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BUILDING A

HIGH-PERFORMANCE

BUSINESS CULTURE

Every human organization creates a unique culture all its own.

From a small family business operating in its hometown, to a

large global corporation spanning national cultures and time

zones, each organization has a distinct identity. Tribes, families,

cults, teams, and corporations all develop a complex and unique

identity that evolves as they grow through the years.

Their culture always reflects the collective wisdom that comes

from the lessons people learn as they adapt and survive together

over time. Thousands of interlocking routines knit together the

fabric of the firm and translate timeless knowledge into timely

action on a daily basis. The traditional habits and customs that

have kept the firm alive and well over time speak loud and clear.

And when uncertainty rears its ugly head, the culture rules!

All members of the corporate tribe tend to fall back on their

tried-and-true methods in order to weather the storm.

Yet try as we might to look to the future, the knowledge

embedded in our corporate cultures is always yesterday’s knowl-

edge, developed to meet the challenges of the past. What part

of the past should we preserve for the future? How should we

adapt the principles of the past to address the problems of the

future? How should we go about the delicate task of relegating the

obsolete practices of the past to the ‘‘corporate museum’’ so that

they don’t grow into obstacles that hold back our best practices

and frustrate our best customers?

Denison, Daniel, et al. Leading Culture Change in Global Organizations : Aligning Culture and Strategy, John Wiley & Sons, Incorporated, 2012. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/capella/detail.action?docID=861640. Created from capella on 2017-10-11 08:08:10.

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2 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

Some leaders try to ignore these challenges and concentrate

on their expense ratios, analyst reports, discounted cash flows,

and their next acquisition. Bad idea. Other top executives see

shaping and managing the corporate culture as one of their most

important challenges. As Wells Fargo Bank CEO John Stumpf

said, ‘‘It’s about the culture. I could leave our strategy on an

airplane seat and have a competitor read it and it would not

make any difference.’’1 Former IBM Chairman Lou Gerstner

made the same point: ‘‘Culture isn’t just one aspect of the

game — it is the game. In the end, an organization is no more

than the collective capacity of its people to create value.’’ 2 The

people make the place.3 The people create the organization. The

people create the technology. The people organize the funding.

The people develop the markets. Without implementation and

alignment, there is no strategy, only a plan.

It can be easy to forget that the people make the place, because

the structures that we create often outlive our memory of how

and why we created them to begin with, leaving us feeling like we

are the victims rather than the visionaries of the systems that we

create. But over the long haul, one of the most powerful things

that a company’s leaders can do is to create a unique character

and personality for their organization that fits their business

environment and distinguishes them from the competition.

But where do you start? Research over the past two or three

decades has shown that an organization’s culture has an impact

on business performance in four main ways:

• Creating an organization’s sense of mission and direction

• Building a high level of adaptability and flexibility

• Nurturing the involvement and engagement of their people

• Providing a consistency that is strongly rooted in a set of core

values

These are the cultural traits that most clearly affect business

performance, so this is where the journey must begin.

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 3

But can something as complex as corporate culture actually

be managed? The task is daunting — but doing nothing is not

an attractive option! Organizational culture guru Edgar Schein

said it best: ‘‘Either you manage the culture, or it manages

you.’’ 4 Managing culture change is certainly not easy, but there

are plenty of real-life examples of global companies who have

succeeded. This book is built around seven of those examples.

What Is Corporate Culture? Why Is It Important?

At the climax of the annual holiday party of one rapidly growing

American company, hundreds of balloons are released from the

ceiling. Inside each balloon is a crisp new US$100 bill. Whoever

scrambles the hardest gets the most money! The lesson is simple,

fun, and more powerful than all the personnel policy handbooks

in the world. It helps capture the essence of some of the key

definitions of corporate culture: Culture is both ‘‘the way we do

things around here’’ and ‘‘what we do when we think no one is

looking.’’ Culture is ‘‘the code, the core logic, the software of the

mind that organizes the behavior of the people,’’ and ‘‘the lessons

that we have learned that are important enough to pass on to the

next generation.’’ 5

Schein’s classic approach divides culture into three levels.6

He argues that basic underlying assumptions lie at the root of

culture and are ‘‘unconscious, taken-for-granted beliefs, percep-

tions, thoughts, and feelings.’’ Espoused values are derived from

the basic underlying assumptions and are the ‘‘espoused justifi-

cations of strategies, goals and philosophies.’’ Finally, at the top

level are ‘‘artifacts,’’ defined as the ‘‘visible, yet hard to decipher

organizational structures and processes.’’

Consider the iceberg image presented in Figure 1.1. Only

about 10 percent of an iceberg is visible above the water;

90 percent is below the surface. But the inertia of the part that is

beneath the surface is what will sink your ship. Similarly, it is often

the parts of the culture that we can’t see that will get us into

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Figure 1.1. Culture Reflects the Lessons Learned Over Time

Artifacts, behaviors,

and norms are

visible and tangible

Visible Symbols

Underlying Principles

Culture lavivruSsnosseL Personal values and

attitudes are less visible,

but can be talked about

Underlying beliefs

and assumptions are

subconscious, invisible,

and rarely questioned

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 5

trouble. This figure also reminds us that the culture is learned — it

is built up from the accumulated principles that we learn as we

survive together over time. The lessons from the past shape

our survival strategies for the future. Winston Churchill said

something similar about architecture: ‘‘We shape our buildings;

thereafter they shape us.’’7

So our mindset and worldview shape the way that we use

the lessons of the past to forge the strategies of the future.

How well are business leaders doing? Well, the record is not all

that encouraging. Phil Rosenzweig’s best seller The Halo Effect 8

explains that when successful corporations become legends, their

business practices are imitated for both good reasons and bad.

Neither researchers nor executives have done particularly well at

separating the principles and practices that truly impact business

performance from those that are simply imitated because a cor-

poration enjoyed great success and everyone now wants to be like

them. Telling fashion from function is often harder than it looks.

There’s a long tradition of studying ‘‘superstitious learning,’’

which probably has its roots in Malinowski’s study of the ‘‘cargo

cult’’ of the Trobriand Islanders in Papua New Guinea nearly

one hundred years ago.9 Richard Feynman tells the story with an

example from the end of World War II:

During the war they saw airplanes land with lots of good materials,

and they want the same thing to happen now. So they’ve arranged

to imitate things like runways, to put fires along the sides of the

runways, to make a wooden hut for a man to sit in, with two

wooden pieces on his head like headphones and bars of bamboo

sticking out like antennas — he’s the controller — and they wait

for the airplanes to land. They’re doing everything right. The

form is perfect. It looks exactly the way it looked before. But it

doesn’t work. No airplanes land.10

You may be thinking ‘‘Surely modern corporate ‘tribes’ must

do far better at separating fact from fiction and deciding what

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6 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

really works than the ancient tribes of Papua New Guinea!’’ Well,

let’s not jump to conclusions. Many of the recent accounts of

the subprime mortgage crisis emphasize the growing power of the

system that was created.11 Mortgage loan officers made a bigger

bonus if they booked more subprime loans. Fee income from new

loans was high enough that even bad loans were good business

for the banks. These government-guaranteed loans were sold to

other banks, who created securities that were certified AAA

grade. Investors around the world grabbed these up because they

paid a higher rate of return. This system created an insatiable

demand for banks to find even more prospective buyers who

would borrow beyond their means in hopes of ‘‘flipping’’ their

new home to take advantage of rising real estate prices before

their balloon payment came due. This system paid off so well that

in the short term everyone kept looking for the next deal long

after the system had stopped paying off. Thus we see how ritual

can become separated from reality even in the most sophisticated

organizations.12

How Corporate Culture Impacts

Business Performance

Over the past twenty years, we’ve studied the link between

organizational culture and business performance. We’ve been

trying to understand the cultural traits that explain the difference

between high- and low-performing organizations.13 These studies

have examined the link between the four basic traits in our

model — mission, adaptability, involvement, and consistency — and

performance measures such as profitability, sales growth, qual-

ity, innovation, and market value. Out of this research, we’ve

developed a way to measure culture, and we’ve created a widely

used Culture Survey designed to help organizations focus on

the issues that need attention and move beyond a discussion

of employee satisfaction, engagement, and morale, to better

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 7

understand the actions they can take to build their organizations

for the future. Figure 1.2 shows what we’ve found out about

‘‘What Counts.’’

• Mission. Successful organizations have a clear sense of pur-

pose and direction that allows them to define organizational goals

and strategies and to create a compelling vision of the organiza-

tion’s future. Leaders play a critical role in defining mission, but

a mission can only be reached if it is well understood, top to bot-

tom. A clear mission provides purpose and meaning by defining a

compelling social role and a set of goals for the organization. We

focus on three aspects of mission: strategic direction and intent, goals

and objectives, and vision.

• Adaptability. A strong sense of purpose and direction must

be complemented by a high degree of flexibility and responsive-

ness to the business environment. Organizations with a strong

sense of purpose and direction often are the least adaptive and

the most difficult to change. Adaptable organizations, in contrast,

quickly translate the demands of the organizational environment

into action. We focus on three dimensions of adaptability: creating

change, customer focus, and organizational learning.

• Involvement. Effective organizations empower and engage

their people, build their organization around teams, and develop

human capability at all levels. Organizational members are highly

committed to their work and feel a strong sense of engagement and

ownership. People at all levels feel that they have input into the

decisions that affect their work and feel that their work is directly

connected to the goals of the organization. We focus on three

characteristics of involvement: empowerment, team orientation, and

capability development.

• Consistency. Organizations are most effective when they

are consistent and well integrated. Behavior must be rooted in

a set of core values, and people must be skilled at putting these

values into action by reaching agreement while incorporating

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Figure 1.2. What Counts

& Intent Or

gan izatio

nal

Lea rning

G oals &

V isio

A gr

ee m

en t

E m

p o

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e n

O bjectives

C re

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C h

a n

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C us

to m

Fo cu

& I

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ti o

C o

o rd

in a ti

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Valu es

CoreDevelopment

Capability

O rien

tation

T eam

StrategicDirection

External Focus

Internal Focus

F le

x ib

S ta

b leBeliefs and

Assumptions

Adaptability Pattern . . . Trends . . . Market

Translating the demands

of the business environment

into action

“Are we listening

to the marketplace?”

Involvement Commitment . . .

Ownership . . . Responsibility

Building human capability,

ownership, and responsibility

“Are our people aligned

and engaged?”

Mission Direction . . . Purpose . . . Blueprint

Defining a meaningful

long-term direction

for the organization

“Do we know where

we are going?”

Consistency Systems . . . Structures . . .

Processes

Defining the values and

systems that are the

basis of a strong culture

“Does our system

create leverage?”

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 9

diverse points of view. These organizations have highly commit-

ted employees, a distinct method of doing business, a tendency to

promote from within, and a clear set of do’s and don’ts. This type

of consistency is a powerful source of stability and internal integra-

tion. We focus on three consistency factors: core values, agreement,

and coordination and integration.

Like many contemporary models of leadership and organi-

zational effectiveness, this model focuses on a set of dynamic

contradictions or tensions that must be managed.14 As Schein

and others have noted, effective cultures always need to solve two

problems at the same time: external adaptation and internal inte-

gration. Four tensions are highlighted by the model: the trade-off

between stability and flexibility and the trade-off between inter-

nal and external focus are the basic underlying dimensions of the

framework.15 In addition, the diagonal tensions between internal

consistency and external adaptability, and the ‘‘top-down’’ versus

‘‘bottom-up’’ tension between mission and involvement exem-

plify some of the competing demands that organizations face.

For each of these dynamic contradictions, it is relatively easy

to do one or the other, but much more difficult to do both. Organi-

zations that are market focused and aggressive in pursuing every

opportunity often have the most trouble with internal inte-

gration. Organizations that are extremely well integrated and

controlled often have the hardest time focusing on the customer.

Organizations with the most powerful top-down vision often

find it difficult to focus on the bottom-up dynamics needed to

implement that vision. Effective organizations, however, find a

way to resolve these dynamic contradictions without relying on a

simple trade-off. American novelist F. Scott Fitzgerald expressed

the same concept when he said that ‘‘the test of a first rate

intelligence is the ability to hold two contradictory ideas at the

same time and still retain the capability to function.’’16

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At the core of this model we find underlying beliefs and

assumptions. Although these deeper levels of organizational

culture are difficult to measure, they provide the foundation

from which behavior and action spring. Basic beliefs and

assumptions about the organization and its people, the

customer, the marketplace and the industry, and the basic value

proposition of the firm create a tightly knit logic that holds the

organization together. But when organizations are facing change

or encountering new challenges from the competition, this core

set of beliefs and assumptions, and the strategies and structures

that are built on this foundation, come under fire. When that

happens, the organizational system and the culture that holds it

together need to be reexamined.

Some Real Examples

The concepts in this model were developed by listening to

hundreds of stories from organizations large and small, public and

private, old and new, successful and unsuccessful, all over the

world. To illustrate how central these four traits are to real-world

business success, let’s now consider four well-known examples:

IKEA, Apple, Ritz-Carlton, and Toyota.

IKEA: Mission Grows Out of Core Beliefs

and Assumptions

IKEA founder Ingwar Kamprad grew up in the hardscrabble

farmlands of southern Sweden and became an entrepreneur at

an early age. By 1976, well established in the Swedish furniture

business, he summarized his key principles of doing business

in a little book called A Furniture Dealer’s Testament.17 It is

remarkable how many of the principles described in this book are

still alive at IKEA over thirty years later.

Like most great organizations, Kamprad’s company has not

just produced profits but has also tried to serve a higher purpose

in the world. IKEA brings style, value, and a better life to many.

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 11

The company’s products are designed for the global everyman,

combining frugality, innovation, and style, using environmentally

friendly materials. Everyone deserves the opportunity to be part

of the IKEA revolution.

What is good for our customers is also, in the long run, good for

us. This is an objective that carries obligations. . . . The objective

must be to encompass the total home environment; that is, to

offer furnishings and fittings for every part of the home whether

indoors or outdoors. . . . It must reflect our way of thinking by

being as simple and straightforward as we are ourselves. It must

be durable and easy to live with. It must reflect an easier, more

natural, and unconstrained way of life.18

In his book, Kamprad also expressed strong beliefs about how

IKEA should operate, stressing the simplicity and self-reliance

of an individual who today is worth over $30 billion but still

counts every penny like it was his last. Consider his thoughts on

simplicity:

Bureaucracy complicates and paralyzes! Exaggerated planning is

the most common cause of corporate death. We do not need fancy

cars, posh titles, tailor-made uniforms or other status symbols. We

rely on our strength and our will.19

IKEA is a terrific example of how a global business strategy

can grow from the core beliefs and assumptions of the founder.

Consider just one key element of the IKEA system: the flatpack.

As all loyal IKEA shoppers know, after following the one-

way corridor through the store, looking at the kitchens and the

bedrooms, and stopping at the restaurant for a coffee or light meal,

you eventually make your way to checkout and finally pick up

your purchases. They are all packed in flat boxes designed to take

home and assemble yourself. You get the home entertainment at

no extra charge!

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12 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

Where did this brilliant strategic innovation come from? Was

it the result of an expensive study from a leading consultancy? Or

an outgrowth of a corporate innovation center designed to make

IKEA more customer centric? No way!

In 1952, one of IKEA’s first employees, Gillis Lundgren, had a

problem. He was trying to load a table into his Volvo to deliver to

a customer. It didn’t fit. Gillis thought, ‘‘God, what a lot of space

that takes up! Let’s take the legs off and put them under the table

top.’’20 Voilà! Global strategy. The rest is just implementation. By

1956, this practice was standardized and has been an essential part

of the IKEA experience ever since. The current system has contin-

ued to build on these key principles established in the early days.

IKEA’s strong sense of mission and powerful corporate culture

are not without their limitations. Growth has been steady, but

relatively slow, especially given the dramatic enthusiasm of their

customers. IKEA has never made much of an impact in the office

furniture market, mostly because very few corporations want to

assemble their own office furniture. Expanding to countries that

are farther and farther away from their Swedish homeland has

also presented some challenges. Successful franchisees who do

like ‘‘fancy cars, posh titles, tailor-made uniforms, or other status

symbols,’’ have also posed difficult choices for IKEA. But overall,

‘‘The IKEA Way’’ has been a central part of the fifty-year journey

from an entrepreneur’s dream to a global icon.

Apple: Adaptability Leads the Marketplace

into the Future

Since Apple’s founding in 1976 in a garage in Cupertino, Cali-

fornia, its people have built their success around an unparalleled

understanding of their customers’ tacit needs. They deliver their

technology to their customers in a way that shapes the customers’

desires. Time and again, they have developed new products that

their customers didn’t really know they needed until they found

out that they couldn’t live without them. As cofounder Steve

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 13

Jobs put it, Apple has focused their attention on developing ‘‘toys

for yuppies,’’ while their competitors were often focused on the

MHz of their new CPUs.21

A powerful recent example of Apple’s genius in leading the

marketplace is the App Store. It is a fascinating example of the

competitive advantage created by adaptability. Building on their

spectacular success with the iPod and iTunes, Apple set about

developing the hardware and software to create another new mar-

ket that didn’t exist before: the smartphone and the App Store.

Nearly a half billion iPods later, it is hard to believe that ten

years ago no one had ever heard of an iPod. A few of us down-

loaded digital music, but most of us were still carrying around CDs.

But the iPod quickly became a necessity for people all over the

world. Apple created a fundamental innovation in the way that

music was delivered to consumers, building a new platform for

revenue generation and innovation that would carry the firm far

into the future. Apple was the intermediary between consumers

and the music that they love.

This set the stage for Apple’s entry into the smartphone

business with the launch of the first iPhone in June 2007.

The iPhone turned the iPod into a touchscreen cellphone with

internet access. No longer would people need to carry a phone

and an iPod and still find themselves in need of access to the

internet to look up movie times or restaurant locations. Now it

was all in the palm of their hand. And it was a big bet that the

future of cellphones would be differentiated not by ‘‘radios and

attennas and things like that,’’ but instead by software.22 The bet

paid off handsomely — by Q4 2008 Apple surpassed BlackBerry

maker Research in Motion to become the world’s third largest

phone maker, after Nokia and Samsung.

At first, developers created their own unsanctioned apps. But

in March 2008, Apple released a software development kit to

help developers create their own apps. They also created a radical

set of rules for the App Store.23 It would cost developers $99 to

submit an app, and they could charge whatever they wanted for

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14 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

downloads. Apple would retain 30 percent of the sale price for

administration. The remaining 70 percent would go to the devel-

oper. If the app were offered for free, Apple would take no com-

mission. Apple itself would maintain the App Store, control the

approval process, and support the whole thing through iTunes.

The App Store was launched with five hundred apps in July

2008, to coincide with the global launch of the 3G iPhone in

twenty-two countries. In the first year, nearly one hundred thou-

sand apps were created, with two billion downloads to over twenty

million iPhones worldwide. By the time that this book is pub-

lished, there will be over one million apps. Apple now estimates

that the App Store generates more than $1 billion each year.

Apple’s approach to innovation is deeply rooted in their

DNA. It has always been informed by a unique mindset that

focuses on the ecosystem that surrounds their customers. Their

innovations combine hardware and software with developers and

consumers in ways that create revolutionary markets. The App

Store connects the endless creativity of the developers with

consumers’ endless demand for software solutions, starting at a

price point of $.99 or less and building from there. With Apple as

the intermediary, Steve Jobs’s legacy of innovation will be with

us for a long time to come.

Ritz-Carlton Hotels: Involvement Creates Capacity

Ritz-Carlton hotels founder Cesar Ritz set the luxury standard for

European hotels in the early twentieth century. He said, ‘‘Never

say no when a client asks for something, even if they ask for

the moon. You can always try.’’ Ritz-Carlton’s ‘‘Three Steps of

Service’’ set a high standard for five-star quality:

1. A warm and sincere greeting. Use the guest’s name.

2. Anticipation and fulfillment of each guest’s needs.

3. A fond farewell. Give a warm good-bye and use the guest’s

name.

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 15

The Ritz-Carlton refers to their twenty-eight thousand people

as ‘‘ladies and gentlemen, serving ladies and gentlemen.’’ Their

remarkable core values are well understood by their people,

starting with the ‘‘Employee Promise’’ and the ‘‘Credo.’’

But perhaps the most remarkable part of all of this is what it

takes to actually do this: every day, all of the Ritz-Carlton ladies

and gentlemen participate in a daily briefing. All of their service

people, in all of their hotels, meet to discuss the incidents that

arose through the day, the actions that they took to address them,

and how those fit with the Ritz-Carlton principles. This debrief is

led by the local manager. The day’s incidents and actions are also

captured in their system so that they have a record of every guest’s

experience in each stay. That record can be used to anticipate

and accommodate a guest’s experience, even if it is at another

Ritz-Carlton hotel. This allows the staff to achieve an unusual

mark of distinction: they can create the same level of customer

service for each of their clients at each hotel. The preferences

that are established for a client at one hotel can be applied across

the country or around the world at any time.

A friend of mine tells a story of going out for a run while

staying at a Ritz-Carlton hotel. The first time, when he came

back after the run, they asked him if he wanted something to

drink. He asked for a bottle of water. The second time they had

a bottle of water ready for him, and asked him if he preferred

sparkling or still water! To his amazement, this knowledge of his

personal habits and preferences followed him on to his next stay

at another Ritz-Carlton hotel.

We usually associate high-involvement work practices with

flat, democratic organizations with few levels and few status

distinctions. But this is one part of the Ritz-Carlton culture

that makes it an intriguing example: in order to thrive with a

demanding clientele in a luxury segment of the market, they stake

their claim on bottom-up input! And they do walk the talk: each

of the ‘‘ladies and gentlemen’’ in their service operation has the

authority to spend $2,500 on the spot to resolve a guest’s concerns.

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Some might argue that you can afford to lavish such attention

on customers only when you are operating in a luxury segment of

the market like the one that Ritz-Carlton serves.24 The average

annual income of their guests is over $250,000, and nearly half

of their guests are repeat visitors. Clearly, it is a big business

decision to invest the time of both the managers and the staff

in the daily debrief. But without this key part of the process,

the good ideas would just remain good ideas. They wouldn’t be

put into action as the cornerstone of a time-tested competitive

strategy that differentiates a Ritz-Carlton hotel from the rest of

the pack in the luxury segment.

Toyota: Consistency Is the Foundation for Quality

Toyota was created by the Toyoda Automatic Loom Works in

1937 to produce automobiles. Their early history was one of

difficult struggle, which required them to take advantage of every

opportunity they could find to reduce waste and use resources effi-

ciently. Toyota’s culture grew organically for many years before

the company attracted much attention. But by the 1980s, their

world-class quality and conspicuous success led many to try to cap-

ture their essence and understand the huge leaps in competitive

advantage that Toyota had made on the rest of the manufacturing

world. Today, the Toyota Way is one of the most clearly articu-

lated management philosophies in the world — there is probably

more written about Toyota than about any other company, with

the possible exception of General Electric.25 But, as many com-

panies have found when trying to imitate the Toyota Production

System, it is much easier to describe the Toyota mindset and

culture than it is to copy it. To quote Toyota’s former president,

Fujio Cho:

The key to the Toyota Way and what makes Toyota stand out

is not any of the individual elements. But what is important is

having all the elements together as a system. It must be practiced

every day in a very consistent manner, not in spurts.

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 17

We place highest value on actual implementation and taking

action. There are many things one doesn’t understand and there-

fore, we ask them, why don’t you just go ahead and take action;

try to do something? You realize how little you know and face

your own failures and you simply can correct those failures and

redo it again and at the second trial you realize another mistake

or another thing you didn’t like so you can redo it once again.

So by constant improvement, or, should I say, the improvement

based upon action, one can rise to the higher level of practice

and knowledge.26

There are fourteen different elements to the Toyota Way

that have been clearly articulated in many different sources. One

of the key factors is the reliance on ‘‘pull’’ systems that avoid

overproduction and force the organization and its supply chain

to respond to the market demands. This helps them to create

a continuous process flow that brings problems to the surface,

levels out the workload, and forces them to stop to fix problems

so that they can get quality right the first time. This approach is

also extended to their partners and suppliers by challenging them

and helping them improve.

Toyota’s system has been built from their experience, over

time. Toyota develops leaders who thoroughly understand the

work and live the philosophy. They rely on ‘‘visual’’ controls so

that no problems are hidden, and when there are problems, they

encourage leaders to ‘‘go and see for themselves.’’ Finally, they base

their management decisions on a long-term philosophy; they

make decisions slowly through consensus but then implement

them rapidly. They have led the way in their industry in

resolving the dynamic paradox between internal consistency

and external adaptability. They have done this by becoming a

learning organization that has mastered relentless reflection and

continuous improvement.

Each of these principles is significant in its own right and is

a required part of the overall system. It is a system created to

manage complexity in an efficient and predictable way through

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nearly flawless lateral coordination. Nonetheless, it can also be

relatively simple once you develop the mindset that allows you

to see the flow.27 ‘‘All we are doing is looking at the time line

from the moment the customer gives us an order to the point

when we collect the cash. And we are reducing that time line by

removing the non-value-added wastes.’’28

Toyota has successfully transplanted the logic and culture

of their production system all over the world. This evolving

philosophy has led Toyota from its original position as a struggling

automaker in pre-war Japan to that of the largest and most

profitable automotive company in the world. Moreover, Toyota

manufacturing methods are imitated by nearly every manufacturer

in the world in hopes of reaching the levels of quality and

consistency defined by the leader.

But in early 2010, Toyota faced their biggest challenge in

years. ‘‘Sudden acceleration’’ problems with Toyota vehicles

in North America made headlines all over the world and com-

promised their reputation. Overnight, their stock price and

sales dropped dramatically. Even though the technical issues

that are at the heart of this problem have proven surprisingly

difficult to establish, one strong lesson does emerge from this

case: when your reputation is built on quality and consistency, it

is absolutely necessary to protect and defend that characteristic

in order to preserve and, as necessary, rebuild your brand. When

we claim to live by our core values, people expect us to live up

to them every day, without fail.

These examples — IKEA, Apple, Ritz-Carlton, and Toyota —

were all chosen to illustrate the importance of the principles of

mission, adaptability, involvement, and consistency. They are

all remarkable success stories that show the power of these

principles and help to illustrate what these principles mean in

practical business terms.

Leading Culture Change in Global Organizations

This book tries to address a big void in the literature about

culture and leadership in organizations: What happens when you

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try to change organizations? What works? What doesn’t? Is it all

chance and charisma? Or is it all process, methods, measures, and

structure? Many authors have given us great principles for leading

change in organizations.29 But very few have tried to systemati-

cally track what works and what doesn’t so that we can learn more

about how to create successful change in global organizations.

Again, we have built this book around a set of seven case

studies from all over the world in which we have tracked orga-

nizations and their leaders over time, studied the changes that

they have made, and tried to understand the impact that those

changes have had on the business. For each organization, we

analyzed ‘‘before and after’’ survey results to track the culture

change. This assessment is a central part of this book, and we

use this same approach in each chapter to track the progress that

each organization is making. So let’s take a minute to look at one

brief example and learn how to interpret these profiles.

The four concepts in the culture model are measured through

a sixty-item survey that produces a profile. This profile com-

pares the results to a benchmark database of over a thousand

organizations.30 These sixty items measure the four culture traits

of mission, adaptability, involvement, and consistency. Each of

these four traits is measured with three indexes, and each

of those twelve indexes is measured using five survey items.

This analysis helps to identify the strengths and weaknesses of

the organization’s culture and understand the impact that it may

be having on business performance. For those with more interest

in this survey and the research that supports it, we have included

a detailed discussion in the Appendix, including an example that

shows the sixty items that make up the twelve indexes.

The first rule for interpreting a culture profile is simple:

more color is better. The scores on the profile show where the

organization ranks relative to the benchmark. For example, a

score of 9 on vision means that the organization ranks in the 9th

percentile, telling them that 91 percent of the other companies

in the benchmark database scored higher than they did on

vision.

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When the executive team of the One-Hundred-Year-Old

Manufacturing Company looked at their results (see Figure 1.3),

there was a long silence. The president, who had spent his career

in operations, said, ‘‘Well, I admit that I’m not a visionary or a

strategist — I’m the guy who makes the trains run on time.’’ When

they focused on the results for consistency, they agreed that their

emphasis on internal control made it difficult to react to the

marketplace. They agreed that they had strong core values, but

they also questioned whether they were the right core values for

the future. One of them spoke up: ‘‘Our core values are perfectly

suited for meeting the challenges of the 1980s.’’ Finally, when

Figure 1.3. The One-Hundred-Year-Old Manufacturing

Company

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 21

they looked at their results on team orientation, one of them con-

cluded, ‘‘We’re a team all right — we’re all going down together!’’

These results helped this leadership team see that the system

they had created made it hard to innovate and grow, even though

they still produced excellent quality products and were a good

employer for many of their people. But the results also helped con-

vince the leadership team that they were at the center of the prob-

lem and that their actions had to be at the center of any solution.

When confronted with this kind of result, most organiza-

tions that carry out successful changes go through a change process

that looks something like the process depicted in Figure 1.4. The

Figure 1.4. Leading Culture Change

Create the Vision

How will the future look?

Track Progress

What’s worked?

What hasn’t?

Drive Action

How will we

get there?

Identify the Gap

What needs

to change?

Build the Team

Who will lead

the change?

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survey results help to identify the gaps and define what needs

to change. But to drive action, an organization needs to build a

team — a ‘‘guiding coalition,’’ in Harvard Professor John Kotter’s

terms — that will create a vision of the future, and define the

actions and the accountabilities that will get them where they

want to go.31 A commitment to tracking progress is also important

in order to bring some accountability to the change process. As

noted management consultant Ram Charan put it, ‘‘There’s a

fine line between vision and hallucination.’’32 Tracking progress

usually leads to another round of focused change. Each of the

organizations that we studied for this book has gone through

some variation of this general change process. We were involved

with the change process in each of these organizations and will

give you an overview of our role in each chapter.

The Plan for This Book

This book is unique in that it is built around seven longitudi-

nal case studies. We have followed the change process in each

organization, and we have tracked that change process using

‘‘before-and-after’’ survey results over several years to help high-

light some of the key lessons about leading culture change in

global organizations. We start in Chapter Two by looking at

the importance of supporting the frontline people in the orga-

nization, using the case of Domino’s Pizza. Domino’s presents

an exciting story of the transition of a firm that had been led

by its founder for nearly forty years, through a Bain Capital

buyout, a new CEO, a successful IPO, and the implementation

of a strategy based on people as the primary source of compet-

itive advantage. Chapter Three turns to the topic of strategic

alignment and uses the examples of two European organizations.

First, the German technology company DeutscheTech shows

us how a clear alignment of the purpose, vision, and strategy

across organizational levels is critically important to the strat-

egy implementation process. Chapter Three also examines the

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BUILDING A HIGH-PERFORMANCE BUSINESS CULTURE 23

implementation of a crisis-driven top-down strategic change at

Swiss Re’s Americas Division. This example shows how changes

that have a real impact on day-to-day work are the most likely

to ‘‘stick’’ and to have a lasting effect. Chapter Four focuses on

one of the most common topics in culture work: cultural inte-

gration in mergers and acquisitions. Although firms realize that

it is hard to create scale without integration, they still struggle to

get everyone around the world on the same page. This chapter

focuses on Polar Bank, a Scandinavian bank trying to integrate

three different acquisitions and make one culture out of many.

Chapter Five leads us to an even more complex topic: the

exporting of culture change from the United States to Europe.

GT Automotive, a UK-based firm, completes a successful trans-

formation in their American division and then tries to export

these changes back to their European organization. Chapter Six

focuses on the challenge of building a global business in a devel-

oping market. We examine General Electric’s efforts to build

their health care business in China and then use that platform

to build a global business. In our final case study, we focus on

the challenges of creating a global corporation from a base in an

emerging market by tracing the Brazilian mining company Vale

in their ten-year journey from being a department in the Brazilian

government to becoming a global player. In our final chapter, we

summarize the key lessons for leaders about the magic and the

method of these transformation stories. We discuss these lessons

in terms of a new model of the rituals, habits, and routines that

lie at the heart of their organizations’ cultures.

Fasten your seat belts!

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SUPPORTING THE FRONT LINE

Japanese scholar Ikujiro Nonaka first rose to fame in his home

country with his analysis of the role of the U.S. Marines in the

Pacific theater during World War II.1 The Marines, he argued,

were amphibious warriors, who moved from the sea onto the

land with a discipline that the Japanese generals had never seen

before. Nonaka seized on the critical importance of those who

stormed the beaches first — the ‘‘gravel crunchers’’ as the Marines

called them. It was a dangerous job. Even when the mission was

‘‘successful,’’ the gravel crunchers could often end up dead, face

down in the water, with tank tracks up their backs. But the tanks

were on the beach! So in order to succeed, the Marines needed

to make certain that they did everything that they could do to

support the gravel crunchers, because they were ‘‘the sharp end

of the spear’’ — if they didn’t succeed, the entire mission would

fail. This image teaches us the first lesson of building a successful

corporate culture, especially in the service industry. Support the

front line! Everything depends on their success and their survival.

JetBlue Airways learned this lesson the hard way. Their

unique high-involvement culture and friendly customer service

initially helped make them the fastest-growing airline in the

competitive U.S. market. In 2006, for example, they set a record

by opening fifteen new routes in an attempt to consolidate their

position in the market. But this dramatic increase in traffic

stretched their growing human and organizational infrastructure

to the limit. On Valentine’s Day 2007, they reached their limit.

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In a fierce ice storm at New York’s JFK International Airport,

their operational infrastructure broke down, leaving passengers

stranded on the runway for hours. The return to ‘‘normal’’

took three days, with the disruption continuing long after the ice

storm had passed. JetBlue’s well-deserved reputation and carefully

crafted brand took a major beating in the media.

But rather than retrenching to a more traditional command-

and-control structure, JetBlue’s approach to solving this problem

reinforced the unique high-involvement culture that had fueled

their rapid growth in the first place. They didn’t take a top-

down approach to creating the infrastructure needed to recover

from this operational setback. Instead, they brought together

a broad, cross-functional coalition of frontline crew members.

This team, with full support from the top, developed the JetBlue

strategy for recovering from an interruption in service and solved

this problem so that it would never happen again. And it hasn’t.

Creating a system that supports the front line makes all the

difference, no matter where you are in the world. The Chinese

company Galanz, now the world’s largest producer of microwave

ovens, is built around teams, and they work hard to develop

human capability at all levels. This is an important advantage in

the hypercompetitive Chinese labor market. Galanz is run like

a family, striving to develop a culture of emotional attachment

between the company and its employees. Liang Qingde, the

founder and chairman of Galanz, is called ‘‘Uncle De,’’ and

employees call each other ‘‘Brother X’’ or ‘‘Sister X’’ like they are

a part of a family. At the end of each year, Uncle De writes a

letter to all employees and their families, expressing appreciation

for their work. Galanz’s success in supporting their forty thousand

employees helped them reach US$2 billion in revenue for 2008.

Employees are supported in a very different way from how it might

be done in a Western organization, but the effect is very similar.

The challenge of supporting the front line is important

in all organizations, but it is especially important in service

organizations, where the product is produced as it is delivered.

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Whether your organization is a brokerage or a burger stand,

a franchise or a fraternity, a hotel or a hospital, a college or

consulting firm, you cannot function effectively without high-

quality human interaction with your customers. Without the

involvement of the front line, you can’t really deliver the most

important part of the organization’s strategy: implementation.

And as far as we can tell, the market doesn’t pay many rewards

to strategies that aren’t well implemented. Without the right

mindset and behavior on the front line, there is no strategy — only

a set of unexecuted plans.

Making the Front Line the Foundation

of Your Strategy

In this chapter, we focus on Domino’s Pizza, which gives us

an example of an organization that took a big step forward in

quality and performance when they finally decided that they

needed to make their people the foundation of their competitive

strategy.We tracked this story very carefully over a number of

years. So let’s start from the beginning.

Domino’s Pizza was founded in 1960 by two brothers, Tom

and Jim Monaghan, who each kicked in $500 to buy a pizza shop.

Before long, Jim wanted out, so he traded his half of the store

to Tom in exchange for Tom’s well-used Volkswagen Beetle. In

his thirty-nine years of leading the company, Tom Monaghan

transformed this one pizza delivery shop into one of the world’s

top brands. In 1999, with six thousand stores and over $3 billion

in revenues, Monaghan sold 93 percent of the company to Bain

Capital, which soon brought in David Brandon as CEO.2

How do you go about creating competitive advantage in

the pizza delivery business? Is it the pepperoni? The cheese?

Maybe the anchovies? The new CEO and his team made the

decision that the only way to create competitive advantage in

their business was through the people. In his first week on the job,

Brandon learned that the annual staff turnover was 158 percent.

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After doing the math, he realized that with 150,000 people, the

company might have trouble finding enough time to make pizzas

and deliver them if they had to continue hiring and training

nearly a quarter of a million people each year. What stunned

Brandon even more was the current HR leader’s acceptance of

this level of turnover as being ‘‘normal for this industry.’’ Brandon

soon recruited a new HR executive from outside the industry.

She was Patti Wilmot, and she was ready for the challenge.

Brandon took over at Domino’s after a career that started at

Procter & Gamble on the recommendation of his football coach

at the University of Michigan. He’d gone on to become the CEO

of a direct marketing company, Valassis Communications, which

he grew from a firm with a few hundred employees to a spot on

FORTUNE’s 100 Best Places to Work list. Here’s what he said

to his people the first day on the job at Domino’s:

If you don’t remember anything else about me today, just remem-

ber these three words — Change is good. Change is not a criticism

of the past. It just means the future is going to be different. If that

sounds exciting to you, you’re going to love me. If any of you are

thinking ‘‘I’d rather do things the way we’ve always done them,’’

I’ve got to tell you — you’re going to hate me.3

Whether he was leading several thousand Domino’s people

shouting out the Domino’s vision — ‘‘We are exceptional peo-

ple on a mission to be the best pizza delivery company in the

world!’’ — or teaching finance to new store managers, or con-

vincing skeptical industry analysts, Brandon always preached

Domino’s four guiding principles: ‘‘People First,’’ ‘‘Build the

Brand,’’ ‘‘Maintain High Standards,’’ and ‘‘Flawless Execution.’’

Domino’s staff had worked together to develop these guiding

principles during the first year of the transformation.

They made every attempt to improve the quality of the work-

force. Hiring placed more emphasis on attitude because they

felt that skills could be taught, but attitude could be stubbornly

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permanent. Drug testing for delivery drivers, new financial soft-

ware designed to prevent ‘‘shrinkage’’ and theft, and a ban on

hiring former employees who had been fired were all implemented

to help improve the quality of the workforce.

Each segment of the employee population received special

attention. A ‘‘pipeline’’ was created for each segment that defined

hiring criteria, developmental targets and investments, advance-

ment opportunities, and exit plans. The pipeline was managed

for all segments of the employee population, from pizza delivery

boys to store managers and franchisees to future executives and

board members. Poorly performing franchisees, in the bottom

25 percent, were also invited to ‘‘straight talk’’ sessions where

they discussed their store’s performance. Part of the discussion

always focused on the business potential of a well-run franchise.

If a franchisee would not devote the time and attention it took

to be successful, Domino’s was always ready to help them or to

help broker a deal to sell their underperforming stores to another

franchisee.

Domino’s performance steadily improved. After their 2004

IPO, Bain Capital noted that Domino’s was one of the best

private equity deals that they had ever done, returning over

500 percent on their investment.4 Involvement, capability, and

teamwork were the hallmarks of their success.

Tracking the Progress

We tracked Domino’s progress over five years, as this transforma-

tion unfolded. The tracking process was designed to make sure

that the progress that the organization was making wasn’t just in

the minds of the executives in the C-suite, but that things were

really starting to change on the ground. The survey was based

upon our organizational culture model, and it included all of the

levels of management as well as the people in the stores.

The baseline culture data from 2001 are presented in Fig-

ure 2.1. These results show that Domino’s started with some

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Figure 2.1. 2001 Culture Survey Results: Domino’s Pizza

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clear challenges: Capability Development, Coordination and

Integration, Customer Focus, and Organizational Learning were

all below the fortieth percentile when compared to the global

benchmark.5 The survey results also helped Brandon and his

leadership team to clarify their goals for transforming the orga-

nization. The low scores in the involvement area — in capability

development, in particular — confirmed that Domino’s had their

work cut out for them when it came to improving the capability

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SUPPORTING THE FRONT LINE 31

of their people on the front line. These results in Figure 2.1

summarize the perspective of management as a whole. But when

we looked in more detail at the lower levels of management and

the people in the stores, the involvement scores are even lower.

When Domino’s compared their culture scores for the higher-

and lower-performing stores and regions, they found that the

culture at the region and store level also made a big difference.

They set goals to cut employee turnover in half and to be

acknowledged as one of the one hundred best companies to work

for in America. They also focused on a clear set of business

goals, setting their target on being ‘‘Wall Street ready’’ so that

they would be prepared for an IPO in the near future by hitting

their targets of ten thousand stores and $200 million EBITDA

(Earnings Before Interest, Taxes, Depreciation, and Amortiza-

tion). The survey results from 2003 (Figure 2.2) show the progress

that they had made. Domino’s had taken big steps forward in the

areas of Coordination and Integration, Customer Focus, Creating

Change, and Capability Development. They were now at least

slightly above average on everything, with real strengths in all

areas of Mission. These results show the clear effects of two years

of hard work in clarifying the direction of the organization and

setting clear expectations about the level of ambition that was

expected from the people.

But they didn’t stop there. Their survey results from 2004,

presented in Figure 2.3, show that they had continued to make

forward progress as they drove the transformation deeper into

the organization. The feedback about their progress and their

challenges was shared widely in the company. and all of the

managers involved went through a goal-setting process that they

called SMAC. This involved discussing their results, linking

them to the real business issues behind the results, and then

creating a set of action steps that fit the SMAC criteria: the goals

had to be specific, measurable, achievable, and consistent with the

C o

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Figure 2.2. Comparing 2001 to 2003 Culture Survey Results: Domino’s Pizza

& Intent Or

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SUPPORTING THE FRONT LINE 33

overall direction of the company. This focus on action helped

them to continue their progress.

Following their successful IPO in 2004, Domino’s actually

accelerated their rate of change. They made some dramatic

changes in their people policies that showed a clear impact on

the survey results in 2006. These changes were all designed to

continue on the path of improving their competitive position

by improving the quality of their workforce. They decided that

there would be no rehires and no demotions. Although this

may sound like a simple HR policy change, consider the impact

that it would have. Before this policy was established, many

delivery drivers, for example, would work at one store for a

while and then, maybe at the end of the college semester, just

stop showing up for work; the following year, when they wanted

another job, they would show up at another Domino’s and get

hired back.

At first, store managers objected to the new policy, because

it placed some limitations on their ability to hire new drivers.

But over time, these changes, along with mandatory drug testing

and new store-level software that made it easier to identify

‘‘shrinkage’’ and dishonest store managers, steadily increased the

quality of the workforce.

Domino’s also focused quite explicitly on getting rid of what

they called ‘‘coalitions of the unwilling.’’ Those who weren’t

really ‘‘exceptional people on a mission to become the best pizza

delivery company in the world’’ began to stand out against the

backdrop of a growing number of people who were on that

mission. Attitude and ambition mattered a lot. The leaders took

the positive energy and ambition of their people very seriously.

They gave a lot, but they also expected a lot in return.

As mentioned earlier, during this time Domino’s also made

great progress in segmenting the workforce in the entire organiza-

tion and defining the ‘‘pipeline’’ for each position. From delivery

drivers to store managers to vice presidents and future members

of the board, each target group understood its pipeline. Which

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y &

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n s ,

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Figure 2.3. Comparing 2001–2004 Culture Survey Results: Domino’s Pizza

& Intent Or

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Lea rning

G oals &

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n A

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SUPPORTING THE FRONT LINE 35

people are at what stage? Who is ready for the next step? What

support do they need? Where does the organization need greater

depth? The support and energy were very positive, but the

organization and its people were held to a higher standard than

they had ever seen before.

The Hard Work Pays Off

All of this hard work on improving the organization and the

quality of the workforce paid off in the performance of the

business. Domino’s met most of the goals that they had set at the

outset of this transformation, and they made excellent progress

against even those goals that they did not meet. Employee

turnover was dramatically reduced; profitability, market share,

and shareholder returns were increased; and they came close

to meeting their goal of being one of the one hundred best

companies to work for in America. There are still many challenges

in this organization, and they have suffered through several

setbacks. But overall, Domino’s gives us a great example of how an

organization can transform itself by focusing on the way it supports

its frontline people. Over the course of five years, Domino’s

had improved their organization and culture in many ways and

created much greater capability on the front line. They received

top scores in nearly all areas (see Figure 2.4) and faced the next set

of challenges to sustain this high performance culture that they

had built.

As mentioned earlier, this transformation also created excep-

tional value in the marketplace. Domino’s became one of Bain

Capital’s most successful investments, returning 523 percent on

their equity investment. On a pizza delivery chain! Mark Nun-

nelly, managing director at Bain, gave Brandon a lot of credit:

‘‘You could put him in the middle of any company and he knew

how to focus on key issues. I wish I could clone him.’’ 6

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W il e

y &

S o

n s ,

In c o

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d . A

ll r

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ts r

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rv e

d .

Figure 2.4. Comparing 2001–2006 Culture Survey Results: Domino’s Pizza

& Intent Or

gan izatio

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Lea rning

G oals &

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A gr

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& Intent Or

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65 91

Domino’s 2006

2 0 1 2 . J o h n W

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38 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

Our Role at Domino’s

We started doing consulting work using the Culture Survey

in the International Division of Domino’s for several years

before the transformation described in this chapter began.

We helped by debriefing the results with the executive team

and facilitating an action planning process. We trained a

number of Domino’s people in interpreting the results and

facilitating the action planning process. During the years of

the transformation, we met periodically with Domino’s to

discuss the progress that they were making. But by that time

Domino’s was very familiar with our approach and drove most

of the change process themselves. As we saw the progress that

they were making, we also developed an IMD teaching case

on the Domino’s transformation.

Source: Denison and Lief, 2008.

Lessons for Leaders

There are many lessons about changing the culture of an orga-

nization to better support the front line that we can draw from

Domino’s experience. Like all transformation efforts, it is an

interesting mix of changes in mindset and systems, structures,

and behaviors, which combines both the magic and the method

of a successful change. The survey process helped confirm some of

the basic strengths and challenges, and it helped lead Domino’s

to define a new set of values and behaviors and the policies to

support them for the future. Let’s look at some of the lessons we

can take from their experience.

Lead with a Personal Touch,

But Follow Up with Structure

It’s hard work to get a culture change process started, but it is

even harder work to keep it going. Domino’s case is remarkable

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SUPPORTING THE FRONT LINE 39

for how long they sustained the transformation process. It is

great to talk about ‘‘creating a burning platform,’’ but it is more

important to understand how to keep the fire going without

burning down the house.

The Domino’s transformation started largely because of a new

CEO with very high expectations, who was positive, inclusive,

open, personal, and very visible. Suddenly, everything seemed

possible. It was an exciting time. They tell a story about the

first time that Brandon went to Mexico City to meet with

the Mexican franchisees. When the staff who were organizing

the event asked Brandon about his plans for the two-hour

meeting, he said that he would just like to make a few opening

comments for twenty to thirty minutes and then do Q&A. The

staff sat in stunned silence. Domino’s had never done a franchise

meeting this way before. Typically, the meetings were tightly

scripted with a clear agenda with little room for Q&A. After

a lot of discussion and extensive nail-biting, they decided to do

it Brandon’s way. And it was the best meeting that they had

ever had with their Mexican franchisees — the message was clear

that Domino’s had a new energy and flexibility and was fully

committed to listening and learning with the franchisees that

make up 90 percent of their worldwide sales and to supporting

them in the best way that they could.

But unlike many organizations with charismatic leaders,

Domino’s was also very savvy at creating the structures that

sustained that energy and momentum. Creating an enduring sys-

tem with the structure that exemplifies the new core values lies

at the heart of every sustainable culture transformation. For all

of the books that have been written about transformational and

charismatic leaders whose personal qualities win the day, there

is an amazing shortage of books about how successful leaders cre-

ate structures that leverage the personal characteristics and the

values at the core of their transformations. Mindset and systems

are often two sides of the same coin. A commitment to improv-

ing the quality of the people and listening to the marketplace

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40 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

and the front line is an important value, but the transformation

doesn’t create much leverage unless leaders create the systems

necessary to scale up those values until they reach everyone in

the organization — without losing energy and focus.

We Are All in the Service Business

Domino’s transformation began when they saw their business

through new eyes as a service business that delivered a product,

rather than a product business with a lot of delivery people. The

difference is simple, but profound: Most of the time, there’s not

as much difference in the quality of the pizzas that get delivered

to your front door as there is in the quality of the people who

deliver them. The primary focus of the entire organization needs

to be on supporting those who deliver that customer experience.

The fundamental difference in the service business is that

the product can never be created independent of the customer

experience. So, this means that the front line experience is the

product, it is the strategy, it is the organization. There’s really

no way around it. And the rate of innovation in the customer

experience our organizations provide is relentless. The best never

rest. But it also requires coordination and consistency! The

‘‘frontline’’ experience for the customer may be a salesperson, a

service person, a flight attendant, a driver, a website, an ATM,

or someone from tech support. In practice, the front line is the

combination of all the ways in which the organization touches

the customer. And if the customer experience doesn’t add up,

guess who takes the fall?

Over most of the twentieth century, production power reigned

supreme. If you had the capability to produce the best, the market

would follow. Build a better mousetrap, and the world would beat

a path to your door. But those days are long gone. Today’s power

lies with those on the other end of the value chain — those who

are closer to the marketplace and the customers. This means

that the balance between the value of product knowledge and

market knowledge is changing. So is the importance of market

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SUPPORTING THE FRONT LINE 41

knowledge in the mindset and culture of the organization. And

this change is happening fast.

Several years into the Domino’s transformation, President

(and now CEO) Patrick Doyle was planning a tour of some of

Domino’s stores. He knew that it was very important to be visible

on the front line so that his support was clear. But where should

he start? There were many choices. His decision was to go directly

to individual stores and deliver the message, ‘‘We appreciate what

you do!’’ His Appreciation Tour was controversial. Shouldn’t the

president make an important strategy presentation or give an

outline of the goals for this quarter? Or talk about the stock

price? Or the competition? Or something really important to the

business, like the rising cost of wheat?

No. Instead, in each of the sessions Patrick said a few words

about how important the people he was meeting were to Domino’s

and how much he and the company appreciated them. Then they

ate pizza and talked. The president may have gained a few pounds,

but he also gained a lot of support from the front line.

What You Keep Is as Important as What You Change

Any way you slice it, Tom Monaghan was a genius at running a

pizza shop. From the invention of the ‘‘spoodle’’ by Jeff Goddard,

the winner of the 1985 world’s fastest pizza maker competition,7

to the ‘‘HeatWave’’ hot pack for keeping pizzas warm, to the

magnetic 3D car-top signs that are now used by many other

companies, Domino’s boasts an endless string of innovations that

have helped perfect the art of running a pizza store. Training

standards for new employees require that they be able to make a

quality pizza in under one minute. (The fastest pizza makers can

make three pizzas in one minute!) In fact, during the Domino’s

transformation, the Investor Relations team was thinking about

ways that they could reconnect with the simplicity of their

business and reconnect with the front line. Their solution? They

decided, as one of their development goals for the year, that all

of the members of the Investor Relations team should be able to

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42 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

make a pizza to the Domino’s standard in under one minute. It

took some of them a while to master this, but they did it.

Monaghan also created an organization structure that required

a clear focus on the pizza business. Each franchisee’s contract

includes Domino’s well-known ‘‘OBI’’ provision. A franchisee

cannot have any other outside business interests. Signing a franchise

agreement forces the franchisee to make a commitment to focus

exclusively on the Domino’s pizza franchise. The company allows

some flexibility on this, especially in developing master franchisee

relationships when entering new countries. But overall, the new

business structure that they’ve created gives remarkable focus to

their efforts. The basic formula is simple: A franchisee with one

store has a full-time job and a good income. A franchisee with

two stores has two full-time jobs and a very good income. And a

franchisee with three stores has three store managers, a full-time

job, and a very good income.

Change is good, but successful culture change is not change

for change’s sake. Developing a clear sense of the policies and

practices that need to be preserved and strengthened is an impor-

tant component of every successful transformation. Domino’s

makes the point very clearly: Many of the elements of running a

successful pizza store have remained unchanged. But the role of

the corporate center and the company-owned stores has changed

dramatically — these parts of the organization have moved from

being the stronghold of the traditionalists to being the core of

the innovation process. And one of the most important changes

in the role of the corporate center was to work relentlessly to

create a system that would dramatically improve the quality and

engagement of the people on the front line.

Strategies for Supporting the Front Line:

Beyond Domino’s

Chris Bartlett and Sumantra Ghoshal positioned the support of

the front line as a clear strategic choice for organizations. They

argued that many companies are still run with a logic that tries

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SUPPORTING THE FRONT LINE 43

to make the firm immune from human errors.8 They argue that

rather than trying to take the human factor out of the equation

and make the organization run like a machine, companies are far

better off if they build an environment that harnesses the power

of the capabilities of their people.

The themes of participation, involvement, empowerment,

and engagement have been with us for a long time. From classic

authors such as Douglas McGregor,9 Rensis Likert,10 and Ed

Lawler11 to more recent authors such as John Kotter12 and Jim

Collins,13 many management gurus have argued that the link

between the individual and the organization is critical to an

organization’s success.

Many organizations have focused primarily on the psycho-

logical state of their employees. After all, this is the desired

result — engaged employees who are committed, satisfied, and

productive. But focusing only on these desired outcomes misses

the most important point: What organizational conditions are

the causes for these effects?

You can identify the organizations that have been too influ-

enced by this approach. They often know what they want to

achieve for their people, but they are having trouble getting

there. The managers talk a lot about ‘‘keeping our people happy,’’

but the employees complain that their leaders don’t ‘‘walk the

talk’’; the employees then tend to get cynical about attempts to

improve things. One manager we met said that he always felt as if

he were trying to win the ‘‘engaged manager of the year’’ contest.

He saw his organization’s engagement efforts as a popularity con-

test to keep employees happy without really changing very much,

rather than a serious attempt to try to improve the organization.

Effective organizations need to focus instead on the envi-

ronment that they create for their frontline service people. To

achieve the desired effect of engaged people on the front line,

organizations and their leaders need to be experts in the orga-

nizational causes that are necessary to support those frontline

people. Organizations that do a good job of supporting their

frontline people understand that the psychological state of mind

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44 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

is important, but they focus most of their attention on the work-

ing conditions created by their management practices. They are

constantly working to improve their culture.

Support Is Strategic:

Mickey Mouse Versus the Street Sweepers

Supporting the frontline jobs that have the biggest impact on

an organization’s customers and their business is probably the

most important part of the strategy implementation process. One

company that is a perennial leader in this type of thinking is

Walt Disney. HR guru John Boudreau shows us how important it

is to have a well-conceived strategy for supporting the front line

by analyzing the relative importance of the skill levels of Mickey

Mouse performers and the sweepers in a Disney theme park.14

Mickey Mouse is a very important part of any visitor’s expe-

rience in a Disney theme park. Mickey gives a warm and friendly

greeting to millions of visitors each year. It is a memorable expe-

rience and the ideal family photo op. But it doesn’t last long.

There’s little room for improvisation on Mickey’s part, and thus,

despite the critical importance of Mickey to the overall theme

park experience, there is only a small performance difference

between the best and the worst Mickeys.

The theme park’s street sweepers, however, have a much more

pivotal role. As Boudreau notes, the sweepers play a highly impor-

tant role in customer relations. ‘‘People seldom ask Cinderella

where to buy a disposable camera, but hundreds a day will ask the

street sweeper!’’15 The sweepers need to understand the strategic

importance of their role, but this works only if the organization

creates a system that recognizes that the sweepers are frontline

customer service experts who happen to carry brooms. Selection,

training, development, rewards, and future opportunities are all

designed to create this context to support their role. Boudreau

summarizes this in a graph (Figure 2.5) that shows us why there

is more value in improving sweepers’ performance than there is

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SUPPORTING THE FRONT LINE 45

Figure 2.5. Mickey Mouse versus the Street Sweepers

S tr

a te

g ic

V a lu

Performance

Worst sweeper

Worst

Mickey Mouse

Best

Mickey Mouse

Best sweeper

Sweepers

Mickey Mouse

Improving sweepers adds more value

than improving Mickey Mouse.

Source: Boudreau and Ramstad, 1961.

in improving Mickey Mouse’s performance. It’s the context that

the organization creates for the street sweepers that makes them

highly engaged and highly effective.

Tom Davenport offers additional examples.16 Harrah’s Enter-

tainment studies their organization to the point where they have

developed a model that tells them the right number of people to

have at the front desk and other key service points throughout

the daily cycle. Voilà! They have a dynamic plan that allows

their people to react to the changing customer expectations. How

happy and engaged can employees be if they never have enough

people to cover the front desk? Global food service giant Sysco

discovered that the biggest positive impact on customer service

came from their experienced delivery associates — those people

whose daily deliveries are the lifeblood of every restaurant that

they serve. Increased dedication to this pivotal group of front-

line people increased their retention rate from 65 percent to 85

percent over six years, leading to major benefits in increased cus-

tomer satisfaction as well as decreased training and hiring costs.

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46 LEADING CULTURE CHANGE IN GLOBAL ORGANIZATIONS

Know More, Care More, and Contribute More

There are so many great examples of how to support the front

line that it’s difficult to understand why some organizations get it

so wrong. The truth is that this is much easier said than done. A

competitive advantage based on people can take years to create.

But it also takes years to imitate, and thus gives a great advantage

to those who know how to walk the talk.

One of the early leaders in understanding the importance

of supporting the front line was Edward E. Lawler III. Lawler

argued years ago that the future world of work would require the

workforce to ‘‘Know more, care more, and contribute more.’’17

Frontline workers, he argued, always need to know more and

to learn more about their job while they master the new skills

that contribute to the business. They also need to care more and

have higher emotional involvement in their work and a greater

motivation to understand the world from their customers’ point

of view. Finally, people on the front line need to contribute more.

The demand in the marketplace for quality service continues to

grow, and the organizations that contribute the most will be the

ones that will thrive.

But although Lawler intended these comments for the work-

force, it is striking how well they apply to the managers and

leaders of organizations, who need to learn the lessons of creating

an organization that supports the front line. Their challenge may

well be the bigger one: They need to create the set of conditions

that allow their frontline people to know more, care more, and

contribute more.

We close this chapter with Jon Katzenbach and Jason San-

tamaria’s five guidelines on how leaders can create systems that

support the front line.18

• Overinvest at the outset in inculcating core values. You never

get a second chance to make a first impression. Leading companies

select people based on the fit with their core values, in anticipation

that each new hire will play an important role with respect to the

implementation of the strategies of the future. The most important

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SUPPORTING THE FRONT LINE 47

part of each new hire’s onboarding experience is not only the skills

that they learn, as important as those are, but also about the impor-

tance of the core values of the firm.

• Prepare every person to lead, but especially the frontline super-

visors. Organizations that teach their people that leadership

happens only in the executive suite are headed for trouble. The

best organizations recognize that leadership has to happen at all

levels. To support the front line, it is essential that an organiza-

tion invest in talented management at the level of the frontline

supervisors. Once the chain of command is broken and the front

line is disconnected from the rest of the organization, it is hard

to put it back together.

• Distinguish between teams and single-leader work groups.

Supporting the front line means establishing clear account-

abilities and decision rights. Fuzzy accountabilities should never

be confused with ‘‘empowerment.’’ Establishing teams that have

collective responsibilities and distinguishing them from individ-

ual leaders and supervisors who lead a work group is essential to

building a collective sense of responsibility.

• Attend to the bottom half. Who gets the most attention? Who

has the biggest impact? Every organization can be improved by

bringing the bottom half up the middle. You know who they are,

where they are, and how they impact the business. And you know

how to improve their performance. This is not rocket science.

It’s much harder! Because it requires not a brilliant conceptual

solution, but consistent support and day-to-day commitment .

• Use discipline to build pride. If you don’t stand for something,

you’ll fall for anything. A strong set of expectations builds a strong

team. A clear standard that everyone must meet means that this

is a team or organization that is worth belonging to. Without

discipline, it is hard to build a strong sense of pride in belonging.

The role of middle managers is to link the vision of the top

to the realities of the marketplace. Want to know how you are

doing? Go ask your people on the front line. That’s the moment

of truth.

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