The only thing predictable these days is unpredictability. Change
is all around us, and the pace of change is accelerating. Many
companies and businesses that were once robust and thriving find
themselves in financial freefall. Organizations with storied
histories such as Merrill Lynch, General Motors, and Motorola have
ceased to exist, restructured, or lost substantial market share,
leaving in their turbulent wake angry investors and unemployed
workers. What has led to such turmoil in companies that once were
While it may be simplistic to suggest a single, overriding cause
for these corporate collapses, there are some compelling
similarities that might serve to warn other organizations to be
wary of complacency and watchful for signs that they are becoming
dangerously misaligned with the world in which they operate.
In the work I have done with a great number of organizations over
the years, it has become increasingly clear that many suffer from a
malady called Organization System Dissonance (OSD) - a misalignment
of the organization with the rapidly changing world in which it
operates (Figure 1). OSD occurs when organizations - which may have
once been successful - ignore or dismiss changes taking place in
the "environment" (everything outside the company), and when
critical parts of the "invironment" (everything inside the company)
become disconnected from one another. When OSD occurs, mission and
goals become fuzzy, company culture runs counter to organizational
strategies, and human resource systems begin operating
independently of each other and the real needs of the organization.
OSD results in chaos, confusion, and inefficiency and left
unchecked can lead to the decline and downfall of even the most
Where it all begins
OSD typically starts outside the doors of the organization. As the
world experiences significant changes in technology, markets,
competition, or government actions, a "disconnect" develops between
the mission and strategies of the organization and the new
realities of the world in which it operates. Business strategies
fray at the edges and show wear in obvious and not so obvious ways.
What worked before may not work so well today, and may work less
One of the most recent and startling examples of the misalignment
of business strategies with the changing environment occurred in
the late 1990s when Motorola held on too long to its analog cell
phone technology. The world was moving to digital technology, but
Motorola - the world market share leader by a wide margin - refused
to acknowledge the need for a digital phone. Instead, it ramped up
its production capacity for analog phones by building an enormous
facility in Harvard, Illinois.
As a result, Motorola lost its market share to Nokia, and
Motorola's share value plummeted. Today Nokia leads the market with
38.6 percent of the share while Motorola is far behind at 8.3
percent, according to News, Brian James Kirk on Friday, January 30,
Mission and culture in conflict
It's difficult enough for organizational leaders to stay connected
to the changing world, but the problems of OSD can spring up from
within the organization as well.
In the last several decades much has been written about company
culture. What is often overlooked, however, is that culture - those
unwritten rules and values that govern human behavior - can
actually hinder an organization's efforts to accomplish its mission
and attain its business goals. Many businesses have charted new
directions because of the changing world, only to be stymied in
their efforts by a culture permeating the organization that does
not support or cannot sustain the new strategic initiatives.
Some years ago, a Chicago-based software company experienced
firsthand what happens when company culture does not support
company strategy. Pansophic Systems, headquartered in Lisle,
Illinois, had seen significant growth from its grassroots
beginnings, and had introduced a number of new products. For a time
it was one of the darlings of the software industry, having secured
a place in the top 10 of Software Magazine's Top 50 listing.
Pansophic had initially been willing to take risks to compete in a
fast-moving industry, but as it grew, shareholder demands increased
and calls for cost cutting and efficiency began to take a toll.
The culture began to shift. Where risk taking had once been
encouraged, it was now discouraged, and creativity was replaced
with a survival mentality. Before long, a new culture permeated the
multi-million dollar company: Those who took risks and failed were
relegated to ancillary roles or banished from the organization. In
short, a culture developed that was not aligned with the new
product development initiatives being mapped out in the executive
suite. Mixed messages were communicated to employees. They were
charged with developing new and better products, but found
themselves working in a culture that was risk averse. The
disconnect between Pansophic's strategy and culture grew, and its
share value began a precipitous decline. The outcome was
predictable: First there was an exodus of talent followed by
layoffs. Finally, when share value reached new lows, Pansophic
Systems - once a rising star of the software industry - was bought
out by a competitor. It no longer exists, a victim of OSD.
Espoused versus actual culture
These days, savvy organizations recognize the need to communicate
the "core values" necessary for organizational success. Walk into
just about any organization headquarters and you likely will see
hanging on the walls (or on wallet-size, laminated cards) the
company credo: "We believe in teamwork, customer service, respect
for employees, shareholder value." But therein lies another
problem: Many companies have done a good job of espousing a
culture, but few have embedded it into the fabric of the
organization. It's easy to come up with five or six exalted
principles. It's much harder to make them truly a part of the
organization. The dilemma is worsened when human resources systems
work against the very culture an organization is attempting to
How recruitment can work against culture
Just about every modern organization recognizes the importance of
teamwork. In fact, "teamwork" is one of the most commonly espoused
cultural values in American business. With all of the changes
organizations are confronting, there is a great need for
collaboration to find new markets, products, and services. Despite
the clamor for teamwork, however, many organizations continue to
recruit "lone wolves" - highly talented, technical, or professional
people who prefer to work alone and are largely ineffective as team
players. Instead of hiring talent that "fits" with the desired
culture, many companies undermine their own efforts by recruiting
people who couldn't work effectively on a team if their lives
depended on it.
Of course, when companies undertake to recreate themselves by
espousing a new and better culture, we should expect some culture
gaps to exist between what they want and what exists, but such gaps
only widen when these same companies hire people whose personal
values clash with desired company values. If teamwork is critical
to accomplishing business goals, then it makes sense to hire team
players, yet many organizations have failed to do a good job of
revising the recruiting process to ensure a proper match between
candidates and culture.
When training systems and culture clash
Another disconnect occurs in organizations when what is taught in
management training classes collides with the way people actually
manage in the workplace. What chance do new skills have to flourish
if trainees return to a hostile culture that discourages the use of
the new skills?
Teaching someone how to be a more participative leader has little
chance of taking root if the existing culture of the organization
encourages an autocratic style of leadership. In fact, training may
do more harm than good. Nothing discourages trainees more than
being introduced to "best practices" only to return to a culture
that supports "worst practices."
What are some indicators that training content is out of sync with
company culture? The most obvious are the comments made by
participants during training: "This is great stuff, but it'll never
work back on the job," or "I wish my boss would attend this
training." Such comments reveal a disconnect between training
content and company culture.
While there is clearly a need to break bad management practices by
teaching new management skills, training by itself cannot change
the culture of an organization.
When rewards send mixed messages
People tend to adopt behaviors that are rewarded, and avoid
behaviors that are punished. Rewards include compensation, but also
include recognition and promotion. The problem with many
organizations is that the culture they espouse is not supported by
the reward system. Even worse, sometimes rewards are in direct
conflict with the very culture a company claims to desire.
Some years ago I did some work for a Chicago-based personal care
company that made a claim to a set of six cultural values that
included "respect for employees." With current labor shortages, it
doesn't take much gray matter to realize the wisdom of treating
employees with respect, but it's one thing for a company to say it
respects employees and quite another to actually respect them.
The marketing director in this particular company had a reputation
for berating and belittling employees openly and regularly. There
was no question he was smart and capable, but if you questioned one
of his ideas during a meeting or suggested an alternative course of
action to the one he embraced, he would launch into an attack that
often left its recipient shell-shocked.
One morning, when I arrived for a meeting, I learned of an
announcement sent via email by the CEO to all employees: The
marketing director had been promoted to vice president. The email
went on to congratulate the new vice president and spoke highly of
his contributions to the company. Imagine the reaction of employees
who knew of the new vice president's cruelty and also knew the
culture the organization claimed to uphold. In the minds of
employees this single action was clear proof that what the company
said it valued, and what it truly valued did not jive. What really
mattered were results even at the expense of people. An indication
of the depth of the anger felt by employees became evident the next
morning: Someone had scratched out the core value "respect for
employees" on the values plaque that hung next to the main elevator
in the lobby.
Culture versus organizational processes
Another cultural value many organizations insist is part of their
culture is "customer service," yet many companies continue to use
processes that hassle customers and create adversarial
Consider the prickly relationship that once existed between Proctor
and Gamble and its biggest customer, Wal-Mart. In 1988, despite a
$375 million joint business, the relationship between P&G and
Wal-Mart was broken. While giving lip service to the importance of
customer service, P&G, it seems, was doing everything it could
to sour its relationship with Wal-Mart.
During this time, according to one report, Sam Walton telephoned
P&G's CEO and was transferred six times before he finally gave
up, having never connected with the top executive. That event
simply confirmed the disconnect that already existed between
P&G's espoused culture of "customer service" and its actual
culture, which was nonresponsive to its customers' needs.
Further evidence of the gap between P&G's claim to "customer
service" was its organizational structure: P&G was organized
into 12 different internal product divisions, and each division
separately and independently called on Wal-Mart. The result was a
fragmented and antagonistic relationship. Being organized around
its product line may have seemed wise to P&G executives, but it
worked against the responsive and cordial relations it wanted to
have with its customers.
To its credit, Proctor and Gamble finally recognized the growing
gap between its "customer service" claim and its antiquated
processes and structure. The two giants collaborated on an
ingenious supply-chain software system that connected P&G to
Wal-Mart's distribution centers. Today, when P&G products run
low at the Wal-Mart distribution centers or even in some Wal-Mart
stores, the system automatically ships more products.
Organizational system harmony
What can an organization do about the tendency to slide into
dissonance? Or, put positively, how can an organization achieve
Organizational System Harmony (Figure 2)? The first step is to
continually review and realign business strategies with the
changing world. Given the increasing rate of change, this step is
probably more critical now than it has ever been. Danger lurks for
those companies that presume to do business as usual, while success
awaits those who develop the flexibility and speed to change course
in turbulent waters.
An effort also is needed to reinforce the existing culture if it
supports the new direction, or define a new culture if one is
needed. The problem is that culture is hard to change. It takes
more than simply coming up with some new platitudes or hanging a
few posters. Culture change efforts should begin by identifying not
only the new values needed but also the new "competencies" required
of employees at all levels in the organization (individual
contributor, manager, and executive). Core competencies identify
the "ideal" employee, manager, and executive. Once the "ideal"
competencies are defined, an HR system makeover can begin with the
- Recruit those who already possess the desired competencies.
- Retrain existing employees so they can learn the new
- Revise performance feedback systems (appraisals and 360s) so
they are "linked" to the new competencies.
- Reward employees at all levels in the organization who truly
live up to the new competencies.
- Rework organizational structure and processes to ensure they
support the business and the new culture (Figure 3).
The future isn't what it used to be. The future, these days, is
much less predictable and much more dangerous to organizational
longevity. The good news is that opportunities for growth always
emerge during changing times. To be prepared for these
opportunities, organizations must learn to change with the world.
Change is inevitable; OSD and its resulting decline are not.
Matt Hennecke is senior director of leadership
development for Kindred Healthcare. For 20 years he ran his own
consulting practice, providing consulting services to companies
such as ABN AMRO, Motorola, McDonalds, and T. Rowe Price; Matt.Hennecke@kindredhealthcare.com .