Dealing with culture transformation is a significant challenge in the business rescue process

Over the past month, we have seen a lot of action within the business rescue/liquidation space. Perhaps the Deloitte prediction of the profession seeing plenty of action over the next two years is not as overly confident as some may think.

One of the biggest challenges that companies face in the business rescue/turnaround process is addressing the issue of culture transformation. This is a all to familiar issue in South Africa which has been dealing with this for the past 28 years.

I recently read an article by McKinsey which details some of the key considerations that need to be addressed when faced with cultural change.

What you’re changing: Mindsets and behaviors

The article points out that, to transform the organization, companies should consider identifying the discrete day-to-day individual behaviors that need to change. Do you want to move away from a federated model? You could encourage leaders to be more collaborative in their decision making and provide more incentives to employees to share knowledge and work across silos. Do you want to emphasize continuous improvement in products or operations? You could establish mechanisms by which managers can regularly provide and solicit feedback from direct reports. Do you want to lead the market in innovation? You could teach employees about product development and customer needs assessments and find ways to help them protect their time for entrepreneurial projects.

In all these cases, no one intervention will fit the bill. Companies can, however, apply four established change management levers, in some combination, to shift individual mindsets and behaviors relevant to cultural aspirations. These are the four levers: role modeling, understanding and conviction, formal reinforcement mechanisms, and confidence and skill building. Each business unit can be responsible for creating and implementing standard interventions in these four areas—although they should be given leeway to determine how and when to initiate them.

The article adds that when it comes to role modeling, for instance, the most influential employees and those in the most critical roles should be encouraged to lead initiatives associated with achieving the common cultural aspiration—for instance, asking them to pilot a “role rotations” program across business units to encourage collaboration and break down organizational silos. To create greater understanding and conviction, business unit leaders could define and use KPIs that are directly linked to the agreed-upon common cultural aspiration, and senior management could find ways to communicate early and often about the overarching change story and how various business units are playing their parts.

Formal reinforcement mechanisms, such as holding an annual “Innovation Olympics,” could be introduced across the business units—although each could deploy these mechanisms differently based on priorities specific to the business unit. In a product team, for instance, the competition might be focused on how to better address customer pain points, while in the sales team, the theme of the Olympics might be on ways to shorten the sales cycle and increase conversion rates. When it comes to capabilities and skill building, senior managers at the center and the business unit leaders could jointly identify critical skills to, say, lead the market in innovation. They could then develop “learning journeys” that could be applied in a fit-for-purpose way, depending on roles, responsibilities, locations, and so on.

How you’re changing: Organizational oversight

The article points out that senior managers will need to establish a central transformation office, led by a chief Transformation Officer (CTO), who can be an arbiter and the single source of truth for the change effort. Early on, the CTO should schedule weekly meetings with leaders in each business unit; eventually, the meetings can be held monthly.

The business unit leaders should come to these meetings prepared to give the CTO updates on critical decisions, progress on goals, or emerging concerns. These updates will give the CTO greater line of sight into what various business units are doing and whether there is information that might be relevant across the organization. For example, the product team may be launching skills training that would be helpful for members of the sales team. Or the sales team may be delayed in launching a new dashboard that, while eventually helpful to the product team and other business unit leaders’ pursuit of overarching strategic objectives, is currently in a holding pattern.

The article adds that the meetings can provide a forum by which the CTO can pressure-test the business unit leaders’ plans—ensuring that they are comprehensive, ambitious, and properly resourced, for instance. They can also provide a platform for business unit leaders and other senior managers to discuss common KPIs and other organizational health metrics, which should be collected and assessed regularly. Doing so will encourage the business units to be transparent about their performance and accountable to the other business units.

Who is responsible for culture transformation at the business unit level?

The article points out that, for a culture transformation to succeed, there must be a clear understanding—by senior leaders and business unit leaders alike—of who is responsible for which initiatives and who the most important influencers are.

In our experience, a single business unit leader should be on the hook for transformation activities and outcomes as part of their formal role. This individual should be senior enough to signal the importance of the effort but also “in the weeds” enough to want to roll up their sleeves and manage the day-to-day tasks associated with transformation. A good way for senior leaders to identify this business unit unicorn is through employee surveys and nomination processes; employees on the ground will have the best sense of who embodies this mix of traits.

The article adds that, this business unit leader can work in a structured way with well-placed influencers—individuals in the business unit who have large, informal social networks and are trusted and respected by others for their transparency, institutional knowledge, and ability to make sense of change. Influencer networks rarely follow organizational charts, and contrary to beliefs held by most senior leaders, influencers are found at every level and tenure. Because others trust them, influencers are effective at soliciting and then aggregating others’ feedback about the transformation. And because they are well connected, influencers can amplify and create inspiration around important messages that would otherwise land flat coming from central communications.

The number of influencers and the frequency of interactions required between the business unit leader and influencer will depend on the scale of change. A merger situation might call for business unit leaders to spend more time with and garner more support from influencers than, say, a process change that already has lots of support inside the company. Regardless, the business unit leader should use every opportunity to invite influencers to critical events: fireside chats with leaders, strategy discussions, capability building programs, and so on. The business unit leader can identify and resolve potential issues much faster and more effectively when they have clear and trusted communications with influencers—and vice versa. Culture transformation is important for any company.

Moses Singo is a Partner at Genesis Corporate Solutions and is a Junior Business Rescue Practitioner