What is Organizational Cultural Reform (Cultural Transformation)? Understanding From the Four Steps of Reform Through Successful Case Studies

Organizational culture is an aggregate of difficult-to-perceive elements such a company’s customs or values, and the atmosphere at a workplace, and has a significant impact on its sustained growth. Such a culture is not merely an abstract concept, but, rather, is formed as a collection of “practices.” Such practices arise from an accumulation of “behaviors” engaged in each and every day by each and every person at the company (see Figure 1).

The most basic element of an organizational culture is day-to-day “behaviors.” This refers to how each person at a company approaches their work, and how they engage with colleagues and customers. Each one of these behaviors represents a first step in forming an organization’s culture. For example, we could ask how people respond to problems when they arise: Do they share the issue immediately, or do they quietly hope that it will pass? Do people respond positively to new ideas, or do they receive them negatively? Choosing between such behaviors will undoubtedly sway the direction of an organization.

When behaviors are repeated, they become “practices.” Practices are patterns of behavior that are repeated unconsciously. They come to be shared within organizations, taking root as cultures. As an example, small, daily practices such as exchanging greetings and sharing information every morning, regularly giving feedback, and a customary expressing of gratitude can foster a sense of unity and relationships of trust within organizations. While practices do not change overnight, they can be gradually shifted into a desired direction through repeated enactment of desired behaviors.

The aggregate of practices formed in this way makes up an organization’s culture. Culture impacts organizations in all manner of dimensions, including a company’s decision making and human relations, and its attitude towards risk. This sort of culture affects not only people within the company, but extends to stakeholders including customers, partners, shareholders and regional society, thus impacting a company’s trustworthiness and brand image. A sound culture serves as a foundation that increases corporate value and supports sustained growth.

Organizational cultural reform is being conducted across all phases of business at companies operating with more than thousands of employees. Here we will summarize the benefits and aims of attempting organizational cultural reform.

One aim of organizational cultural reforms is to serve as a countermeasure for management risks such as compliance violations or incidents of misconduct. Organizational culture has a significant impact on standards of behavior and decision making in companies and organizations. For example, as in past cases involving a certain food product manufacturer, a restaurant chain and a second-hand automotive dealer, revisions to organizational culture became essential as part of efforts to regain the trust of society in the wake of serious issues stemming from compliance violations being revealed. It would be safe to classify such efforts as more than mere efforts to restore these companies’ images. Instead, they were genuine efforts to prevent recurrences and to ensure the viability of the companies.

Establishing an organizational culture is important for stably sustaining a business and improving the quality of its products and services. In particular, as the needs of society and customers remain in constant flux, companies need to rely on the abilities of people and teams that can meet such challenges flexibly. Core business activities such as the provision of value to customers, the building of relationships of trust with partners, and the establishment and activation of employees, are all deeply connecting to the stances and behaviors of the business as an organization. That is to say, to its culture. For this reason, many companies feel this point is an important challenge, and are attempting to transform their cultures.

To achieve sustained growth, it is essential for companies to reform their businesses in ways that go beyond the bounds of what has come before. Launching new businesses and reforming business processes requires an organizational culture that welcomes new challenges and fosters the free exchange of ideas. Traditional Japanese companies in particular tend to have established cultures of “leaders lead and followers do.” Initiatives to transform such cultures into ones that generate innovation by being led by people on the ground and putting the focus on dialogue are an example of this sort of reform. In this case, organizational cultural reform can be viewed as a kind of strategic investment aimed at further increasing corporate value.

For organizational cultural reform to succeed, a “shared understanding” throughout the company is important above all else, including even the design of systems and policies. In particular, the promoters and organizers of transformation efforts making clear how they see the company’s current challenges and carefully sharing that understanding with internal stakeholders forms the foundation of such initiatives. Here we will go over three essential points to bear in mind when creating a share understanding that are essential for realizing transformation.

The first thing that is needed is to share a sense of urgency across the organization as a whole in relation to the status quo. Organizational cultural reforms make no progress where people are satisfied with how things are. The promoters of reform need to broadly convey a sense of crisis about the future of the organization to everyone from the leadership to people on the ground, suggesting that the company could lose its competitive edge, that the trust that customers and the public have in it could be shaken, and that employee engagement could decline and they could lose exceptional personnel. A sense of crisis is a driver for change. Without this, people will treat reform as someone else’s problem, and behavioral change will not occur.

The next important task for organizations is to clarify what sort of organization they aspire to be, and to make that vision into something that they can get buy in from their employees for. An ideal culture needs to be more than just abstract slogans. It needs to be something that people can concretely visualize in terms of how it affects day-to-day business and interpersonal relations. For example, even in the case where an organization aspires to a “culture that welcomes challenges,” it is important for companies to convey a specific message that lets members of the company take ownership of how they become a collective that make choices when confronted with difficult decisions where there is no one right answer. By getting buy in, companies may be able to turn transformation from “something that is done to” the people within a company to “something they do to build the future.”

Finally, it is essential for companies to get acceptance from stakeholders for the approach they take to advancing reform. To get as many stakeholders onboard with advancing the reform process as possible, it is important to involve them at the earliest possible stage, for example, in the deliberation process at the consideration stage or by sharing progress as something that is currently ongoing, rather than trying to advance such efforts by notifying them of and ordering them to take part in top-down, unilateral policies. Without the buy in of on-the-ground stakeholders like employees and middle leaders, such efforts are likely to become empty formalities and reform is unlikely to make much progress.

So far we have covered ways companies attempt to reform their organizational cultures. Now we will turn our attention to some specific points to beware of in carrying out organizational cultural reform.

Organizational cultures do not change overnight. Organizational cultures are formed from the accumulation of everyday behaviors and values. This is why companies need to attempt reform projects on the assumption that they operate on a scale of years. It is important for companies to be oriented towards attempting reform in an ongoing manner from a long-term perspective, rather than demanding short-term results.

Organizational cultural reform is a theme that is difficult to measure the process and progress of through clear figures like sales and productivity. The mainstream approach is to treat survey indicators like engagement and wellbeing as process KPIs to measure the outcomes of progress. However, while such methods are useful for advancing data-driven efforts that eliminate bias, overly focusing on variance in engagement scores and reacting excessively to fluctuations risks losing sight of the essence of the issue. It is instead important for companies to constantly share the purpose and aims of what they are doing, asking, “why is this reform needed,” and “what sort of culture do we aspire to,” thus focusing on qualitative changes and long-term business outcomes.

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No matter how meaningful a reform is, there will always be people who want to maintain the status quo or who feel anxiety in the face of change. Pushback is a natural reaction. This means that companies should react not by eliminating it, but rather by involving such people through careful dialogue and promoting understanding. While it is impossible to completely get rid of any resistance, issues arise when its impacts are to the extent that they interfere with the overall plan. For this reason, companies should not neglect the tasks of explaining and exchanging views about reform in order to promote cooperation among stakeholders and middle leaders, advancing their efforts in a balanced manner, while taking on board valuable feedback and the opinions those parties.

As we have presented throughout this Insight, the process of reform runs the risk of running into confusion or disorder. What is important at such times is to avoid losing sight of why you are pursuing reform and what your vision for the organization is, and to continue to repeatedly share these ideas. Clarifying your aims and vision is essential. It serves as a “compass” that gets everyone moving in the same direction.

Recent years have seen a rapid rise in interest in organizational cultural reform as companies seek sustained growth and better utilization of human resources. This Insight has systematically covered the genuine key points needed for successfully introducing such efforts.
Organizational cultural reform is behavioral change of the people who make up a company. Because people are people, companies will not be able to achieve the transformations they want without their acceptance and buy in. Naturally, this also means they will be met with opposition and criticism. However, those people are still coworkers who have come together in the same company. Broadly speaking, it is more or less the common wish of all coworkers for their company to overcome difficult phases and survive in this era. This is precisely why we feel it is important for corporate leaders to pursue transformation without forgetting to think hard to come up with a purpose and aims for transformation that the employees, who are their fellow coworkers, can get behind, and to communicate this in ways that ensure a continued shared understanding with people across all layers of the organization.
ABeam Consulting works side by side with clients to reform organizational culture in order to achieve corporate transformation, from formulating a vision to executing on it, based on our wealth of experience and insights. We also boast numerous successful case studies where we have worked tenaciously, while creating a real sense of impact from reform.
Please do not hesitate to reach out to us if you are looking for a transformation partner to achieve organizational cultural reform.

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