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Culture eats strategy
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Understanding a company’s culture is a key component that leaders may ignore. When I took on a new role, an updated strategy was cited as top priority. What the team needed was a culture boost. I focused on culture management to change the “delegate up” practices and effectively implement strategy. It's an ongoing process of encouraging people to take the risks associated with making their own decisions, but it's paying off with faster decision-making, improved performance, and higher morale.
Department/Area: SAP Marketing
Global Headquarters in Walldorf, Germany
Industry: Technology/Business Software
Size: SAP employs nearly 55,000 people in more than 50 countries; More than 1,200 employees in Marketing
Age: Company founded in 1972
- Ranked 24th Most Valuable Global Brand
- 74% of Forbes 500 companies run SAP software
- More than 183,000 customers in over 120 countries
Senior members of the team were afraid to make decisions without the boss weighing in which was affecting the team’s overall performance.
Key Innovations & Timeline
Challenges & Solutions
The challenges were changing the culture from a “delegate up” mentality and getting the team to feel comfortable with their own decision-making. This story illustrates the situation and how culture management changed the team’s dynamic and improved performance.
Culture Eats Strategy
Remember when you were young, and threatened to run away and join the circus? You bristled under your parent’s oppressive regime; every decision was made for you. They even chose what you had for breakfast.
Remember when you first joined the workforce and longed for the day when you were in charge? Your managers made such stupid decisions. They didn’t even know what was really going on.
If only you were in charge. It’s good to be the king. All successful change management projects require executive support. Strategy starts with the leaders. If you aren’t the lead dog in the sled, the view always looks the same.
Earlier in my career at SAP, I took a new role with a group that was described as in need of a “turn-around” and an “updated strategy and direction”. I was urged to introduce a new mission/vision, strategic objectives, and revised key performance indicators. Exert top down control.
My first few weeks on the job contradicted this advice. I got my first hint of the problem at a meeting I called in New York to meet all of my direct reports from around the world. I invited them to share their complaints with me, and I was surprised at the minutiae of their issues. They seemed like little problems, well below the level that I would have expected from managers with teams of 50 to 300 people. Why wasn't I hearing larger, strategic concerns from this group?
As I got into the job, I noticed that almost every important decision had to be made by me personally. At first I assumed this was because individual employees had little understanding of the company strategy. However, it became apparent that cascading the strategy was unlikely to help because everyone was used to delegating up.
For example, when limited budget forced trade-offs between two high-priority activities, senior members of the team would ask me to make the decision. Even if I asked them for a recommendation, they usually demurred for fear of being wrong or irritating their stakeholders. In addition, it was unheard of to have discussions between members of my inherited management team without me there to adjudicate. Why should they debate, when the boss will ultimately decide?
I came to the conclusion that the organization didn’t need a new strategy to solve its performance problems. While performance hadn’t been up to full potential, the issue didn’t seem to be with processes or structures or metrics. After a couple of years of being told what to do and being discouraged to think for themselves, my new group had a culture problem.
Because most leaders view culture as something soft and intangible, it’s often overlooked when they take a new job. Unfortunately, in my experience, the single biggest roadblock to success for a new leader is not understanding the current culture of his/her new team and clearly articulating how that culture must change. A well-designed and well-implemented strategy will not be effective unless people are motivated to support it. This idea is captured by the mantra “culture eats strategy for breakfast”, popularized during Mark Fields tenure at Ford Motor. In my situation, culture was clearly my job one.
So rather than working on strategy or objectives or metrics, I concentrated on changing the culture. I immediately removed myself from some of the approval chains. I delegated critical and visible decisions to my direct reports and publically reinforced their decisions. I encouraged them to finalize some long-standing issues without vetting them with me beforehand. And perhaps most importantly, I shared all of this with my manager who went out of his way to reinforce the new style.
One of the key cultural shifts was to signal that it was okay to fail. I give myself permission to fail, so why wouldn't I extend the same permission to my staff? I could tell, in my initial meetings with my managers, that there was a fear of retribution if someone took a risk that didn't pan out. So we set out to change that. We made it clear that risks were about decisions, not about the people. A failure could result from a poor decision, but that didn't mean the person was a failure. We have a saying about this: hard on the issues, soft on the people.
Of course, none of this was without some drawbacks. Not all of the decisions that my team made were consistent with my point of view. And I missed some chances to put my own imprint on the group. But the benefits more than outweighed these downsides.
One situation stands out to me. About six months after these changes, my direct reports invited me to an emergency weekend teleconference. A major corporate initiative – which had CEO visibility – was failing. Not only was it late and over budget, but my directs had concluded that it was fundamentally flawed. The US-centric design would not work in other target countries.
Without my knowledge, that week they had taken the core team off the project, installed a new design team, and come up with an alternative strategy. They had even pre-syndicated the change in approach with a few key external stakeholders. While this new approach was less expensive and quicker-to-market than the original, they could not make up for the lost time or budget. Unanimously they asked for permission to go forward with the revised strategy.
I was stunned but approved their request. In the following days, I briefed my boss and the then CEO, both of whom were pleased with our willingness to admit our mistake and move forward. And yes, the project ended up being a big success and possibly contributed to the fact that I was later promoted to CMO.
We've made other changes in the way we communicate to reinforce this cultural shift. For example, about 44% of our staff actively follow our marketing community internal social network, and about 27% are active contributors. I post frequently, and I'm active on the comment threads. And, of course, it doesn't all have to be focused on work. I saw one of my biggest responses -- 67 comments last I checked -- with my year-end post asking people what they were doing for the holidays. It's all part of the ongoing dialog. People sometimes say that culture is a trickle-down thing, but my observation is that it's more erratic than that, less controlled. It moves in all directions.
It’s a few years since we began to implement these changes and the difference in the team’s culture is palatable. There’s a sense of teamwork that didn’t exist before. People don’t wait for the boss to make every decision and don’t assume that I’m always the smartest guy in the room. Yes, we make more mistakes than before but we catch them quickly and our overall performance has significantly improved. Importantly, many of the people who went through this transformation with me are helping me with my latest cultural change. And no one seems to want to run away to join the circus.
Goals, initiatives, and metrics. I have a huge appetite for strategy management. But I never forget that breakfast is the most important meal of the day – it all starts with culture.
Benefits & Metrics
Increased teamwork, accelerated decision-making, improved performance, reduced costs and increased revenue
Voices of Experience
As this post is written very much from my own personal point of view, I thought it was important to inject the perspective of my leadership team at the time. Here is what they had to say regarding the impact the culture shift had on their effectiveness and that of their team.
- Jonathan immediately created speed and trust by telling his directs, ‘You are a decision-maker and leader of Marketing. Make decisions. Lead. Sometimes you will make mistakes – that’s OK. I will tell you when that happens.’ Basically, this meant you did not need permission before deciding to do something, even something significant that could impact the entire Marketing organization. It also gave you freedom to fail, knowing that it would not be the end of you. He put his trust in the people he assigned to the leadership team in a real way.
- In retrospect what Jonathan did was the classic influence model that McKinsey has documented. He fostered conviction that change is possible and we all need to lead with that thought.
- Jonathan role modeled the desired behaviors and reinforced them with formal mechanisms such as performance reviews with a significant percentage of bonuses dedicated to "one team" behavior. As a result, he became the standard by which leaders across the company were assessed for their ability to bring the best out of people and when the Chief Marketing Officer job became available he was the preferred choice among his peers.
- When you can’t delegate upward you’re faced with making decisions with your peers. No referee. The upside is that we’ve learned to deal with and understand one another’s styles better. I feel like I’ve got some new friends that I depend on every day.
- Jonathan drove the biggest transformation in SAP Marketing in more than five years. In the first two weeks after Jonathan’s initial decision to remove himself from approval flows, we were able to unlock things that had been stuck for six months. Not only did his decision have a profound effect in our velocity, but his management style also empowered and energized the team because we felt like we were witnessing the dawn of a new era.
- As a side effect of the culture change, the entire Marketing organization earned a new level of respect within SAP, as the rest of the company recognized that Marketing was more agile and closer to the sales marketing organization than, perhaps, ever before.
- The culture shift increased teamwork and interdependencies across the team. For example, I am now working with my peers more than ever. The work is productive and the co-dependency is strong. The outcome of our work may end up shifting resources and responsibilities, yet, we seem to be working together without concern about this. I think our confidence in one another is higher as a result of Jonathan’s leadership style and culture.
- What I’ve learned during my experience under Jonathan is that the muscle memory of an organization is one of the biggest impediments to change. You may call it culture, but the DNA of an organization can put any strategy to shame.
- Here are a few key things I’ve learned working within the new culture:
- Strategy is extremely important, but recognize “good” today is better than “perfect” two weeks later.
- Change is slow, but speed and urgency of the actions you want to role model are critical.
- Public compliance, private defiance is a morale killer and one of the biggest impediments to a leader’s credibility.
Culture management and empowerment can improve a team’s performance more than dictating strategy.