Our work world has changed forever. The sudden mass shift of people working from home, means the effort of commuting and being embedded in an office is being replaced by virtual communication, greater flexibility and autonomy. This unprecedented change is providing greater clarity and perspective about the culture we’re a part of. Before the pandemic, research shows a staggering half of companies were attempting to change their culture and 70 per cent of transformation efforts failed. Having worked on many of them, I know that the rule-choking systems in place simply don’t allow fundamental change.
Nine months later, the dialogue about vexed issues such as income and gender disparity, is becoming louder. Our big, powerful corporations are being tested like never before and cracking under pressure from the market, investors and employees. For example, the backlash to Australian insurer AMP’s decision to promote Boe Pahari to lead AMP Capital, despite knowing he had been financially penalised after settling a sexual harassment claim with a female subordinate, has been unprecedented. It has triggered a series of decisions that have bought AMP to its knees.
Corporate culture is based on hierarchy and control, creating conditions that are toxic and stifle innovation. It’s like a ‘glasshouse’, where growth is contained. Here are the top three reasons why:
It lacks psychological safety. This is the ‘golden key’ to creating a strong culture. Feeling safe means being free to speak candidly and raise ideas and concerns without fear of reprisal, so that we shift into ‘connection mode’. The brain processes a provocation or threat at work as a life-or-death event, triggering the amygdala which closes down the neocortex, responsible for rational and strategic thinking. However, when the brain is relaxed, we think creatively, generate new ideas and take moderate risks. This is when we can reach our capability and perform at our best.
The data to back this up is clear. For example, Google’s Project Aristotle found that people on teams with higher psychological safety are less likely to leave, more likely to harness the power of diverse ideas from their teammates, bring in more revenue, and be rated as effective.[1] Psychological safety, more than anything else, is critical to establishing trust and making a team work. It creates the ‘roots’ for a strong, thriving culture.
It was designed for the industrial revolution. Organisational design is based on compliance with clearly defined roles and has changed little since the early 1800s. Hierarchical, controlled, structures of decision-making determine who can participate in decision-making processes, and therefore to what extent their views’ shape the organisation. Not merit, experience or the quality of ideas. A hierarchy also creates internal competition, where people need to ensure they are better positioned than their peers in order to advance their status, position and security. Large consulting firms are renowned for pitting staff against each other using revenue-only targets and subjective performance appraisals. Inherently, a lack of trust and freedom for adults to make decisions keeps people small, uniform and function-based.
It’s bureaucratic. The volume of procedures in place, so that authority can be given to make even cursory decisions, inhibits initiative, risk taking and creativity – all required to innovate. Jamie Dimon, CEO of JPMorgan Chase, agrees that bureaucracy is “a disease”.[2] The larger an organisation, the more bureaucratic it becomes, requiring constant effort to maintain. It also leaves companies’ vulnerable to unconventional competitors, as their focus is on maintaining their strategy, customer and technology groups, rather than generating new thinking and opportunities for market share. The neo-banks that have captured customers looking for cheaper, faster alternatives, are a good example of this.
The Glasshouse is a culture of surviving, not thriving. It’s inhumane and doesn’t work, except for few at the top. While the perfect culture doesn’t exist, it’s time for new, smarter ways of working. One solution is the use of ecosystems of work, which have been successfully integrated into multinational Haier. Non-hierarchical teams allow adults to behave like entrepreneurs and manage their own customer base. They are trusted and given freedom to make decisions, which is essential to create and innovate – generating a thriving, globally competitive culture.
[1] Duhigg, C. 25 February 2016, NY Times, ‘What Google learned from its quest to build the perfect team’. Viewed, 27 October 2020, NYTimes.com.
[2] G. Hamel, M. Zanini, p.50-59, November – December 2018, ‘The End of Bureaucracy’. Harvard Business Review.