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Fortune
Fortune
Amber Burton, Paolo Confino

Why so many leaders fail at transforming corporate culture

Businesspeople making handshakes, while standing on painted pattern on asphalt (Credit: Getty Images)

Good morning!

Want to get a group of HR leaders to collectively roll their eyes? Tell them you want to change an organization’s culture without sharing a concrete roadmap. Shifting a company’s culture can often be opaque and difficult to measure. But new research from the human capital research firm Institute for Corporate Productivity (i4CP) finds that leaders who successfully create a “fit” workplace culture can improve their bottom line, employee engagement, and productivity. Though, there can be many pitfalls along the way. 

Let’s start with the benefits. Organizations that reported top cultural health also reported high market performance—better revenue growth, market share, profitability, and customer satisfaction than their competition, says Kevin Oakes, i4CP’s CEO. And employees at companies with “fit” cultures were almost five times more likely to report higher engagement scores and two times more likely to report increased productivity. 

Despite the clear benefits of a fit culture—defined as being employee-focused, inclusive, innovative, and collaborative—most employers still struggle to achieve such organizational change. According to Oakes, leaders veer off track from the start, with just 15% of surveyed companies that set out to change their corporate culture proving successful. Oakes says this is because C-suite leaders tend to jump straight into building a new culture—or at least trying to—and skip the critical planning and internal fact-finding. 

“[Deploying] a comprehensive listening strategy is often ignored because the senior team thinks they know all the issues,” Oakes says. “Things are significantly filtered by the time it reaches them.” 

Leaders also gloss over two of the most important steps in shifting corporate culture: conducting a network analysis to identify internal influencers who could help usher in cultural change and determining how progress will be measured, monitored, and reported. “Our research showed that 90% of companies that were unsuccessful at renovating culture ignored this step,” says Oakes.

On the flip side, executive teams that are most successful in creating a new corporate culture truly empower their CHROs. 

“It’s crystal clear in organizations that have successfully renovated their culture that the CHRO played a leading role in the effort,” Oakes notes. “I can almost always immediately spot a healthy culture; it’s one where the CEO views the CHRO as one of the top strategic roles in the company and views that position as overseeing their most valuable asset.”

Amber Burton
amber.burton@fortune.com
@amberbburton

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