Despite increased investment in culture change, less than one-third of organizations agree that their current culture enables their strategy. As pressure mounts from internal and external stakeholders to prove an organization’s culture drives its performance, heads of HR are looking to build and sustain the culture needed for the future. CEB’s Investor Talent Monitor (which CEB Corporate Leadership Council members can access here) found that 70 percent of organizations saw talent issues come up on investor calls last year, and culture was chief among them.
At the same time, organizations are experiencing unprecedented levels of change, disrupting traditional theories of management and organizational structure. In this context, MIT Sloan Management Review editor-in-chief Paul Michelman wonders if the culture challenges organizations are now facing mean that the prevailing ideas about culture are no longer fit for purpose in today’s business world:
We are evolving toward the age of networked enterprise, in which the traditional hierarchies of the corporation will be supplanted by self-organizing systems collaborating on digital platforms. It will be the era of entrepreneurship, distributed leadership, and the continual reorganization of people and resources… Layers of management will fall; the need for centralized systems and trusted go-betweens will dissipate, if not disappear.
And that makes me genuinely worried for my friends in the corporate-culture business. Because I’m not sure that culture is going to matter all that much in the future — at least not in the ways we conceive of it today.
While Michelman cites these changes in today’s work environment as reasons why culture is less important today, we believe they are precisely why culture matters more now than ever. Today we are seeing more and more examples of what we call the “on-demand organization,” which requires employees to have a firmer grasp on culture to guide their decisions, using culture as a tool and not a byproduct of work. Today’s on-demand organizations operate in a business world defined by a decrease in three major types of “time to action”:
Oxford evolutionary psychologist Robin Dunbar is most famous for his theory that humans can only maintain personal relationships with about 150 people at any given time, so much so that the figure is referred to as “Dunbar’s number.” Quartz’s Kevin Delaney explores the application of Dunbar’s number to management in the context of growing startups:
“There is no question that the dynamics of organizations change once they exceed about 150 or so,” says Dunbar. “The [Hutterite faith group] deliberately split their communities at this size in order to avoid having to have both hierarchies and a police force. Keeping things below 150 means you can manage the system by peer pressure, whereas above 150 you need some kind of top down, discipline-based management system.”
At a startup, once the staff exceeds 150 people, employees are no longer the single, cohesive, culture-reinforcing unit they were during the company’s earliest days. Staffers become more specialized and entrenched with their teams, which are probably sprawled across an office, perhaps on multiple floors or in several locations.
A recent survey commissioned by the staffing firm Spherion looks at how employees feel about their job titles. One quarter of employees, the survey found, “consider non-traditional job titles unprofessional and are against the idea of having one,” while 23 percent also said these types of titles don’t accurately describe their roles:
Although not every company may have a “Chief Happiness Officer” on the payroll, Spherion found that creatively-named roles are merely a small part of employees’ overall professional title dissatisfaction. Nearly half (42 percent) of today’s workers feel their job title does not accurately reflect their true roles and responsibilities. However, even employees in favor of more traditional titles believe they could use improvement, as 14 percent consider monikers such as “Project Manager” or “Specialist” too generic.
“Employees take great pride in their job titles, and in some cases, a title that is considered limiting or hard to describe can significantly impact their job satisfaction,” said Sandy Mazur, Spherion Division President. “As businesses face greater pressure to retain and recruit top workers, reexamining how different titles are perceived and applied can make a big difference in building morale and positioning a company as a favorable place to work.”
Job titling is an area of frustration from the employer perspective too. At CEB, we asked HR leaders last year if they were planning to reduce the number of job titles in their organizations. About two-thirds of HR leaders reported that they had done so, or would consider doing so. Their goals were to create consistent titling nomenclature across the organization, increase clarity of career opportunities for employees, emphasize titles that provide clarity and impact in external markets, reduce the gap between junior- and senior-level employees (in other words, flatten organizational hierarchy), and reduce overspecialization of roles and responsibilities. On the flip side, only 2 percent of organizations were letting employee choose their own job titles (though another 17 percent said they might consider it).
Over the past two years, there has been plenty of focus on performance ratings—are they good, bad, or a necessary evil?—and a number of major employers have radically reformed or even discarded their rating systems in an effort to overhaul the way performance management works. At CEB, we’ve found that for all the criticism they’ve gotten, ratings do serve an important purpose in helping employees understand how their work is measured and where they stand, and getting rid of them doesn’t actually improve performance.
With so much attention given to performance ratings, or what comes out of the back end of the performance management process, HR may be neglecting an equally important question: What are we putting into the front end of that process when it comes to goal setting? For organizations that are having trouble with performance management, the source of their frustration might be a “garbage in, garbage out” problem. In an interview at First Round Review, BetterWorks CEO Kris Duggan discusses how his company uses a technique called Goal Science Thinking to solve that problem:
It’s an approach that uses OKRs [Objectives and Key Results] as a foundation and turbo-charges them by applying human behavioral psychology, increasing engagement, and enforcing regular practice. Essentially, it leverages all the tricks and hooks we mortals use to stick to good habits — only re-imagined to help large teams stay on top of business targets. …
Everyone at the company can view everyone else’s goals. There aren’t any secrets or hidden agendas. Hierarchy has been banished — allowing direct reports to view their manager’s goals and even those of managers on completely unrelated teams. Interestingly, BetterWorks found that people view their supervisor’s goals 20% more often than their own. Obviously there’s appetite for this kind of knowledge and transparency. In older, more traditional systems, this wouldn’t have been possible. Only managers could have reviewed reports’ goals down through the chain of command.
Corporate culture is changing and organizations are increasingly experimenting with new, non-hierarchical models of management like holacracy, while some are even embracing the concept of “corporate democracy.” Central to “flat” management philosophies like holacracy is the idea that nobody has a line manager, per se; instead, teams are self-organized and the organization makes large-scale decisions through sometimes elaborate processes, rather than simply taking orders from senior executives.
Offering a counterpoint to this trend at Fast Company, Jes Kirkwood makes the case for shaking up structure by creating more managers, not fewer:
The truth is, some employees have more experience and expertise than others. That’s why their peers intuitively look to them for advice and leadership. But leadership doesn’t have to be centralized. If you’re considering a shift toward distributed leadership but aren’t sure if going completely flat is right for your company, consider embracing joint leadership. Yes, it means you’ll have more managers, not fewer—but that could be just what your growing company needs. Here’s why.
Joint leadership simply means dividing what’s typically one person’s managerial duties between multiple people, who put their heads together to make leadership decisions. By adopting this model, you can benefit from two unique skill sets and personality types.
Kirkwood also advocates this model of leadership as a way to enable employees with little or no management experience to test the waters:
Holacracy, the “flat” management philosophy popularized by Zappos CEO Tony Hsieh, is meant to unchain decision-making from the strictures of hierarchical authority, but at Forbes, critic Jurgen Appelo derides it as “a top-down, bureaucratic, big government framework” that is “completely the opposite of what agile, scalable organizations need in the 21st century”:
Most importantly, when I delegate work to someone, I ask a human being. I asked my friend Sergey to automate some of our business processes because I fully trust his programming skills as a developer and his business insights as an entrepreneur. I specifically did not delegate this work to our Business Process Architect, because A) we don’t have one, and B) we don’t want one. We have Sergey. And here we encounter the fundamental problem at the heart of Holacracy, the trendy corporate governance framework that is known for causing some turbulence at Zappos, Medium, and other forward-thinking companies.
According to founder and creator Brian Robertson, Holacracy is like an operating system, but for organizations instead of computers. It is yet another version of the organization-as-machine metaphor that has led the world of business to adopt and implement far too many misguided, command-and-control practices. This is the sentence from the book Holacracy that made me cry out in despair: Roles are the most basic building block of Holacracy’s structure. When we distribute authority, we distribute it not to individual humans, but to the roles that they fill. …
Kelly Max, the CEO of Haufe USA, was elected to the job by Haufe’s employees in 2015 and must be re-elected each year to keep his position. Writing in Fast Company, Max retells how “corporate democracy” became the norm at his organization:
My company, Haufe, adopted leadership elections four years ago, when our founder, Hermann Arnold, realized he wasn’t the right candidate for global CEO as the company grew and expanded. Arnold stepped down from that post in 2011 and assumed the role of chairman. Then, rather than simply appoint someone, Arnold asked himself, “If we truly believe employees run companies—as our fundamental market approach says—what better way to prove it than to have our employees elect the next CEO and other top leaders?” So all 200 employees at the time were enfranchised, and they chose Marc Stoffel as the company’s CEO.
That set a pattern, which the company followed globally.
One rationale for Haufe’s democratic experiment is to prevent the emergence of “shadow organizations” within the company, he explains: