The Essential Activity for Real Culture Change
According to a quote attributed to the management guru Peter Drucker, “Culture eats strategy for breakfast every day.” While many senior leaders embrace the notion that culture is mission critical, the achievement of fully human work environments is rarely actualized. According to a 2018 global survey conducted by the Katzenbach Center, while almost two-thirds of C-Suite executives and corporate board members thought they had strong cultures, only 41 percent of the employees agreed. And, more importantly, regardless of how they assessed current culture, 80 percent of all survey respondents said their organization’s culture needed to evolve for their company to succeed in future markets. Why is it that, despite understanding the importance of a strong culture for business success, so many companies fail to build outstanding work environments?
I discovered insight into the answer to this question a few years ago during a three-day corporate culture improvement event. At the time, I was the General Auditor for the Blue Cross Blue Shield Federal Employee Program (FEP), a division of the Blue Cross Blue Shield Association (BCBSA). FEP is a business alliance of the 35 independent Blue Cross Blue Shield organizations that provides health insurance to federal employees. Today, FEP covers more than five million federal employees and family members nationwide.
In late 1996, the new BCBSA CEO felt we needed a cultural boost and hired an outside firm to conduct workshops to improve our esprit de corps. As part of this initiative, the entire FEP management team participated in a three-day interactive workshop. The two highly skilled facilitators designed a powerful set of activities that enabled us to recognize the talents of each of our co-workers, engage in appreciative inquiry, share touching stories that made us laugh and sometimes cry, and craft an agreement that we all signed to pledge our commitment to behaving differently when we returned to the office.
The high energy and the camaraderie that we all experienced made these three of the best days I ever spent at work. However, despite the sense of exhilaration and promise we experienced, my most vivid memory of the workshop happened midway through the last day when I had a troubling thought. While I felt that everyone was truly genuine and we had a glimpse of how powerfully we could work together, something inside me said, in about three weeks’ time, our behavior would return to the old ways and our signed agreement would be nothing more than good intentions on a piece of paper.
Unfortunately, this premonition turned into a reality. It didn’t take long before we regressed to business as usual because, while we may have attempted to change our intentions for how we would work together, we didn’t change the organizational operating system in which we worked. Our organization was still a top-down hierarchy where individual professional success remained a matter of how well we pleased our individual bosses. If the supervisor’s interests didn’t align with the needs of our co-workers, the written agreement we all committed to took a back seat to pleasing the boss. It turned out that our good intentions were no match for the dynamics of an entrenched operating system. Based on this experience, it seemed to me that changing business cultures was more about changing the organizational operating system than changing people’s intentions and attitudes.
Six months later, I would have the opportunity to test this hypothesis when I was asked to lead an operational turnaround of our business. For the previous two decades, FEP had struggled with low growth and less than desirable performance. In the mid-1970’s, we had been forced to raise our insurance rates by over 50 percent to remain financially solvent. While this rate increase did solve our immediate financial woes, it came at a great cost as we rapidly lost 23 points of market share. Over the next two decades, we managed to gradually build up our financial reserves but we were able to regain only four points of our lost enrollment. With our financial reserves strong once again, it was time for us to make a bold move and put FEP back on a high growth trajectory. To accomplish this, we needed to substantially improve our operational performance and our customer experience.
In contemplating this challenge, I realized that we would need to change how we managed because FEP is an unusual business organization. It’s not a vertically integrated organization; it’s a business alliance. The best analogy to describe how our business alliance worked came from an offhand comment made by a management consultant FEP had hired, who remarked that the only other organization he had worked with that was similar to FEP was the National Football League. Just as each of the teams in the NFL is a separate business organization with its own ownership and management, each of the Blue Cross Blue Shield organizations has a separate board and management group. Whereas the NFL has a commissioner’s office to provide the general management for the league, FEP has a director’s office to coordinate the joint efforts of the health insurance alliance. And much like the NFL, the various Blue Cross Blue Shield organizations often competed against each other.
This competition was a nagging problem and a driver of our less than desirable operational performance because it was often difficult to come to agreement on operational policy and processes when the different organizations had competing interests. Our meetings tended to be endless unresolved debates, and, as a consequence, operational issues could remain open for years. When the director’s office attempted to resolve issues by issuing top-down policy directives, many of the participants in the alliance would push back and assert their independence to act otherwise.
As I reflected on how we might change our management practices to move beyond these difficulties, I realized that, if we were going to be successful, we needed to align with the reality that we were leading a network, not a hierarchy. We needed to stop issuing top-down directives and find a way for the various alliance partners to consistently and rapidly reach consensus on critical operational issues. Learning how to lead a network would not be easy because in the mid-1990’s there was no body of knowledge on how to lead organizational networks. If we were going to succeed, we were going to need to become pathfinders.
To successfully lead this network, we needed to do two things well. The first task was creating a meeting format that could effectively achieve consensus among the alliance participants. And the second was to transform the 150-person FEP director’s office into a highly effective networked organization.
We accomplished the first task by creating an innovative large group meeting format that is today known as the Collective Intelligence Workshop. These sessions include approximately 40 participants that represent a wide diversity of business perspectives. The sessions are designed to greatly minimize debate by using facilitated individual and group activities to integrate the best thinking from various perspectives. By using facilitative activities rather than debate as our primary vehicle for processing human information, we were able to achieve the rapid consensus that had alluded us for over two decades.
The second task involved changing our organizational operating system and transforming the FEP director’s office into a productive network. This meant shifting the focus of work from individual performers to highly effective teams. Several actions accomplished this transition.
The first action was to cultivate a highly integrated senior leadership team by holding one-day strategic offsite sessions every two weeks. If we were serious about becoming a highly effective team, we needed to spend quality time together to co-create a robust shared understanding of our business strategy. As part of this discipline, we quickly established a principle that no single leader could make a unilateral strategic decision for their areas without first reaching consensus among the group. This assured that marketing, product development, product delivery, and supporting systems were aligned. Building a highly effective strategic team became a prime driver of improved operational performance.
We also put in place key self-managing teams that were responsible for coordinating essential operating activities. These teams were cross-functional, egalitarian and became highly effective at consensus decision-making. As a consequence, peer-to-peer shared understanding rather than supervisor control became the catalyst for an incredible leap in more intelligent decision-making and better performance.
And finally, to incentivize the collaborative behavior that is essential for maintaining highly effective networks, we redesigned our performance review metrics to include direct cross-functional feedback so that people saw their co-workers as key customers rather than as competitive rivals. Accordingly, our compensation practices rewarded those who both delivered results and collaborated with their peers. The prime driver for individual advancement was no longer about pleasing the boss; it was now about contributing to teams.
Learning how to lead a network did turn our business around. Over the next several years, FEP regained all it lost market share and significantly improved both its operational performance and customer experience. But more importantly, FEP was able to sustain this turnaround because a transformed operating system provided the continuing support for the emergent positive human work culture that became our hallmark.
This article was originally published in Emergence: The Journal of Business Agility.