The fourth in a series of posts based on the National Center for the Middle Market’s in-depth research report, High-Performance Culture: How Middle Market Executives View & Harness the Power of Culture, this article discusses when, why, and how culture changes in an organization and explores key challenges associated with that change.
A little less than a quarter (22%) of middle market executives claim to have a deeply ingrained, slow-to-change culture. For the remainder of companies, high-performance culture is evolving to some degree or another. Our data show that changes in the business or competitive environment and a growing workforce are the primary drivers of high-performance culture change.
Sometimes, the focus of high-performance culture evolves organically as a company grows and matures. In our study, we found that companies with a customer-centric culture are somewhat older and slower-growing than companies with innovative and creative or great-place-to-work cultures. This may be because as companies become more established, they become more in tune with who they are, what they do best, and the specific customers they exist to serve, and the focus naturally shifts to the existing customer base and its needs.
Other times, high-performance culture shifts more quickly and dramatically as the result of a major change in the organization, such as a new leadership team, restructuring, or a merger or acquisition. Regardless of the root causes of culture change, or whether change is a direct intervention or a natural evolution, the process can be difficult. Here are a few things we learned about culture change in the middle market:
- 20% of middle market executives desire a different type of culture in their businesses.
Overall, high-performance cultural satisfaction among middle market leaders is high, but one in five executives wants a change. The percentage of leaders seeking change rises to 45% among companies that define their cultures as risk-averse. Executives in these businesses would rather see the company focus more on offering a great place to work or on putting the customer fist.
- Two out of five middle market companies have made a specific effort to change culture, with varying degrees of success.
About a third of companies that undergo intentional high-performance culture change believe the effort was extremely successful. A similar percentage describe the process as only somewhat successful or a bust.
- Following M&A, cultural integration is almost always a challenge.
About a quarter of the middle market leaders we talked to were part of a merger or acquisition in the past three years. Three-quarters (76%) of these executives say culture was a major factor in choosing a target company. Still, most (62%) felt integration of culture post-acquisition was very difficult, and a nominal 4% described the integration as not difficult at all.
- Aligning subcultures is easier said than done.
When subcultures exist in the organizations and when they are in conflict with the predominant corporate culture, leaders sometimes want to reign them in. But these efforts are typically only somewhat successful. Among companies that have intentionally tried to align subcultures, 25% succeeded, 21% fell sort of objectives, and most (54%) fell somewhere in between.
- Ideally, HIgh-Performance culture change comes from rank-and-file employees.
People often resist being project-managed into new ways of working and interacting, which is a key reason why culture change can be so difficult. Companies seeking high-performance culture change may do best by engaging employees early in the process and inviting them to be a part of the process of defining the new culture. Clearly communicating the purpose of the change and the benefits or advantages for employees that will come from the change can also help drive a more successful effort.
- Executives and leaders must devote time and resources to make culture change a success.
The data show clearly that high-performance culture change is hard. But it’s not impossible. Whether change is happening as a result of business growth or is a direct intervention, leaders must commit to making the effort to nurture the culture they want to see within their organizations.
Learn more about the types of high-performance culture in middle market companies and how they impact performance goals.
If you’re considering a high-performance culture change, understanding how different types of culture can help (or hinder) your organization’s performance can help you make a stronger case for the culture you desire. For the details, more information on culture change, and best practices for establishing a high-performance culture, download our full research report, High-Performance Culture: How Middle Market Executives View & Harness the Power of Culture.
Previously in this series
Post 3: Pinning Down High-Performance Culture: How to Manage Yours and Measure Its Impact
Next in this series
Post 5: How Leaders Can Promote a High-Performance Business Culture