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STRATEGIC LEADERSHIP ISSUES

Cheryl L. Thomas Managing Director

Impacting People, LLC Wadsworth, Illinois

thomascherylx@gmail.com 847-395-7160

August 4, 2017

Graduate School of BankingAugust 2017

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Culture and Leadership

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Presenter

Cheryl Thomas, SPHR, SHRM-SCPImpacting People, LLC

847.274.8783cheryl@impactingpeoplellc.com

thomascherylx@gmail.com

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Agenda•Why Culture Matters•What is Culture?•Culture and Change•Strategic Leadership

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Leadership Questions1. Do you know your

organization’s current culture?2. How do you know?

• Observation, Feedback• Formal Assessments

3. Is it enhancing success, or a barrier to success?

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Why Culture Matters1. Better financial performance2. Positive customer

experience3. Greater employee

engagement4. Higher levels of productivity

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Why Now1. Economic Recovery2. Leadership and Management revolution 3. Creating Value for customers and

employees4. Software/technology has reshaped how

people engage with each other.5. Workplaces and spaces are changing

• Remote work is becoming a viable option for more people.

• Some companies re-thinking work-at-home

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Re-establishing Trust

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Success and CultureOverwhelming research correlates strong culture to:

Intention to Stay Cooperation/Teamwork

Quality Adaptability Satisfaction

Turnover Stress

Source: Correlations from Szumal, J.L. 2001

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What Is Culture?The shared values, beliefs,

and behaviors that underscore:

◦how things get done,◦how decisions get made

◦how people interact

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Organizational Culture “The way we are expected to do things around here.”

•Culture is cognitive: what people believe and know. •It reflects shared values (what is important) and beliefs (how things work). •It encompasses norms and expectations that influence the way members of the organization think and behave. •However, norms and expectations (Current Culture) are not always in alignment with shared values (Ideal Culture).

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Copyright © 2015 by Human Synergistics International. All Rights Reserved.

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Values - Exercise1. What are your institution’s stated values?

2. What does your institution value?

Why is there a difference?

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Financial Institutions Values

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The Elements of Culture

•Business Environment•Artifacts, Physical Settings, Work Environment•Values and Beliefs•Heros, “Standard Bearers”, Influencers•Rituals, Traditions, Known History•The Cultural Network

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Source: Deal, T.E. and Kennedy, A.A., Corporate Cultures, 2000

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Culture and Engagement Relationship

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Assessing Your Culture

Organizational Culture Inventory

(OCI)

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Human Synergistics•40+ years of research

•Valid and reliable

•Normed globally

•Linked to team and organizational behaviors

• High-Performing Individuals

• High-Performing Teams

• High-Performing Organizations

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The Circumplex•Dimensions based on theory (e.g., Maslow’s Hierarchy of Needs) and analysis of thousands of surveys tying behaviors to style descriptions and to outcomes

•Measures 12 distinct styles that describe key behavioral styles

•Raw scores from the survey are converted to a percentile score relative to the database of thousands of responses

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OCI -Cultural Norms

Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

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Cultural Style Clusters Constructive Passive/Defensive Aggressive/Defensive

Characterizes behavior that contribute to one’s level of satisfaction, ability to develop healthy relationships and work effectively with people and accomplish tasks

Represent self-protecting behavior that promote the fulfillment of security needs through interaction with people.

Reflects self-promoting behavior used to maintain one’s status/position and fulfill security needs through task-related activities

Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

Types of Cultures•Constructive Cultures•Defensive Cultures

•Passive•Aggressive

Source: Research by Robert A. Cook, PhD. Copyright 2003 Human Synergists International

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Constructive CulturesBehavioral norms contribute to high levels of satisfaction, ability to develop healthy relationships, work effectively with people and accomplishment of tasks. Examples:

1. Establishes challenging and realistic goals2. Employees develop themselves3. Employees are supportive and open to influence

in working with each other4. Cooperative5. Sensitive to each others needs.

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Characteristics of Constructive Culture

HumanisticAffiliativeAchievementSelf-Actualizing ______________________________________________________•Employees share a set of relatively consistent values and methods of doing business•New employees adopt values quickly•Seen by outsiders as having a certain “style”•Strong alignment among strategy, goals, values, and behaviors

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Constructive Cultures Impact on Performance

•Goal alignment•Increased motivation and engagement•Structure and controls without having to rely on bureaucracy•Efficiency and fewer mistakes/risks

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Defensive CulturesBehavioral norms are self-protecting or self-promoting in order to maintain one’s status or position. Behaviors meet security needs, focused either on the interaction with people, or accomplishment of tasks. Examples:

1. Employees are expected to agree and be liked2. Employees do what they are told3. Clear all decisions with superiors4. Avoid being blamed for mistakes5. Oppose new ideas6. Operate in a “win-lose” with colleagues.

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Characteristics of Defensive Culture

Oppositional, CompetitivePower, PerfectionisticAvoidance, DependentConventional, Approval__________________________________________________________________________________

•Employees focused inwardly (focus on self-protection, promotion)•Many beliefs but no agreement about what is important•Behaviors that are disruptive or destructive•High degree of fear ; little innovation; resistance to change

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Signs of a Culture in Trouble

1. No clear values or beliefs about how to succeed; many beliefs but no agreement on which is most important; different beliefs in different areas

2. Behaviors that are destructive or disruptive; emotional outbursts

3. Short-term focus; morale problems4. Fragmentation/Inconsistency5. Subculture values preempt shared company values

Source: Deal, T.E. and Kennedy, A.A., Corporate Cultures, 2000

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Constructive Cultures Matter

BetterFinancial Performance

Positive Customer Experience

Greater Employee Engagement

HigherProductivity

Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

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In a study of 69 companies across a variety of industries . . .

Profitability (Over 3-Year Period)1

Strength of Cultural Norms2

Earnings/Sales Ratio (n=69)

Earnings/Sales Volatility (n=60)

Constructive + 0

Passive/Defensive 0 0

Aggressive/Defensive 0 +++/- signifies positive or negative correlation significant at p<.05.++/-- signifies positive or negative correlation significant at p<.01.0 signifies relationship is not statistically significant.1Financial data for the three-year period provided by Towers Perrin for 69 companies in various industries. Ratios are averages for the three-year period; volatility scores are standard deviations.

2Organizational culture data provided by Human Synergistics, based on factor scores.

Research conducted by Robert A. Cooke, Ph.D. Copyright © 2003 by Human Synergistics International.

. . . there were positive correlations between Constructive Cultures and profitability and Defensive Cultures and sales volatility.

Copyright © 2012 by Human Synergistics International.

Discussion1. Pair up 2 or 3 nearest people2. Share your OCI results:•Is it Constructive, Passive/Defensive or Aggressive/Defensive?

•What is the primary style? Secondary?•Share 1 or 2 experiences that illustrate your OCI results

•Identify 1 or 2 styles to change

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Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

How Culture Is Supposed to Work

PhilosophyMission

Individual Level

Group Level

Organizational Level

GoalsStrategy

Ideal Culture Current Culture Outcomes

Values and Beliefs Norms and Expectations Effectiveness

FocusMeasuring

“What should be expected here”

“The way we are

expected to do things around here”

“How we’re doing here”

Assumptions Espoused

Values

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Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

Organizational Factors

PhilosophyMission

Structures

Systems

Technology/Processes

Skills/Qualities

Individual Level

Group Level

Organizational Level

GoalsStrategy

Assumptions Espoused

Values

“The way we are

expected to do things around here”

Ideal Culture Casual Factors Current Culture Outcomes

Values and Beliefs Levers for Change Norms and Expectations Effectiveness

FocusMeasuring

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Leadership Responsibility

“Culture happens. Leaders and managers can let it happen or

they can manage what happens. It is a choice!”

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Organizational Change Model

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Transformational Leadership

. . . Leadership in which the leader identifies the needed change, creates a vision to guide the change through inspiration, and executes the change with the commitment of the members of the groupThe non-quantitative ‘stuff’ ultimately is the real driver of sustained bottom line profitability . . . the numbers are not the plan!

Culture and StrategyStrategy alone is not sufficient.“Culture eats strategy for breakfast”

- Peter Drucker

Organizations must have a strongculture that aligns with the strategy and is supported by structure, leadership, management systems, processes, and people.

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Current Issues Impacting Strategy

•Non-traditional competitors disrupting the industry•Need for competitive differentiation•Cyber-security•Technology to transform core business activity•Technology to enhance customer experience•Integration of Risk Management and Compliance•Big-data—Advanced Analytics•Succession/Talent Management•Mergers/Acquisitions•Diversity and Inclusion

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Why Strategy FailsCultural Barriers

Turf issuesBlameBureaucracyHierarchySelf-InterestPoor Communication

StrategyLack of . . .AgilityBias for ActionOpenness and TrustExternal FocusAlignment at the Top

Success

Aligning Culture-Top Ten

1. Define the desired culture◦ Values described in terms of behaviors

2. Make the Mission/Vision/Values known3. Hire for “fit”

◦ Consider behavioral assessments; screen for values and competencies

4. Best Practices in Performance Management◦ Clarity of roles and responsibilities (Job

descriptions)◦ SMART goals/clear objectives◦ Regular feedback◦ Coaching/training◦ Rewards tied to performance

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Aligning Culture – Top Ten

5. Establish and align incentives and rewardsPerformance driven rewards

6. Best practices in Staff Development

7. Establish effective lines of defense• Staff and Management attend to the desired behaviors• Human Resources on the Executive Team• Ability to monitor; report issues

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Aligning Culture – Top Ten

8. Assess and measure Culture• Intentional management

9. Establish shared responsibilities for culture• Executives• Managers• All employees

10. It starts at the top – Board Governance• Own the issue; Lead by example; Cascade culture from

the top; Define cultural leadership attributes; Monitor progress

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Change for Positive Growth

1. Assess Culture ◦ Look at all levels ◦ Identify where culture and engagement supports or detracts from

performance2. Plan and Manage Change

◦ In the context of culture◦ In alignment with strategy and goals

3. Focus on:◦Organization structure◦Management systems◦People

4. Measure and monitor progress

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Questions for Effective Change

1. What habits in our culture will get in the way of achieving our strategy?

2. What qualities do we need to add or strengthen in our culture to support our strategic goals?

3. Do we have the necessary alignment between our strategy, structure, systems and behaviors to execute?

4. What behavioral shifts are needed to align our culture?

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How We Lead Matters“Leaders cannot truly be judged until ten years have passed after their tenure.”

• Did the company stay the course?

• Did it produce other leaders just as successful?

- Marilyn Carlson Nelson

Chair, Carlson Companies

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QUESTIONS?