in behavior or in the way people feel about the organization. While such tools and observations can be important, improved results are the surest benchmarks of whether the change is worthwhile.
In fact, benchmarking culture change to anything other than results ultimately may be counterproductive. Using other benchmarks reinforces the idea that culture doesn't matter. Worse, other benchmarks divert people's focus away from the beliefs and actions that they must change in order to improve results.
Therefore, the best benchmarks are keyed to important before-and-after results the organization must achieve, and to the beliefs and actions that produce those results. The linkage between culture change and improved results tells managers to manage the culture. It also points to the best way of doing that, which is to instill beliefs that will drive actions that will produce results.
Meaningful Benchmarks
Culture is so tightly linked to results that at times merely communicating the targeted result clearly and forcefully throughout the organization will ignite change.
For instance, store managers at a retail food chain on the West Coast had to achieve a profit margin goal of 7.5%. However, knowledge of this goal was kept at the store manager level. It was not communicated to supervisors, shift leaders, clerks, and cashiers, nor were any of those people held accountable for the result.
Choosing an operating result- the 7.5% profit margin- as a benchmark was a positive step, but it wasn't until that benchmark was made known throughout the company that change became possible. In this case, the objective was to create a culture of personal accountability for results at all level in the company. The cultural transition created a shift in which everyone at every level in the company, assumed ownership of the corporate objective. After the cultural transition, even the produce clerks could explain the profit objective and how it related to their jobs.
Over the next year, the result was a 200% increase in profit margin.
Most managers-and employees- see the value of clearly targeted results and, when encouraged, will actively engage in defining and communicating them. However, sharp targets aren't enough to fuel an entire cultural transition. Real culture change means transforming the way people think and act. Those are the changes that ultimately produce improved results.
Therefore, in addition to business results, change facilitators should benchmark people's beliefs and actions before and after the change process.
Which beliefs and actions should be benchmarked? Those that drive, or would drive, achievement of key results. The specific operating result a company might pursue could be to: increase sales, cut costs, retain customers, reduce delivery times, develop new products, upgrade or diversify the workforce- virtually any objective or combination of objectives.
For instance, Cardiac Pacemakers Inc. (CPI), a medical equipment manufacturer, had traditionally grown through acquisitions. Over time, however, that strategy stopped working. Management saw that to maintain leadership CPI needed to focus on developing new products in-house. They decided to transform the organization into "a product-development machine."
CPI first benchmarked its current results in product development- number of new products introduced per year, length of development cycle, revenue form new products, and so on- and found them to be dismal. Then it benchmarked the key beliefs and actions that hindered product development as well as those that would promote product development, if they were instilled in the culture.
Specifically, managers found they had to change the belief that the company would grow indefinitely through acquisitions. To maintain market leadership, a goal management had targeted, CPI needed new products and technologies of its own, rather than continued reliance on acquired technology.
Another belief that had to change was the idea that deadlines could be missed. As a result of that belief, product development schedules slipped by three weeks per month. Yet another belief had been that customers would be very slow to change over to competitors' products.
These beliefs had to shift, respectively, to a belief that new products are the well spring of growth, that speed-to-market (achieved through ambitious deadlines) was essential, and that customers had to be done over every day.
When the cultural transition was underway, these new beliefs drove a new set of actions. People learned new skills that had not been available in-house. They worked overtime to meet deadlines. They reduced spending in other areas to free up funds for new product development.
The essential benchmarks that facilitators at CPI used to ignite change were the results- the number of new products introduced per year, the length of development cycle, revenue from new products, and so on- and found them to be dismal. Then it benchmarked the key beliefs and actions that hindered product development as well as those that would promote product development, if they were instilled in the culture.
Specifically, mangers found they had to change the belief that the company could grow indefinitely through acquisitions. To maintain market leadership, a goal management had targeted, CPI needed new products and technologies of its own, rather than a continued reliance on acquired technology.
Another belief that had to change was the idea that deadlines could be missed. As a result of that belief, product development schedules slipped by three weeks per month. Yet another belief had been that customers would be very slow to change over to competitors' products.
These beliefs had to shift, respectively, to a belief that new products are a wellspring of growth, that speed-to-market (achieved through ambitious deadlines) was essential, and that customers had to be won over every day.
When the cultural transition was underway, these new beliefs drove a new set of actions. People learned new skills that had not been available in-house. They worked overtime to meet deadlines. They reduced spending in other areas to free up funds for new product development.
The essential benchmarks that facilitators at CPI used to ignite change were the results- the number of new products introduced per year, the length of the product development-cycle, and so on. Those benchmarks got the organization focused on the cultural transition and enabled it to define the changes in beliefs and actions that would, and did, transform the company into a ?gproduct development machine."
The Business Case for Cultural Change
Change facilitators often shy away from benchmarking cultural transition to results and instead focus solely on behaviors and feelings: Are people communicating well? Do employees feel valued?
There is nothing wrong with such questions, as long as they are accompanied by a strong focus on results which enables facilitators to direct everyone's attention to the beliefs and actions that will produce results.
Therefore, before the change process it is useful to benchmark behavior by asking:
"What must we stop doing if we're to achieve the desired result?"
"What must we start doing?"
"What should we continue doing?"
This stop-start-continue method of benchmarking actions, done on paper and by consensus, enables facilitators to firs direct and then monitor the culture change effectively. If the right behaviors have been identified at the outset and people begin to perform them, then the change is underway and results will surely follow.
CPI found this to be the case. Company-wide, people vigorously applied themselves to new product development, directly or indirectly. They learned new skills, worked over-time to meet ambitious deadlines, and found ways to get jobs done with constrained resources. As a result, they developed 14 new products in as many months, and increased sales from $300 million to $650 million in a three- year period.
The Real Value of Benchmarking
The goal of benchmarking corporate culture isn't to keep score. As in other areas of business, the real value of benchmarking lies in the process. Real and permanent culture change- a change in the way people think and act and in the results they achieve as a group- occurs only when people embrace the beliefs and actions that are represented by the benchmarks. They must buy in. They must recognize, intellectually and emotionally, the worth of the targeted results and the value of the organizational beliefs and actions.
For facilitators of culture change, benchmarks of organizational culture are therefore more useful as catalysts for change than measuring devices. If targeted results do not motivate people, if people do not act to produce those desired results, and if management cannot promulgate useful organizational beliefs, then the benchmarks haven't served their purpose, no matter how accurate or sophisticated they are.
Change facilitators can best serve their organizations by using, and enabling management to use, benchmarks to create new, positive experiences for people in cultural transition. It is those experiences that will first instill in people the beliefs and actions that will eventually constitute the new organizational culture.
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Roger Connors and Tom Smith, principals of Partners In Leadership, LLC, based in Temecula, California. They are management consultants. Their most recent book, Journey to the Emerald City: Achieve a Competitive Edge by Creating a Culture of Accountability, was published by Prentice-Hall in 1999.
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