In building their businesses, founders and founding families often hold values other than purely economic ones. David Packard was quoted as saying that “It should be possible to run a business in a gentlemanly fashion” and he always stood for the “HP way” as being highly oriented toward employees (not just stockholders). Ken Olsen at one time said that he was reluctant to open too many plants in Maine because it would alter the economic and social structure of that state, even though there would be economic advantages to having plants there. Founders impose non-economic values on the organization and embed them in the culture.

On the other hand, general managers who have worked their way up in the organization usually learn that humanistic, social, environmental, spiritual, and other non-economic values have to be subordinated to the pragmatic problems of running the business and keeping it financially viable. Promoted managers do not have the luxury that founder-owners enjoy of taking financial risks to preserve certain of their values and beliefs. Promoted general managers are usually more vulnerable to powerful outside boards; they have shorter tenures and learn how to survive in organizations. As CEOs, they typically come into their jobs when the organization is already highly differentiated in terms of subcultures.

As such managers rise and take on greater responsibilities, they also discover the painful reality that managing systems and processes gradually displaces managing people. As one CEO of a consumer goods industry told me:

This comment refers to the loss of “functional familiarity,” which was pointed out in the last chapter as one of the most important consequences of organizational growth and age. Except for the immediate subordinates and a finite number of others the manager can remember, his or her relationships to people become more formal and process-driven. From a cultural perspective, the mid-life organization therefore faces a very complicated situation. It is established and must maintain itself through some kind of continued growth-and-renewal process. It must decide whether to pursue such growth through further geographical expansion, development of new products, opening up of new markets, vertical integration to improve its cost and resource positions, divisionalization, mergers and acquisitions, partnerships and joint ventures, or spin-offs. The past history of the organization’s growth and development is not necessarily a good guide to what will succeed in the future because the environment is likely to change; more important, internal changes are likely to alter the organization’s unique strengths and weaknesses. The embedded culture is, therefore, both a potential help and a potential hindrance in the further strategic development of the organization.

Whereas culture was a necessary glue in the period of growth, the most important elements of the culture are now deeply embedded in the structure and major processes of the organization. Hence, consciousness of the culture and deliberate attempts to build, integrate, or conserve the culture are less important. The culture that the organization acquired during its early years is now taken for granted and largely invisible. The only elements that are likely to be conscious are the credos, dominant espoused values, company slogans, written charters, and other public pronouncements of what the company wants to be and claims to stand for—its philosophy and ideology.

Whereas leadership created culture in the early stages, culture now creates leaders, in the sense that only those managers who fit the mold are promoted to top positions. In fact, one of the most dangerous aspects of culture at this stage is that the shared tacit assumptions are now an unconscious determinant of most of what goes on in the organization, including even the mission and strategy of the organization.

At this stage, it is more difficult to decipher the culture and make people aware of it because it is so embedded in routines. Raising awareness of the culture may even be counterproductive unless there is some crisis or specific problem to be solved. Managers view culture discussions as boring and irrelevant, especially if the company is large and well-established. On the other hand, if the organization undertakes geographical expansions, mergers and acquisitions, or joint ventures, and/or introduces new technologies, it must do a careful self-assessment to determine whether the existing culture is compatible with the new ways of thinking and behaving that are to be introduced.

Also at this stage, there may be strong forces toward cultural diffusion and loss of integration. Powerful subcultures have developed, and a highly integrated corporate culture may be difficult to maintain in a large, differentiated, geographically dispersed organization. Furthermore, as the organization ages, it becomes less clear whether all the subcultural units of an organization should be uniform and integrated. Several conglomerates I have worked with spent a good deal of time wrestling with the question of whether to attempt to preserve, or in some cases build, a common culture. Are the costs associated with such an effort worth it? Is there even a danger of imposing assumptions on a subunit that might not fit the situation at all? On the other hand, if subunits are all allowed to develop their own cultures, what is the competitive advantage of being a single organization? Resolving such questions often requires careful assessment of the actual culture to see what elements, if any, should be generalized, given the varying tasks of the organizational units.

From a cultural perspective, then, the essence of the leader’s job is not how to create an organizational culture but how to manage the diversity of subcultural forces that are already operating; how to integrate and further evolve a highly differentiated organization; and how to enhance elements of the culture that are congruent with new environmental realities while changing dysfunctional elements of the culture. If cultural elements have to be changed, then we are dealing with transformative change, which requires mechanisms that go beyond the evolutionary ones characteristic of the young and growing organization.

The actual change activities in a managed change program will vary according to the situation, but almost all such programs involve the creation of a “parallel learning system” in which some new assumptions are learned and tested.¹ The process starts with senior management experiencing enough disconfirmation to realize that a change process must be launched. Senior management also must realize that, if elements of the culture may require change, a temporary parallel structure will be needed because it is often too painful for everyone in the organization to give up a shared assumption in favor of an unknown substitute or to learn some new and untested behavior.

The essence of this concept is that some part of the organization must become marginal and expose itself to new ways of thinking so that it can be objective about the strengths and weaknesses of the existing cultural elements and examine how these will aid or hinder the changes to be made. Fully engaged insiders simply cannot see the culture in which they are embedded clearly enough to assess and evaluate its elements. For example, in the financial crisis of 2008, whether or not to give money to the ailing American auto industry hinged on an assessment of whether the current auto executives were capable of making the kinds of changes that would be required to make the industry internationally competitive and environmentally responsible. Skepticism about their ability to change arose from the fact that General Motors had successfully innovated with Saturn, with the electric car, and with the Fremont factory built on the Toyota model, yet had failed to utilize any of the insights from those innovations in their mainstream business.

On the other hand, having an entirely outside assessment of the culture is equally unlikely to be productive because the outsider does not know enough of the cultural nuances to be able to make an accurate assessment and will not have a sense of where there is leverage to begin the change process. The solution is to create a temporary parallel structure that includes key insiders who then work with outsiders or hybrids to decipher the culture and plan the change program. If some part of the organization can learn an alternative way of behaving and thinking, and if the alternative can be shown to work, then there is less anxiety as the alternative is gradually introduced into the main part of the organization. An excellent example of such a parallel system was the staff group that Procter & Gamble created to redesign their manufacturing process (referred to in Chapter One).

A current example is Alpha Power, a large urban power company, which was brought up on criminal charges fifteen years ago because it had allegedly concealed the existence of asbestos in one of its plants. The judge fined the company heavily, forced it to sign a consent order that put the company on probation for several years and said that “the culture” was part of the problem. He ordered periodic reviews of progress by outside consulting firms and appointed a monitor to keep close track of the company’s progress in becoming more environmentally responsible. The monitor wrote quarterly reports highlighting both successes and failures in the company’s efforts to become more responsible; the failures he cited and described in great detail created more disconfirmation and more survival anxiety throughout the organization.

One of the most stringent goals was to become more open and honest with the government in admitting environmental events and putting into place remedial measures. Senior management came to the important realization that, to be competitive in the future deregulated market, the kind of employee behavior that would lead to responsible behavior with respect to environment, health, and safety issues (EH&S) would also be desirable to make the company generally more effective.

The CEO strongly articulated a vision for employees to become more team-oriented, more open in their communications, more personally responsible, better at planning and risk assessment, and more capable of assessing and remedying EH&S issues. A senior vice president for environmental affairs was hired and charged with building an organization that would provide training, consulting, expertise in diagnosis and remediation, and—most important—some oversight to ensure that EH&S affairs were properly handled at every level. A high-level environmental committee (EHSC) including all of senior management was formed to meet monthly to assess progress in reducing environmental events, such as oil spills, set policy, and generally oversee the entire program.

In addition, an environmental quality review board (EQRB) was formed, consisting of two highly respected environmental lawyers whose job was to help the company with its problems of compliance. The board would also ensure that the program as it evolved would satisfy the U.S. attorney’s office sufficiently to warrant recommendation that the probation be lifted at the end of the three-year period. I was added to this board as a “culture expert” when it became apparent from the monitor’s quarterly reports that he viewed “the culture” of the company as being one of the major constraints to effective change in the EH&S area, but no one was quite sure of what he or others meant by “the culture.” We were permanent members of the EHSC and represented the outsider point of view toward cultural analysis. The fact that this committee had outsiders as well as high-ranking insiders made it de facto the steering committee for the entire transformation effort and functioned as the parallel structure.

Some of these five steps require very little time, while others are themselves whole programs, but no step should be bypassed. Although this process model applies to any kind of change, it is especially relevant to changes that may involve the culture because it enables you to determine the optimal time for culture assessment and analysis. How this works in practice is illustrated in the Alpha Power culture change program.

In the case of Alpha Power, the steering committee (EHSC) empowered the vice president of environmental affairs and his entire organization to become the change team and to work with line management to implement various change processes. All our discussions reaffirmed the need for change and reinforced the concept that fixing the environmental problems would actually improve the overall management of the organization. The change planning was to be done with that larger goal in mind. The program now rested not only on the external disconfirmation but also on the internal desire to improve overall. The environmental program would, in a sense, be a pilot for a more general improvement effort.

To begin the change program in earnest, the vice president of environmental affairs created a “culture committee” whose role was to think specifically about how the culture of Alpha would impact the change program. This committee consisted of a diagonal slice of the organization to ensure that subcultures would be adequately represented in any assessment process.

Being very specific and concrete in terms of ideal new behavior does not come easily. In the case of Alpha, senior management said that the workers were to “become more environmentally responsible,” that “communication in the future should be more open,” and that “there should be more teamwork in the future.” These were still very vague goals that did not specify precise behavior. One of my roles as the outsider at this point was to probe just what leaders meant by these three goals. I found the following meanings:

The cultural assessment processes described earlier in Chapter Five are appropriate and necessary at this point. If the culture is assessed before the ideal future state is known, it is likely to be diffuse, boring, and useless. If the culture assessment is done at this stage, it should reveal where there are gaps and potential barriers to achieving the vision and the concrete goals derived from it. At this point the change process also moves from analysis and assessment to concrete planning. For each of the gaps identified, specific plans must now be made for what to do next, how to get from the present to the future.

In Alpha Power both the EHSC and the culture committee spent a great deal of time on this stage to identify what the current norms in the organization were that would aid or hinder getting to the new behavior.

Some of the behavioral goals seemed on the face of it to be directly contradictory to the basic job employees had. For example, in the old way of working, if a hospital transformer broke down and the work crew dispatched to fix it discovered that their truck was leaking oil into a nearby sewer, there was no question that they would fix the transformer first and then worry about the oil spill later. In the new way of working, they were required to do both, something that seemed impossible. To give another example, in the old way of working, if one member of a work crew was not wearing safety equipment or was doing something unsafe, crewmates would say nothing, even if it endangered them. In the new way of working, they were supposed to be mutually responsible and monitor each other, something that seemed equally impossible given the group norms.

Movement toward the new way of working is then produced by changing the balance in the force field, either by increasing the driving forces or reducing the restraining forces. Depending on how the culture assessment came out, cultural norms and assumptions are likely to appear on both the driving and restraining force sides. The driving forces include the disconfirming information that causes survival anxiety and one of the main restraining forces will be what I have called “learning anxiety.”

No change will occur unless the driving forces (the survival anxiety) are greater than the restraining forces (the learning anxiety). The change team then needs to examine each set of forces to determine what to focus the change program on in terms of access, feasibility, cost, and desirability. For example, severe disciplinary measures for any cases of failing to report are an obvious way to increase survival anxiety. On the other hand, that might increase union resistance and lead to a deterioration of relations. Or it might be discovered that one of the reason for failure to report was that supervisors were encouraging covering up, in which case punishing the employee would be counterproductive. One might then realize that supervisory pressure to cover up is one of the restraining forces and that one should try to reduce it by shifting pressure to supervisors and encouraging employees to speak up, even if supervisors discouraged it.

In general it will be found, as was pointed out in Chapter Six, that the optimal way to produce change, is to reduce the restraining forces, the learning anxiety, by providing psychological safety during and after the learning process. This means involving the learner, providing training, role models, resources, and supportive rewards and incentives.

For example, an obvious source of learning anxiety in Alpha Power was lack of information and knowledge about environmental hazards. If employees were to identify and clean up environmental spills, asbestos, mercury, PCBs, and other hazardous substances, they had to know what to look for in the streets, in building basements, in the various chemical and electrical processes they worked with. All of the employees had to be educated and specifically trained.

By the time I arrived on the scene, most of this training had already occurred because Alpha Power had a highly developed learning center in which all technical training for their highly hazardous technology took place. The strongly autocratic, paternalistic, and technical cultural assumptions that dominated the culture had already been put to good use in getting the employee population up to speed on the technical side of environmental compliance. These same cultural elements drove the reward and discipline system and made it very clear, for example, that any supervisor or employee who encouraged covering up an environmental event or harassed another employee for wanting to report something was subject to severe discipline, including termination.

More problematic was the cultural restraining force of employees thinking of themselves as keeping on the power and solving emergency power problems, not as cleaners. The vision of the future did not jibe well with the self-image that many employees held, as was illustrated above with the hospital generator example. To deal with this, all the levels of management and supervision had to have insight into the issue and develop positive messages to facilitate this change in self-image.

The vice president of EHS working with me and the two environmental lawyers (the EQRB) used the Culture Committee to begin to think through how to use cultural insight to evolve this crucial cultural element. This committee and several subcommittees articulated as best they could the detailed programs that would help to achieve the change goals and overcome the barriers to achieving the desired future state.

It was decided after several months that I should make a presentation to the EHSC, which would begin to educate them on the concept of culture. The essence of a good educational intervention is to get difficult concepts across concretely so that the audience can apply the theory to themselves immediately. The presentation was discussed at length, and senior management began to appreciate how complex this change would be. Most important, I needed to test whether or not the group was still committed to culture change, given better understanding of what would be involved. They asserted that they were committed and followed up the assertion by scheduling a similar talk for the next layer of management below them. In the meantime, I continued to meet with groups that would help define what the cultural dilemma was at the employee level. In other words, if a new way of working were to be defined, what in the old way of working would get in the way? These elements of the culture gradually surfaced during the group interviews we held with employees.

In terms of making employees responsible, the culture aided the process because of strong organizational traditions of training employees thoroughly and enforcing new behavior through a strong autocratic paternalism. The need for quicker upward communication was also aided by a well-engrained discipline system. However, employees “ratting on each other” clearly was out of line with the strong union subculture. The vice president of EHS also discovered from actual experience that the deep paternalistic assumption of not firing people led to a dysfunctional career system where less competent employees and managers tended to be “parked” until retirement in areas like environment and safety.

The parts of the culture that I found hardest to deal with were certain elements of the employee and union subcultures. There was a strong norm to keep dirty linen in the work group. If reporting a spill was embarrassing because it resulted from negligence or an error, this would be a strong restraining force against reporting. If a fellow employee failed to report or did something environmentally harmful, there was a strong norm to respect that employee’s independence and not do anything. The strong tradition of paternalistic autocracy created the norm that if a supervisor asked employees to do something that broke rules, they would do what they were asked to do.

Inasmuch as these were norms based in strong groups, the only way to accomplish change in this area was to involve all echelons of the organization, especially the employees themselves. If they did not participate actively in defining the methods of learning, their norms would not change. To support the whole program and to begin the involvement of employees, a number of structural interventions were made.

Needless to say, considerable anxiety developed in the management ranks because of the possibility that employees would use “time out” frivolously or irresponsibly, but that has not happened. In those cases in which an employee did stop a job, it was found that expert help was indeed needed, and new procedures were instituted. The program was so successful in this one unit that the company eventually made it a general program throughout and gave it senior management’s blessing and support.

Notice that “time out” is a concrete way of changing the hierarchical norms of the culture by giving employees the license to stop a job, which means refusing to continue to do what the supervisor had sanctioned or even explicitly ordered. Notice also that the old norm of always following orders is now undermined, but the new norm of “we have the power and the responsibility to stop a job when necessary” is not yet totally accepted. A new culture has not formed; only new behavior has been sanctioned. Forming a new cultural element depends on whether the new behavior is, in the long run, successful in making the company more responsible and productive. In the meantime, acceptance of this program by supervisors is a clear signal that the old hierarchical culture is gradually evolving toward some employee empowerment around EH&S issues.

To deal with this dilemma, it is again necessary to look for creative examples within the organization. One came from a department in which the labor management safety committee decided that safety inspections and post-accident reviews should not be done solely by safety experts but rather by employees who were peers in rank. If a fellow employee from another group points out to a given workgroup the “stupidity” of not wearing safety equipment, this clearly has more impact than if the message comes from the supervisor or a staff expert. In some departments it was decided that the safety inspectors who would visit jobs should be union members rather than safety experts or managers. They received the relevant training and have had more success in getting fellow employees to wear their personal protective equipment.

It should also be noted that under the principle of perpetual improvement all kinds of other programs could be factored into the overall change program. Thus programs of conflict resolution, Six Sigma, re-engineering, quality circles, and employee surveys all would be seen as elements or components of the overall change program, rather than change mechanisms in their own right.

As can be seen from this long example, the mid-life culture change process involves many steps and is, in a sense, never finished. As some processes are institutionalized and become stable, other sources of disconfirmation arise that launch new change initiatives. As some elements of the culture change, others are reinforced. For example, with more employee and union involvement, the tight hierarchy is evolving into more of a delegation style, but the absolute commitment to training is being reinforced. As the goals change from environmental responsibility to more emphasis on safety, the peer group norms become more of a focus for change programs to evolve from individual autonomy to employees caring for each other.

The triggers for mid-life culture change will be highly variable for different organizations, but the mechanism by which the culture will evolve will always be some form of the planned change program that has been described—the creation of a parallel system, a functioning change team, and a five-step change process.