Culture Transformation: How McKinsey's 5 Bold Moves Undermine Company Success

Welcome to the Elephant in the Boardroom, where we talk about the business practices we love. Love to hate, that is. These are the practices that frustrate employees, anger customers, and hurt shareholders. I'm Terri Long.

And I'm Jeremy Eden.

And we are the co-CEOs of Harvest Earnings. We challenge conventional wisdom, share our stories, and give you advice you can use at work, and even sometimes at home. It's time to banish those elephants in the boardroom.

Good morning.

Good morning. How are you?

I am well. How are you?

Good. How was the book club last night?

Book club was great. It was raucous. I have too much food left over from it. But yeah, we had a good time discussing our book.

Excellent. What book was it?

I'm not naming the book. The book was very unusual for our book club. We were looking for a page turner, and we often do some relatively heavy stuff. And this was so different that one of our members, Stephanie, who wasn't with us when we chose the book, said she was reading it at one point and thought to herself, "What has happened to my book club?"

Well, maybe you're changing the culture of your book club.

Oh, what a smooth transition. Okay, so yes, we're going to talk a little bit today about transforming your culture, which you can tell by the tone of my voice we have a little disdain for.

I've always wondered what that tone meant when you used it with me.

Hmm, now you know.

Now I know.

Now you know. So I was, I'm not going to say doom scrolling LinkedIn, just scrolling LinkedIn the other night and came upon this post from McKinsey and Company.

I've heard of them.

Especially when they gave you a paycheck.

Yeah, exactly.

And the post was called "Five Bold Moves to Quickly Transform Your Organization's Culture."

And in my opinion, and I know in yours too, it is just fluff. There's nothing substantive about it. It doesn't work. It's not practical. It's just ugh. And the thing that really kind of bugged me is, oh, I don't know, a thousand plus likes and many reposts said, "Oh, this is great." And this is why so many companies fail to have the culture they want or the earnings they want, the growth they want. Let me just read you a couple of them and then we'll go from there. The first one is, "Don't just tell, show. Senior leaders should actively expose individuals to new ideas and best practices, encouraging them to learn from a variety of sources."

Okay. So that's how you transform your culture is the senior leaders have to expose individuals to new ideas and best practices. Go ahead, say it.

No, you go.

No, you go. Go. You go. You go, boy.

You go. Okay.

Maybe at least sometimes senior leaders should listen to the new ideas that their teams would like to expose them to. Why is this always about, oh, the great senior people have to bring along the sheep. It's often their own behavior that needs fine tuning.

Right. For sure. Why are they expected to have the new ideas? I mean, it's just nonsensical, really.

It is.

Okay. So the next one, "Don't assign enroll."

Okay. Those words we kind of agree with, but here's how they describe it. "Large-scale change requires voluntary engagement from everyone. Without such commitment, the status quo will prevail, reducing the chances of success." Okay.

If you could get voluntary engagement, then you've already got a good culture. So what's voluntary? Tell me the analogy you threw out earlier.

Well, I know our town is trying to slow cars down in front of the elementary school, but you know, I'm not really enrolled in that, maybe because I don't have kids enrolled in the school. So I'm not going to volunteer for that. I need to get home for dinner quickly.

(Laughter)

Yeah, exactly. Yes, you need engagement. Of course you need engagement, but voluntary?

And by the way, for whatever people think of basic training, I'm pretty sure it's not a bunch of voluntary enrollment. It's getting, in fact, there's a major flaw here. There's so, so much of this McKinsey stuff, but one of the flaws here is the psychology of change. It's like I act because I believe something, so I better change someone's beliefs to make them act differently. Quite often, we believe because we act, we act in a certain way. We're sort of made to be generous or we're made to push ourselves or we're made to do something. And our whole belief system actually changes as a result of the experience we have acting differently.

So, you know, welcome to, we've gone well beyond the 1700s. This isn't just about changing beliefs and getting behavior to follow.

Yeah, the 1700s.

(Laughter)

I was going for the enlightenment.

I see. Okay.

Yes, and there are ways, lest everyone think you think we're just saying that every company should act like a boot camp. There are ways to get engagement that are not voluntary, but also aren't painful. If people are assigned, you know, if they understand the goal, if they benefit from the goal, so they're going to get, you know, they're going to get listened to, they're going to get a new idea, they're going to give a new idea, then, you know, maybe it will become voluntary, but just saying you need voluntary engagement is worthless.

Should we give the Agile example or not? No, please. So, we were at a company that used Agile for its IT costing, and our project was going to yield, you know, I don't know, 150 ideas that needed IT costing. And we're told using the Agile system, maybe they'd get to 10 in the time period we needed, which was a matter of weeks. And it was absolutely, you know, this cannot be changed, and it would be bad for us to change it. And everybody up and down the line with the, thank God, the exception of two people, believe that. These two people who are pretty senior in the IT department said, no, we can do this a lot differently. And together we created this thing called speed costing. They costed 150 ideas in a matter of weeks, accurately, actually conservative, still conservatively, which is good, that's what we wanted, and could make decisions very quickly. Very quickly. And at first, nobody believed this would work. But because people were forced to do the process for a week or 10 days, go to several of these meetings, suddenly it was like, oh, this is great. I'm not wasting my time. We're getting decisions made. The right decisions are getting made. This is terrific. So, you know, did we force people? Yeah. Yeah, we kind of forced people. But we forced people to do something that, you know, they really liked.

Shout out to Adam and Warwick.

Yes, they were the two.

So, okay, moving on. Connect the dots. Oh, McKinsey, you're brilliant.

In a cultural transformation, or is it sorry, not sorry.

Yeah, yeah.

I had to quote Demi Lovato, I think. In a cultural transformation, it's crucial to identify and empower hidden influencers within the organization. Okay. I mean, sure. Yeah. But, you know, how do you do it? And you want to change a culture in a big company. How many influences are there? How far down the chain do you have to get to find the influencers and then bring them on board? How do you do that? Yeah.

In fact, often it kind of happens the other way. This is what happened with Adam and Warwick.

We presented what had to get done and how we typically think about doing it. And they rose to the occasion, right? The influencers raised their hand. We didn't go do a bunch of interviews and try to find out the hidden influencers. We presented the problem and they came forward. Yeah.

Because honestly, how do you find the hidden influencers in a Fortune 1000 company? Yeah.

And they shouldn't be that hidden if they're that good at influencing.

Maybe I could become.

Maybe it's easy, actually.

I am, by the way. You probably didn't know this. I am a hidden TikTok influencer. Nobody knows it.

And I've never been on TikTok. That's how hidden I am.

That is very, very hidden. Excellent. Okay. I'm going to quickly go through, I think, the next, throw out the next two together.

The next one is it's personal. Business leaders must recognize the personal challenges of cultural transformation. They should support employees holistically, minds, bodies, and spirits.

I think HR might object to some of that, but okay.

Yeah, I think you're right. And okay.

Again, so okay. If a company wants to, you know, like Google at least gives lip service to the holistic.

Well, I shouldn't say just lip service. Because, you know, they have soccer fields in the office or, well, not in the office.

Yeah. Yeah. They could afford to have them in the office.

So again, it's just for me, it's the impracticality of this advice. And this is a bold move. Think about your employees as whole people. That's a bold move. All right. And then the last one, and then we'll talk more about how we think a culture actually changes, is shake it up, all of it. Leaders should introduce and embed new meaningful rituals in the workplace and continually refine employees' roles, mindsets, and behaviors to align with organizational strategy. Now, I don't even understand how the first part of that sentence connects with the second part. So leaders should introduce and embed new meaningful rituals in the workplace. Now, I happen to love a good ritual. And I do think people connect to it and it is part of the culture. I mean, you know, 100 years ago, I worked at, I guess, Harris Bank in Chicago. It's now Bank of Montreal. Every holiday season, Christmas, really, there was a choir that sang in the lobby. And the commercial bankers at that time were mostly up on the second floor, but it was open. So it was this tall season and, you know, ceiling. And I loved it. First of all, we all know I love Christmas.

And it's just this beautiful music booming out. And, you know, every year I wasn't, I mean, I don't know how long I was there, eight years or something, but it was just a ritual that I loved that when I left Harris Bank, I really, really missed and made me feel really good about the company. But that's a very one-off. That is not the culture. I mean, there were many other things. The fact that, for example, in my division, I was in a division that lent to construction companies. So as you can imagine, the vast majority of those were men. So the annual golf outing for our division was at a men-only course that I could not go to. So other people had to golf with my customers while I got to do, guess what? Stay back in the office. So did that trump the ritual of the Christmas music? Oh, hell yeah.

Yep.

And again, what is the con-- so the second part of the sentence is, "And continually refine employees' roles, mindsets, and behaviors to align with organizational strategy." Refine roles, mindsets, and behaviors to align. So that's closer to something we're going to talk about now. So.

Though, I will say it is ironic and not, I think, nitpicking to say this is about building a culture. Culture, among other things, is the thing that is more permanent than other things. You might change internal policy to react to a new law. And you might want to do that on the fly. But a culture is something that should last years, possibly decades. It's that. And yet this is saying, "Continually change it." No, no. This is the thing that shouldn't be continually changed. It might have to change, just like the culture of welcoming women into the workforce and making sure their opportunities are equal. Sure, that's an important change.

Yeah, and I'm sure there were undoubtedly tons of culture change around COVID.

Right, right. But it's not like, oh, it should be built in that we're continually changing it. Anyway, one of the problems, now, you got to give McKinsey this, in their document, they did make five bold moves in blue. So, how's your-- Bold. I mean, how-- It's really important.

There is nothing bold about any of this.

Is these words, undoubtedly, they think to themselves, well, this is just top line. Then you have to hire us to figure out what to do about it. But it's kind of top line, like getting a manual for your washing machine that says, if it's broken, turn it off, fix it, turn it back on. The words are fine, but completely useless. Completely. In making progress.

Yes. So, would you like to dive in, or shall I?

No, you shall.

We very firmly believe that culture isn't something you change at the top. Here's culture, and let's do this stuff. Let's engage people and all that. Once you decide the behaviors you want, those behaviors all add up to the culture. It's not the culture that creates the behaviors, it's the behaviors create the culture. So, if you want a culture of one company, so lots of places have even named our projects, one company, one their client, insert client name, so that everybody acts in the best interests of the company as a whole. So, you don't act in the best interest of your division, your unit, whatever, you take a holistic look. Okay, that's fine. If you want that culture, you've got to reward those behaviors.

So, I was telling you earlier about. So, for years, I've had a French calendar of the day. We all know I'm a Francophile.

Indeed.

As an aside, we used to call it the French calendar that speaks the truth. The phrases on particular days were shockingly pertinent. It was a little scary. The other day, the phrase is "couffette vous," which means, "What are you doing?" But the translation was, "Where are you going?"

So, I was gobsmacked. I thought, "Have I lost so much French that I don't know what "couffette vous" means?" So, I googled it, and I think, "Oh, it's probably colloquial. It's probably slang." I googled it, "I can't find anywhere that it says, "Oh, yeah, that's a loose translation to where are you going?" So, I decide I'm going to write Lonely Planet and just tell them, "I don't care. I'm not asking for my, you know, $12 back for the calendar or whatever." I just think, you know, "Well, I'll let them know." So, first of all, of course, nearly impossible to actually find any way to contact them and give them this little tidbit, but I find something and I fill out a form and I say this. And my response, first of all, I get the auto response, "We've received your inquiry. You know, your message is important to us. Blah, blah, blah. You'll hear from us within two business days," or whatever it was.

And then I hear from them, and the response is, "Oh, sorry. That's not our problem. You need to write the French company. They take care of that." And here's their website. So, not even an email or a contact form for them, their website. And I don't want anything. I don't care. I'm just providing this company some information that they maybe had a mistake in their calendar. And the response is, "Go do some more work to get it to the right place."

One company attitude? No. So, if Lonely Planet wants that as part of their culture, that needs to be part of the training. And if somebody is looking at responses for training or for performance reviews or whatever, somebody needs to say, "That's not an acceptable answer." They, of course, could have told the French company if that's truly where it needs to go. Now, it's a French to English calendar. So, is it really just a French? Who knows? And who cares, honestly? It's just to give me more work to do.

Right. Right.

Yeah.

So, this, you know, you, well, so one of the things that we can't stand when we walk into a company, it actually can't stand a little strong, but that we, is an addition to us that there might be an opportunity to improve the culture, is that on the walls we're hanging mission, you know, our core values, and then it's some acronym, and they're each some core value, and our mission statement, and we do employee surveys, and HR does something with these employee surveys.

And it's all very kind of fluffy, and there's no evidence that this has ever worked. And in fact, McKinsey, who, you know, prides itself on being analytic, data-driven problem solvers, there don't give you in this document or any other I've ever seen something that says, "Well, here's 12 companies that did this rather than this, and this is how their culture actually changed, and this is how that changing culture led to growth, better earnings, better customer service, lower turnover, if lower turnover is good in that situation," whatever it is. Yeah. And what all this verbiage and high-level stuff is doing is avoiding an engineering problem, a hard engineering problem, and the engineering problem is, you could call it cultural engineering or behavioral engineering. It is like every problem. The first step is, what's the specific problem we're trying to solve?

So, we were at a company where the operations in one country made a product, and the operations and marketing and R&D folks in another country were buying that same product from vendors because they were completely unaware that their compatriots were making this stuff and could get it to them cheaper at the same or better quality.

So, what's the problem to be solved? Well, you'd have to look at that very specific situation and say, "Who knows what? Who should know what? How should they communicate to each other?" And then engineer practical, simple ways. In that case, it was having joint meetings that were kind of show and tell periodically where each area could show the others what it was doing, almost like a food company, almost like a food fair or something.

So, the problem is in high-level quasi-religious kind of talk. It's an engineering problem.

Just a point on your values poster.

So, back in the day, we used to take pictures of those. And so, say we're in an office somewhere because we're meeting with the CEO, but then the CEO wants us to present to the whole executive team. So, we, in the past, would take a picture of those values. Well, yeah, take a picture and then we would use each one later on a slide. We would talk about how it meshes with what we do. And lots of times, they wouldn't even recognize it themselves. They would have no connection to it at all. So, just proving that it's completely useless. And so, we stop doing it.

The challenge here is moving from this sort of high-level, "I want cultural transformation and I want it now," make it happen head of HR to collectively, "We need to figure out what the engineering problem is we have. What are the specific behaviors?" And by the way, as you've said several times already today, we don't want people to get the idea that there's some single best culture. There isn't.

Not only is there no single best culture- I don't think I said that even once, but okay. Oh, well, you implied it.

Okay.

When you were semi-chastising me for sounding like there was a right answer. Not only is does each company maybe need different cultures? But within companies, you might need radically different cultures. So, there might be some behavioral attributes that should cross the entire company. Like honesty, like listening to people's ideas, like making decisions quickly, like being a one company player. But you might want your accountants in finance to have many cultural attributes that the new product folks or the creative marketing folks have a completely different set of cultures on top of those commons.

Yeah. Do you want your audit team to have the same risk tolerance that your R&D team does?

Right. Probably not. Probably not. So, that's another challenge for the poor CEO, and I don't really say that. Sarcaskia, I mean, you've got one person at the very top thinking of this big thing saying, "I'm frustrated because I feel like there aren't behaviors I'd like to see demonstrated." But to get underneath that, figure out what they are, figure out how to change them, is a big project and there's no easy way to do it. And certainly bringing in McKinsey to tell you what to do. It's not going to work.

So true. All right. So, I guess just to sum up, culture is not something you can do five bold moves and suddenly your company has a new culture. Culture is all about behaviors. So, find a way to change the behaviors, incent them, reward for them, but also, what's the op- punish? That's not the right word. I mean, it is the opposite.

No, but hold people accountable to them.

Thank you.

That's the right way to say it. And provide them the tools and the process and all the...

Yeah. And then you will change your culture. And then your other important point to summarize is that, especially in big companies, there is not a single set of behaviors you want all of your employees to live by. There's a subset. Yes. Maybe you want people to be welcoming. I don't know. Something at that level. But then the behaviors may well be very specific to what their jobs are. So.

Yeah. And here's the thing. And it explains why McKinsey says bold moves. People want speed and they think they want big earnings, they want fast transformations. And they think the only way to do that is through a small number of large, bold actions.

And that's wrong. Turns out you can change the culture of a company in kind of a heartbeat, doing very practical things that might not appear that bold, but that actually engineer those behaviors.

Yeah. We should know because that happens to be exactly what we do. All right. I think it's time to wrap this up. Coincidentally. Coincidentally.

All right.

See you later. All righty. Back to work. Thanks for listening. To learn how Harvest Earnings helps large companies overcome the bad practices, visit our website, harvestearnings.com or email us at info at harvestearnings.com. Also, please subscribe wherever you get your podcasts. And if you're feeling generous, leave us a rating and a review. It really helps others discover the show. Until next time, I'm Terri Long.

And I'm Jeremy Eden. And now it's time for us to get back to work. Bye.