Organizational culture: Navigating between the breeze and the tornado

So, what is at the heart of this somewhat elusive, impossible-to-catch force of organizational culture? While it may be codified in your manuals or rulebooks, the actual essence of it is not to be found there. It is how people feel at work, or the series of behaviors that trigger their feelings about their contribution to the company and/or personal growth.

A very significant thought threads through the books written by one of the best-known historians and philosophers of our times, Yuval Noah Harari, and it talks about the transformation of human existence on the planet through three major revolutions: cognitive, agricultural, and scientific.

He argues that human jump to the top of the food chain that occurred as part of our evolutionary trajectory was as sudden as it was devoid of any adaptational depth that other food chain leaders from the animal kingdom went through. The way in which humans advanced compared to other species has actually left them feeling anxious and in constant fear that new coming uncertainties will somehow endanger their position and push them down the food chain. How is this related to the role of organizational culture in digital transformation? The core of this anxiety-fuelled existence translates into the topic of this blog: some organizational cultures will hinder while others will propel the digital transformation path of an organization and this blog is about the characteristics of both focusing on people with their primordial fears being at the center of it all. 

If we look at the ongoing phase of the latest big chunk of history that Harari termed ‘’scientific revolution’’ we will notice that a new cloud of uncertainty is looming over the society as we know it. To inspire more structure over our current condition, some have termed it the Fourth Industrial Revolution, a term used by the World Economic Forum founder Klaus Schwab or Society 5.0 as they refer to this day and age in Japan recognizing that our challenges go far beyond technology use and into reimagining the way we organize our economic and social lives. Whatever the label we decide to assign to this period of time, it is certain that digital transformation is the engine of it. Digital transformation is to our current world what the invention of machines was to the textile industry in the late 18th century or the introduction of computers into our lives in the late 20th century. In a gist, it is what will change us forever. 

Through our previous blogs, we have established that digital transformation is a process, a journey that uses the lessons on human behavior or more specifically human-machine interaction to reinvent new ways of creating value both internally in the organization and through market interactions. In the same way, we did not know the final chapters of previous revolutionary shifts as they were unfolding. It is impossible to tell how the tide of digital transformation will shape us or what it will evolve into. But what we do know is that this chapter of human history will be written by us, and not merely about us. 

Even though there are many unknowns in the world of digital transformation, mostly revolving around why so many attempts have failed to actually bring organizations into their next evolutionary phase, we do know a few things that are worthwhile diving deeper into. My colleague Nedzad wrote about how to approach the processes and build the structures for digital transformation step by step. This blog is about how to approach the people who will drive those structures forward. In many ways, organizational change of any kind is the interplay between people and structures. It is not rare that rigid structures make change hard or even impossible. Many argue that it is the people or the culture they cultivate through their mutual interaction in a workplace that accounts for the success or failure of digital transformation. Davenport and Redman (2020) go as far as to suggest that digital transformation is not about technology but about talent, and specifically, talent in these four areas: technology, data, process, and organizational change capabilities – all glued together with proper leadership capacity. Just like many others, they argue that having talent in these four areas and a good understanding of the scope of digital transformation efforts will not guarantee you success but the lack of it will almost certainly guarantee failure. 

So, what is at the heart of this somewhat elusive, impossible-to-catch force of organizational culture? While it may be codified in your manuals or rulebooks, the actual essence of it is not to be found there. It is how people feel at work, or the series of behaviors that trigger their feelings about their contribution to the company and/or personal growth. With a stretch of the imagination, it can be compared to natural forces like wind, for example. It exists in the background – it can propel you forward but at its worst, it can crush you down. And it will crush down any effort at transformation if that process triggers the centuries-old anxiety Harari writes about which is why clarity of vision is a true source of power in any digital transformation project. Hence, the role of proper leadership.  

Change is difficult. Especially when it requires us to unpack some long-held instinctive, repetitive habits, and emotional responses: core pillars of any organizational culture. Mistakes are common and they can be costly. Although writing on a subject of changing habits on an individual level, in his book Atomic Habits, James Clear writes about one of the most common mistakes that can be applicable to a business context as well. A deep organizational transformation requires a new lingo too. In the organizational culture of the 21st-century company the usual performance indicators may well be the result of the impact you are perceived to be making. Employees of today like to understand ‘’the why’’ behind the business ventures. Because the business world is used to seeing success through performance lenses, we often attempt the process of habit changing, or cultural adaptation, by defining the goal we wish to achieve through the transformation (i.e. we remain performance-focused!). If we were to look at the digital transformation in a narrow (and incorrect) sense this would be all the improved performance due to the introduction of certain technologies or processes. 

In the illustration below taken from James Clears’ book Atomic Habits, the most outer circle refers to goals, then come the processes, and in the middle of the circle is the identity – these are the three layers of behavioral change. The goals are of course the most obvious target, then come the processes. Organizational culture builds on these and also comprises collective behaviors, incentive structures, emotional reactions, etc. Organizational culture is a unique way of describing the identity of the organization and its power rests on shared values and principles. Starting the change from the outside-in will allow you to show for some change but it not likely to be durable. 

If we step back and ask ourselves what kind of organization we wish our companies to become instead of what kind of targets we wish to reach, processes and goals will align to help us create the change that is identity-based and long-lasting. That is how changing culture works, at least the one that can digest the depth of digital transformation processes. This is, of course, easier said than done. So, let us then tackle some of the fears that turn organizational culture from a friendly wind of change into a deadly tornado when attempting digital transformation at an organizational level.

Fear No.1: Digital transformation is a swift way to make the majority of people redundant at the workplace. 

Here is a good place to differentiate between digital optimization and digital transformation. While digital optimization is about the use of technology to optimize the internal use of resources and it may result in certain jobs being handed over to the machines, the actual intent of digital transformation is an overarching change in the way value is perceived, designed, and delivered in the organization. With digital transformation, we are not only introducing technology as tools to improve productivity but we are reimagining what that productivity means in our particular context. That is a completely different ball game which eventually will require upskilling of employees. If employees perceive this as a forced transformation that is neither aligned with their present skill set nor in compliance with where they see themselves professionally, there will be resistance. Resistance, in fact, becomes a survival mechanism. 

What culture to build to handle this: A learning culture

When you insist that learning new skills is an integral part of what your company is all about then change becomes part of the evolution and not a threat to your organizational identity. And learning needs to happen at all levels. The proven way of mitigating fear is through increasing knowledge on the fear-inducing subject. Make it a point that everyone in the organization needs to evolve, management included. For this, the organization needs to embody the growth mindset as opposed to a fixed mindset. Carol Dweck writes very elegantly about this. We will not fail on purpose, but we will learn on purpose and might fail in the process. Organizations should stop vilifying failure and understand that every employee’s decision not to risk something because it might lead to failure is actively diminishing their creativity at the workplace.  The illustration below shows what words, sentences to use to encourage a growth mindset over a fixed mindset. Do not shy away from trying this out.

It is the management that will have to lead the way if the transformation is to be successful and do so by managing the processes and leading the people. In the organization of the 21st century, leadership is no longer about roles. It is about skills and abilities to assume responsibilities not just for your tasks but for your team and colleagues. This expanded understanding of leadership empowers learning as the DNA of the modern organization and defines failure as a learning tool. This is not easy and it takes patience to see the bigger perspective here. This is why it is essential that beyond performing their usual roles, people are allowed to contribute to various other cross-cutting initiatives that take down the culture of silos and replace it with a culture of collaboration and trust. This engagement helps couple together two powerful forces: leadership and employeeship.

Fear No. 2: The burden/cost of the digital transformation will only be born by those who are not in leadership positions

Even though the current pandemic has highlighted the need to go all the way digital, some industries and companies are better advised to take the process incrementally, especially if there is a fear of who carries the burden of the organizational overhaul or even more importantly who pays the price of a failed process. At times, for the culture’s sake, it is better to identify the core processes, start small, develop your own metrics of measuring success, and then gradually, while creating buy-in from the employees, expand to less critical processes. The name for this is Discovery-Driven Planning (DDP), first developed as product-innovation methodology and later adapted to fit the ‘’lean start-up’’ tool kit. It is essentially about helping some companies learn their way towards a new business model which is the ultimate goal of digital transformation. When trying to plan, design, and prepare for the execution of the digital transformation strategy, it is advisable to keep in mind one critical difference between organizational cultures in companies that were born digital compared to the so-called legacy companies. So much of what traditionally used to be part of one company can now be done out there in the digital market space making the borders between markets and firms blur. The direct result of this is that digital start-ups or digital-born companies naturally learn from the environment, pivot, and change direction without destroying much value. The legacy companies are usually not blessed with the same kind of luxury. For them, if the digital gamble fails, there will be some hard-felt consequences usually described in jobs lost or physical assets being devalued. They cannot pivot easily and the fear that the burden of the company-wide digital transformation will be too heavy to carry becomes all too real. 

What kind of culture to build to handle this: A flat, caring culture

It is not enough for leadership to empathize with the rest of the organization. This is but a first step that assumes the understanding of the problem faced by the employees. What is required is a direct action to show that in the midst of the identity make-over, leaders care about the mental well-being of the employees. The best way to show that they care is through changing their own behaviors, one step at a time. Ron Westrum provides an interesting framework that illustrates what this shift means when applied to levels of cooperation, responsibility handling, collaboration efforts, and attitudes towards failure. What once was a power-oriented entity needs to become a performance-oriented organization, or better yet, a value-driven company that truly puts people first. The language slightly differs from the one used before, but the point remains the same. Organizations that are successful in digitally transforming themselves are open and collaborative. 


Ron Westrum’s Typology of organizational culture

Gone are the times when the employer-employee relationship was perceived as a simple transaction between labor and wages. Not much contact, not many worries. We have embarked on a journey where the currency of success is defined by how well we use the four Cs: critical thinking, communication, collaboration and creativity. And these skills are not cultivated in cubicles and isolation. They are best advanced when teams work together requiring high levels of cooperation and tolerance for experiments. We now speak of the experience of work. And people like to be treated as partners in that game. 

Final thoughts: Be inquisitive and curious

Changing the culture to fit the goals of digital transformation is an arduous task. It is as much about strategy as it is about operations. Leaders often lose sight of one obvious thing: make it a point to continually ask how people feel, what they expect, and how they see their interaction in an office network. A useful framework that can be employed to this end is known as CTS diagram.

You can run this in its own right as an independent survey, or integrate parts of it into your other practices. But do not miss the point, organizational culture shifts do not happen alongside digital transformation as some sort of side-kick cosmetic project. They are an integral part, if not the foundational part, of your organizational trajectory towards a new, digitally supported business model. 

Asking people how they feel working in the company might be the best possible way to understand how to approach your digital transformation journey. What we do at Softhouse on a regular basis is to follow the team temperature with regards to issues we hold dear and important to us. At our office in Sarajevo, from the input collected from the employees, we arrived at four fundamentals that underpin the values we stand by. Being a Softhouser to us means putting the team first, being courageous in your actions, using simplicity when offering solutions, and being passionate about your work. 

Office values at Softhouse Balkans

Will these change at some point? Probably not drastically. Could we get better in how we translate these into our everyday operations? Always.  The point here is not to nail the organizational culture at once. It is to nail the direction in which it is taking you so that when you embark on a complex journey like digital transformation you know you have the good wind blowing in your sails. 

/ Samira Nuhanovic

References:

Clear, James. (2018). Atomic Habits. New York: Penguin Random House LLC.
Dweck, Carol. (2006). Mindset: the New Psychology of Success. USA: Ballantine Books. 

Harari, Noah Yuval. (2015). Sapiens: A Brief History of Humankind. NY: University Press

Thomas H. Davenport and Thomas C. Redman. (May 2020) Digital Transformation Comes Down to Talent in 4 Key Areas, Harvard Business Review. Available at: https://hbr.org/2020/05/digital-transformation-comes-down-to-talent-in-4-key-areas?referral=03759&cm_vc=rr_item_page.bottom Westrum, Ron. (2004) A topology of organizational cultures. Quality and Safety in Health Care, 13(Suppl II):ii22–ii27. doi: 10.1136/qshc.2003.009522