Transformational Leadership: Changing Culture to Fuel Financial Success
An Examination of the Importance of Leadership Behaviors and Attributes on Shaping Culture
Executive Summary
Organizational culture is a critical factor in financially successful companies. But culture change is often overwhelming and elusive. In a fast-paced digital workplace, leaders face increasing pressure to innovate, make data-driven decisions, and effectively lead a remote and multicultural workforce. To thrive, change is necessary. It is crucial for leaders at every level to be equipped with the capability to act both within and upon a company's culture. Although overwhelming, culture change doesn't require sizeable investments and employees in the office. Leaders with dynamic transformational leadership attributes and behaviors are effective culture change agents. Evidence suggests that idealized influence and inspirational motivation are key leadership attributes and behaviors for leaders to drive culture change. They are foundational for enhancing trust, emotional connection, and the leader-follower relationship. Additionally, these leadership behaviors and attributes increase the willingness of employees to excel and give discretionary effort. The benefits of architecting a positive organizational culture are found to extend beyond financial success to include improved employee morale, commitment, health, and well-being.
HOW TO READ THIS WHITE PAPER
This white paper is divided into five sections. Each section is essential to understanding the importance of key leadership behaviors and attributes in shaping organizational culture. Sections one and two of the white paper provide a contextual understanding of what is meant by organizational culture and modern organizational culture challenges. Section three focuses on proven approaches to architect organizational culture. Section four looks at two key leadership behaviors and attributes vital to shaping culture. The white paper concludes by highlighting the significant benefits associated with improving organizational culture.
This white paper aims to establish the importance of leadership behaviors and attributes and guide business considerations for architecting organizational culture. As designed, the insights covered will improve our communities and workplaces by applying proven thought leadership.
Section 1: Understanding Organizational Culture
Organizational culture is the one thing that influences every aspect of a business. It directly impacts organizational success, employees, customers, and communities. The underlying cultural values of an organization affect the behaviors of employees and their decisions. Scholarly research directly linked the effects of an organization's culture on customer satisfaction, employee teamwork, cohesion, employee involvement, and innovation (Gregory et al., 2009). Just as some organizational culture characteristics can support these qualities, others can also inhibit these qualities. For example, a hierarchical corporate culture type is proven to decrease an organization's ability to innovate (Cameron & Quinn, 2011).
The idea of organizational culture is abstract and often not well understood. The word culture gets used in different ways by people at different times. Culture has been studied for many years resulting in many different models and definitions. Organizational culture is complex because it involves individuals, their interactions, teams, and the organization. Edgar Schein, who is considered to be one of the most influential contemporary thought leaders on organizational culture, described it as:
"a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems" (Schein & Schein, 2016).
A more simplified working definition of organizational culture is how things get done within the organization when no one is watching. It is easy to focus on the things that are visible to describe an organization's culture. However, an organizational culture framework consists of artifacts, values, and underlying assumptions.
Artifacts: These are the things you can see, feel, or hear in the workplace. Examples include what is displayed, office layouts, uniforms, identification badges, and discussed and not discussed.
Espoused Values: What you are told and beliefs that you can use to make decisions. Examples include a company's vision and values or mission statement. They are explicitly stated official philosophies about the company.
Basic Assumptions: These are things that go without saying or are taken for granted. Examples could include speaking up in meetings, holding a door for someone, smiling, or greeting someone by name when walking down the hall.
Often many elements of an organization's culture are not visible daily and drop into the background. However, significant events like a company merger or acquisition can make organizational culture differences noticeable.
Section 2: The Organizational Culture Reality
No organization is looking to stay the same year over year. The world needs organizations that desire to create a better future. According to the Business Roundtable, made up of the CEOs of 181 largest corporations, the principal purpose of a corporation is no longer only to maximize shareholder return (Business Roundtable, 2021). The purpose includes creating value for customers, investing in employees, dealing fairly with suppliers, and supporting the communities where corporations operate. Modern leaders are asking, can organizational culture be changed? This question is not just about changing but thriving. Today’s organizational culture reality includes challenges with innovation, making data-driven decisions, and a geographically dispersed multicultural workforce.
Innovation
Organizational cultures need to cultivate innovation. A global survey of over 5000 CEOs revealed that greater than 60 percent of organizations anticipate introducing new products or services to fuel their growth. A quick walk through a parking lot looking at the similarity of cars reveals a need for organizations to move beyond making incremental improvements. Company cultures centered on efficiency thinking have flooded the marketplace with low-cost, widely available products and resulted in tremendous waste and social issues (Brown, 2009). The future for organizations involves changing the organization's culture to create value for both the individual consumer and society.
Data-Driven Decision Making
Advances in technology create a significant advantage for organizations that can leverage data to make better decisions and take the right actions. To maximize their technology and talent investments, organizations need a culture that aligns with data-driven decision-making (Bartlett, 2013). This represents a sizable shift for many cultures that rely on stories to make decisions. A study involving more than 1000 executive leaders demonstrated that 80% of organizations with a mature approach to data analytics exceeded their goals, and 48% significantly exceeded their goals (Deloitte, 2019).
Geographically Dispersed Workforce
Modern organizations need to foster a culture that is shared across geographically dispersed and physically present workers. Hybrid models of remote and physically present workplaces for knowledge workers are projected to persist. According to a study of 2000 tasks, 800 jobs across nine countries project that 20 percent of an organization’s workforce could be remote three to five days a week (Lund et al., 2020). This represents an increase of three to four times as many employees working remotely. These changes are fueled by the workforce, advances in technology, and the pandemic.
Multicultural Workforce
The world is full of complex problems like cybersecurity and global political uncertainty. Still, the topics of diversity, equity, and inclusion are being discussed from the boardroom to the breakroom. As companies continue to expand into new markets, the makeup of the workforce in our companies and communities served is becoming more diverse. The United States is more diverse today than at any time since data has been collected, and projections are for continued increases in diversity (Vespa et al., 2020). However, organizations face serious cultural challenges, including broadly held perceptions of inequity to illegal business practices based on race, sex, language, and other diversity factors. Inequity and discrimination result from failure, one person at a time, one action at a time (Greenleaf, 2008). These ethical failures are often not the result of one "bad actor" alone but systemic issues.
Section 3: Architecting Organizational Culture
Leaders at all levels in the organization play a vital role in the success of shaping organizational culture in business. Although architecting organizational culture is challenging, making changes often doesn't require considerable investments or physically co-located employees. Leaders can leverage the following primary and secondary actions and tools for leaders to embed the desired culture (Schein & Schein, 2016):
Primary Actions and Tools
Pay attention to metrics that matter and provide regular updates
Respond to organizational crises
Resource allocation
Training and development
Rewards and recognition
Selection, promotions, and terminations
Manage change
Secondary Actions and Tools
Organization design
Policies and procedures
Rituals and events
Workspaces
Traditions and stories
Vision and mission statements
Organizations are likely to deny the need for organizational culture change. It is common for organizations to become anxious at the suggestion of change. Leaders should exercise caution and approach the change thoughtfully or risk being seen as the problem. Overcoming resistance to change begins with establishing a desire for survival and reducing learning anxiety through creating a sense of psychological safety. Psychological safety is created by leaders proactively helping followers understand and accept the need for change.
Section 4: Two Key Leadership Behaviors and Attributes
Organizational culture is everyone's responsibility, and leaders play a fundamental role in influencing and supporting culture (Schein & Schein, 2016). Leaders must be able to operate both within and upon the organization's culture. Leadership is a system increasingly influenced by technology and consists of the leader, followers, the situation, and time (Sosik & Jung, 2018). In today’s turbulent and fast-paced digital marketplace, leaders are challenged to quickly discern and apply the appropriate leadership attributes and behaviors that will bring out the best in followers, so they will go beyond what is expected in ways that contribute to the organization’s results and make the world a better place.
Leadership Behavior – is how a leader responds within the leadership system. A behavior is something that can be seen and described.
Leadership Attribute – is an inherent quality of a leader as perceived by others.
Often each leadership challenge requires a blended approach. Based on research, generally, the more dynamic transformational leadership behaviors and attributes are most effective (Sosik & Jung, 2018). Leadership thought leaders Sosik and Jung identify two key leadership behaviors and attributes to help leaders meet today’s complex organizational culture challenges: idealized influence and inspirational motivation (Sosik & Jung, 2018).
Leadership Key #1: Idealized Influence
Success is achieved through others rather than a leader alone. Establishing positive leadership influence is not easy, and it is vital for leaders to shape organizational culture. Leaders displaying idealized influence possess a high degree of moral behavior, virtues, character, and work ethic (Sosik & Jung, 2018). These leaders reflect the organizational culture, impart pride in followers, and reinforce the importance of teamwork and shared success. The following are idealized influence behaviors and attributes (Sosik & Jung, 2018):
Idealized Influence Behaviors
Talk about their most important values and beliefs
Communicate the importance of team trust
Reinforce the importance of purpose
Evaluate the ethical consequences of decisions
Reinforce the need for teamwork and its possibilities
Idealized Influence Attributes
Infuse pride in others
Make personal sacrifices for others
Create respect
Demonstrate confidence
Encourage others about the future
Idealized influence increases trust, enhances learning, increases emotional connection, and empowers followers to think independently and express their individuality. A modern example of idealized influence leadership behaviors and attributes is Jack Welch. He is the former GE CEO and is known for achieving tremendous organizational results and developing followers.
Leadership Key #2: Inspirational Motivation
In a volatile and uncertain marketplace, leaders need to adapt and motivate followers toward a challenging and aspirational vision (Sosik & Jung, 2018). Human nature focuses on what is missing or needs to be fixed when presented with organizational culture change. However, inspirational motivation behaviors involve creating and effectively communicating a shared positive vision and purpose for followers (Sosik & Jung, 2018):
Inspirational Motivation Behaviors
Optimistically communicating about the future
Enthusiastically communicating about what needs to be achieved
Communicate a compelling vision of the future
Provide an exciting image of what is essential to consider
Express confidence that goals will be achieved
Like idealized influence behaviors, inspirational motivation enhances the leader-follower relationship by increasing trust and emotional connection. Additionally, inspirational motivation behaviors heighten the willingness of followers to excel. Jack Ma is a modern example of idealized influence leadership behaviors and attributes. He is the former Alibaba CEO known for his ability to communicate a small business eCommerce vision, leading Alibaba to become the world's largest retailer and online marketing company.
Section 5: Benefits of Improving Organizational Culture
Ultimately every organizational result is the direct contribution of an employee. Organizational culture is identified as a critical factor in financially successful companies (Craig, 2018). Research has linked organizational culture to employee morale, commitment, health, and productivity (Schein & Schein, 2016). Failing to improve the organizational culture on challenges such as social justice reinforces stereotypes in communities, increases litigation risks, damages the organization’s brand, and increases missed opportunity costs. According to the Business Roundtable, made up of CEOs from the largest corporations in the United States, advancing social justice promotes access to key enablers of well-being and prosperity, such as healthcare, finances, education, and housing (Business Roundtable, 2019).
Conclusion
Architecting organizational culture is necessary for organizations to thrive in a volatile, uncertain, complex, and ambiguous marketplace. Leaders need to be able to operate within and upon an organization's culture. The leadership behaviors of idealized influence and inspirational motivation are key for leaders to shape an organization’s culture. The benefits of improving organizational culture extend beyond performance and financial success to include employee morale, commitment, health, productivity, and well-being.
If you have organizational culture or leadership development needs you cannot solve independently, we're ready to partner with you to craft a solution specific to your organization's context and challenges. Getting started is as easy as visiting www.organizationaltalent.com or contacting us via email info@organizationaltalent.com.
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