Case Study: Making the Connection Between Culture and Performance

Despite a leading position and 13 million customers, one retailer couldn’t ignore the surge of value-priced retailers into the marketplace in the mid-2000s or the new customer-driven definition of value that arrived with it: great selection and high quality at low prices. To gain efficiencies necessary to lower prices while keeping selection and quality high, the retailer restructured operations only to realize that it wasn’t operational issues threatening its survival, but cultural ones. Brought to light under the strains of the restructuring, poor working conditions, non-competitive salaries, a culture of “top-down” communication, and a lack of development opportunities had earned the retailer the reputation as the “worst place to work.” “Trying to control costs, we neglected what mattered,” says a senior VP. “Employees felt unappreciated, so when job options became plentiful, we lost talented people, and along with them, customers.” Changing Culture Through Leadership Development Recognizing the need for culture change, the company had two directives: realign the culture to make the company a better place to work and shop; and develop management, giving them the skills to direct and sustain the cultural shift. Both directives were challenging since neither culture nor development was a priority at the company. The current role of HR was recruitment; training and development were non-existent. “The situation was damaging, and there was no structure in place to fix it,” says the then-newly installed VP of Human Resources. “The first challenge was getting managers to recognize that cultural issues were impacting the business.”     Faced with these directives in this culture, the HR team needed a plan to quickly address the issues so the company could benefit from the restructuring investment made earlier. They also had to convince leadership that the plan would work and was worth the investment required. To help design and implement this ambitious initiative, the HR team engaged the help of learning solutions provider Discovery Learning Inc. Starting the Change at the Top Working closely with Discovery Learning, the HR Team kicked off the initiative with two surveys: a customized Employee Engagement survey and the Denison Organizational Culture Survey, a survey that links cultural issues to performance, measuring culture’s impact on ROI, customer satisfaction, and the organization’s change readiness. The surveys identified issues in communication, employee engagement, and management practices, all of which were validated by focus groups that followed. Knowing the importance of early leadership involvement to any change initiative, the HR team quickly engaged senior management, administering three assessments: Change Style Indicator, Decision Style Profile, and Discovery Leadership Profile. “These assessments validated the results of the surveys, helping us see how culture was preventing us from developing the trust of employees and customers necessary to sustain and grow our business,” says a senior VP. “They also provided insight into each leader’s effectiveness, management, and decision-making styles—all of which would prove critical to achieving the necessary cultural change.” Positioning the Change as a Business Initiative After identifying four areas for improvement from the surveys and focus groups—Mission, Involvement, Consistency, and Adaptability—the HR team worked with senior management to develop four Culture Action Planning Themes:

1. Communications
2. Management Practices/Performance Management
3. Training
4. Customer Service

Clearly making the connection between culture and business performance, Discovery Learning helped the HR Team deftly position the program as a business initiative. Once this foundation was laid, the HR team had senior leaders communicate the planning themes to the remaining leadership, effectively engaging each level of management, achieving buy-in for the program at all levels, and making each leader a change agent. Making a Case for Change With leadership on board, the HR Team worked with them to develop a Case for Change that would be used to gain acceptance and cooperation for the change. The three points:

1. Build trust between employees and management
2. Improve how employees feel about working here
3. Adjust financial models to consider long-term business sustainability

“Defining the case for change was necessary to gain recognition of our cultural shortcomings and why rebuilding the trust of our stakeholders was critical to the business,” says a senior VP. The development and delivery of the case for change also served as key messaging training for the leaders, which continued with the executives creating “elevator speeches.” These speeches enabled leaders to confidently explain the rationale for change in their own words, adding credibility and reinforcing their change agent role.  Keeping Training Relevant     With management leading and modeling the change, the HR team began engaging the rest of the company through experiential learning. Chosen for its ability to make the quickest connection between concepts and behaviors, experiential learning allows participants to experience different outcomes resulting from different behaviors, learning firsthand what works and what doesn’t, making training relevant instead of theoretical. “The simulation we used, Paper Planes, Inc., is so realistic it fully engaged everyone,” says an HR director. “As a result, it was both relevant and fun, making the lessons learned easy to remember when we got back to work.” After facilitating 55 additional leaders through Paper Planes and the Change Style Indicator, Discovery Learning conducted a “train-the-trainer” session, for the company, certifying six HR directors in both tools and equipping the retailer to continue the program alone. Which it did, promptly delivering a program to change employee-customer interaction to 500 store managers. To model this, a senior manager hosted each learning event, playing the customer role in Paper Planes. This tactic helped to drive home the concept that customer service is priority one for everybody—including senior management. Reinforcing New Behaviors To reinforce the budding culture of two-way communication started by the initiative, Discovery Learning facilitated a second learning experience for VPs, which included real-time peer coaching; the Discovery Leadership Profile; and a different experiential learning simulation, Press Time. In addition, the HR directors conducted a one-day coaching and communication skills program for more than 800 managers and support staff. Both events clearly demonstrated the company’s new commitment to development at all levels—a distinct cultural change. Results Employee and customer surveys show improvement in employee engagement and satisfaction, and the customer experience. Perhaps most importantly, sales are up. In the months following training, sales increased 4.8 percent, and net earnings increased 65.2 percent. The company admits that although it’s impossible to attribute the upturn solely to this initiative, the learning definitely had an impact. “Our employees tell us they see a difference, and we’re seeing the results in the bottom line.” says a senior VP. “Our leaders are more thoughtful communicators, development is now seen as the norm, and customer service is directly linked to financial results. Thanks to this initiative, we’ve definitely learned the importance of culture to our success.” Quick Tips More than 67 percent of all change initiatives fail. Here are three reasons this one worked.

•  Starting the change at the top: The early involvement of senior management (with leaders modeling the changes) made every leader an effective agent for change.
• Business initiative positioning: Positioning as a business initiative and gaining early buy-in from senior management communicated that the program was critical to the business. In turn, the change occurred faster and is still part of the culture today.
• Relevant training: The experiential learning kept training relevant to what was happening in-store while demonstrating that communication would no longer be just top-down—both of which helped gain acceptance and cooperation for the change.