It’s time to reinvent organisational culture and employee engagement

There has never been a more important time to focus on culture and employee engagement. For decades, evidence has shown the relationship between positive culture, employee engagement and performance: companies that have them deliver dramatically improved revenues, as well as higher profitability and productivity. From Peter Drucker to Richard Branson, Pep Guardiola to Neil DeGrasse Tyson, culture and engagement are now fundamental ingredients in any organisation’s success.

However, the roles of culture and employee engagement have recently taken on a new urgency. As we begin to emerge from the shadow of Covid-19 an amalgamation of pressures are driving organisational culture higher up the priority list – things such as the demands of hybrid working, the fallout from the ‘Great Resignation’, concerns over employee wellbeing, and shifting stakeholder expectations on leadership and purpose. Culture and engagement is clearly having its moment:

• PwC’s 2021 Global Culture Survey discovered that 66% of C-suite executives and board members believed culture is more important to performance than an organisation’s strategy or operating model; 72% of senior management reported that their culture helps drive successful change initiatives
• according to a 2019 report by Gartner, $230 billion is spent in the US and a further £55 billion in the UK on organisational culture each year
• the Chief Purpose Officer is set to be the next major C-level role, as companies prioritise their relationship with their employees and customers, the communities they operate within, and their role in society
• disenchanted employees now cost US companies $450-500 billion each year (that’s up from $300 billion in 2000)
• HR teams are rebranding themselves as ‘people and culture’ to reflect the new demand for a human-centric rather than process-centric function
• Forbes has identified 2022 as the Year of Workplace Culture

Despite these developments, there’s one problem: current approaches do not work.

In fact, when it comes to culture and engagement there’s still much stumbling around in the dark, with businesses looking for answers to questions they don’t fully understand, or continuing to invest in solutions that have never really worked. It’s a case of either dramatically underestimating the potential of the looming opportunity/threat, or dramatically overestimating how much headway has been made.

While companies may think they have their organisational culture wrapped up nicely, too many are basing their endeavours on serious fallacies and misunderstandings.

Organisational culture and employee engagement are misunderstood

The problem starts with a fundamental misreading of what culture and employee engagement are. Culture is a system of values, beliefs and behaviours unique to each organisation. Culture describes the ‘way things work around here’, shaping how people interact with each other, how the company relates to their suppliers and – critically – with their customers.

Employee engagement speaks about an individual’s connection and motivation to the company. It describes how employees ‘feel about the way things work around here’; interventions, meanwhile, seek to drive a sense of organisational belonging by addressing personal aspirations.

They are two sides of the same coin, operating in symbiosis. But they are very different sides, with very different inputs and outputs.

Yet many organisations don’t differentiate between the two. The terms are often seen and used interdependently, so much so that they blur into one and the same thing. And that’s a problem when organisations then try to address these very different disciplines with a single approach. For example:

• employee engagement surveys are used to measure culture (which they don’t)
• financial rewards are used to pay people to change their values (which they can’t)
• people-processes are employed to get workers to ‘fix themselves’ so they fit in (which they won’t)

This goes a long way in explaining why many culture and employee engagement initiatives don’t deliver the expected results. In fact, such misconceptions are often the first challenge Hoxby identifies when working with new clients. They act as a powerful brake on starting – let alone delivering – effective improvements.

Current approaches are ineffective

Despite decades of investment in culture and employee engagement there is growing evidence that the tried-and-tested approaches don’t work anymore. In fact, some have never worked, while others might actually be doing more harm than good. The results of all this are plain to see:

• Gallup’s 2021 State of the Global Workplace reported that 85% of people are not actively engaged at work. Shockingly, that percentage has not changed in 20 years. The situation is especially alarming in the UK, where the amount of engaged employees is as low as 8%.
• Only 30% of organisations believe they have the right culture, despite spending over £300 billion a year trying to shape them.
• 69% of employees still do not believe in their organisation’s definition of their own workplace culture.
• Professor Bill Khan of Boston University, credited as the founder of employee engagement, has concluded that organisations have misdirected their efforts, focusing on how hard employees work for the organisation rather than how motivated they are to work with the organisation.

Traditional HR models do not support the new role HR must play

While HR has always been the steward of company culture, the new demands of the digital age are dramatically accelerating and expanding their responsibilities. To name just a few:

• as organisations become more agile, HR needs to lead fundamental changes to both working practises and behaviours to deliver strategy at speed
• as employee expectations transform, HR needs to redefine the role of leadership, upskilling managers to offer greater meaning, appreciation, safety and autonomy to their teams
• as hybrid working becomes the norm, HR needs to build and nurture brand-new working environments and practises that unify the workforce (no matter their location or workstyle)

All this presents HR with an opportunity to be more proactive and entrepreneurial, challenging conventional wisdoms, while reinventing approaches to get ahead of demand.

But despite the new ‘people and culture’ title, the HR operating model remains characterised by the same traditional risk management, compliance and service accountabilities that have dominated for 40-plus years. And that presents a challenge:

• HR cannot nurture a desired culture and behaviours while ‘serving’ the very employees who disrupt and challenge that very culture
• HR cannot create and embed essential new workflows at the same time as enforcing compliance with obsolete, old ones
• HR cannot proactively lead and coach managers through critical people-change initiatives if they are restricted to reactively advising on transactional HR tasks

So what should organisations do?

If we’re not clear on the problems we are trying to solve then most of the existing approaches won’t work. And if we’re not empowering HR, a key part of the organisation, to enable and sustain improvements, then leveraging the undoubted power of culture and engagement becomes very hard indeed.

At Hoxby, we believe organisations operate more like living organisms and less like programmable machines. They must compete for survival with limited resources and constant threats, continuously adapting to their unpredictable environment. As they evolve, their cultures and employee engagement approaches need to evolve with them.

That requires organisations to persistently and intentionally shape their culture and engagement approaches. They need to let go of the methods built for a different age and start to develop new approaches that genuinely work for them.

We’ve broken these down into four distinct areas.

1. Clarity

Despite seeming rather nebulous concepts it is possible to demystify both ‘culture’ and ‘employee engagement’, making them easier to understand, to measure, to change and to sustain.

For one of our clients, Hoxby developed an operating model with which to accurately evaluate their existing culture, define their desired future state, and then operationalise a change programme to kick-start the transformation. This not only allowed the business to collectively agree on its change goals, but also empower their workforce to own, develop and deliver the culture interventions they wanted to succeed.

2. Intentionality and ownership

According to the Harvard Business Review, culture change typically originated in an organisation when the CEO commissioned HR to come up with a new-look company culture. Following an offsite with the C-suite, HR would develop a mission statement and some values, share these across key communication channels, implement some shiny new tactical perks and launch an annual engagement survey to keep an eye on things. ‘With their culture-building to-do list completed,’ the report states, ‘the CEO and HR would then move onto other priorities.’

But this is nowhere near enough in an era when culture and engagement have become indispensable ingredients in the delivery of first-class customer experiences, game-changing innovation and greater commercial agility.

Instead, leadership should be dedicating time and resources to intentionally and continuously shape their company culture. They need to create a self-regulating environment where the workforce collectively owns and shapes the culture, while HR must be liberated from its old restrictions to curate the transformation.

3. Enabling leaders to be ‘enabling leaders’

According to professor Khan, employee engagement lives in the small interactions between and within teams. He argues it falls to leaders throughout the organisation to create the conditions for employees to be their authentic selves – thus enabling them to do their best work – and to create an environment where workers feel unreservedly at home in the company.

If leaders are the key to employee engagement, then leadership development and coaching must be refreshed and re-prioritised. Leadership is now about creating psychological safety, distributing authority effectively and encouraging everyday feedback while nurturing culture across a distributed workforce. Hoxby has developed a psychological tool to help our clients do just that, allowing them to constantly improve their ability to lead distributed teams.

4. Continuous change

The forces shaping our world only increase in speed and complexity, challenging organisations to continuously adapt in order to survive. But long-term change implementations are often out of date before they’re up and running, while complex multi-phase change programmes often falter when each stage reaches its end date.

The key is to implement small, fast and frequent changes. As the old, generic methods stop working, organisations should empower their teams to develop their own solutions, constantly testing their ideas to discover what really works while keeping experiments small to manage risk.

Conclusion

If organisations are serious about culture and employee engagement, they need to let go of the traditional thinking, tools and approaches that are struggling to deliver in the digital age.

They need to invest in genuinely understanding these critical levers and how they work, measuring them at every level of the company. They need to upskill their leaders, so that they can drive collective ownership and sustainable improvements. And they need to empower their own teams to develop small, simple improvements that can evolve so as to create the kinds of change workers themselves want to see.

Over time, organisations will develop unique and powerful approaches that not only work in harmony with their business, but create a company where the workforce strives to go the extra mile, where shareholders want to invest more and where customers want to come back again and again.

Gavin Russell is a change and innovation leader who runs Hoxby’s culture and engagement practice at Hoxby Futureproofing. He is also the author of ‘Transformation Timebomb’, a guide to change in the digital age.

Curious to find out more? Get in touch at hello@hoxby.com.