Insigniam Quarterly Summer 2016 - Corporate Culture

TRANSFORMING THE PRACTICE OF MANAGEMENT AND LEADERSHIP
Volume 4 Issue 3 | Summer 2016 | quarterly.insigniam.com
AIRBUS’OUTSIDE-IN
APPROACHTO
CULTIVATINGINNOVATION
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TALENTINCHINA?
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EMBRACEDESIGN
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TRANSFORMCULTURE
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LEADING
CULTURE
CHANGE
INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC.
ALL RIGHTS RESERVED. REPRINTED WITH PERMISSION.
SUMMER 2016

2 INSIGNIAM QUARTERLY | Summer 2015
“Unfortunately, telling people what
the right thing to do is does not work.
Prescribing the right action does not
change behaviors. What drives behaviors
is the context that we think inside of: the
assumptions, beliefs and presuppositions
that form the nonphysical setting. To
cause any meaningful change, to invent
and implement a powerful culture, that
has to get revealed and unhooked.”
—SHIDEH SEDGH BINA, INSIGNIAM FOUNDING PARTNER AND
EDITOR IN CHIEF, INSIGNIAM QUARTERLY
Over 30 years ago, Insigniam pioneered the field of organizational transformation. Today, executives
in large, complex organizations use Insigniam’s consulting services to generate breakthroughs in their
critical business results. Insigniam’s innovation consulting enables enterprises to identify and cross into
new strategic frontiers to rapidly generate new income streams. Insigniam provides executives of the
world’s largest companies with management consulting services and solutions that are unparalleled in
their potency to quickly deliver on strategic imperatives and boost dramatic growth. Insigniam solutions
include Enterprise Transformation, Strategy Innovation and Innovation Projects, Breakthrough Projects,
Transformational Leadership and Managing Change. Offices are located in Philadelphia, Laguna Beach,
London, Paris and Hong Kong. For more information, please visit www.insigniam.com.
SUMMER 2016

quarterly.insigniam.com | INSIGNIAM QUARTERLY 1
No single topic has been more top-of-mind over the past year for CEOs around the
world than organizational culture.
Finally, leaders are recognizing corporate culture for what it truly is: an essential and
unavoidable determinant of company performance. It influences, shapes and distorts the
perceptions, thoughts and actions of the people within the enterprise—and often makes
the difference between success and failure.
Yet some organizations still have to learn this the hard way. Just ask Volkswagen, the
Fédération Internationale de Football Association (FIFA) and Toshiba. In 2015, each
of these enterprises was rocked by high-profile scandals that undermined customers’
goodwill and cost significant sums to repair. At the root of each of these scandals was a
broken—or even toxic—corporate culture.
In February, after Moody’s downgraded its assessment of Toshiba in the wake of the
company’s major accounting scandal, the Financial Times said, “The scandal exposed not
only a corporate culture where employees were afraid to speak out against bosses, but also
weaknesses across most of Toshiba’s businesses after the inflated figures were corrected.”
Ultimately, it is the CEO who is responsible for building and driving culture throughout
the organization. And when that culture becomes a liability, it is the CEO who is held
accountable. For example, in April, Amazon’s Jeff Bezos was still seemingly defending
his company after a scathing 2015 New York Times article described a workplace where
employees were forced out after suffering from cancer and other personal crises. In his
2016 letter to investors, Mr. Bezos wrote, “A word about corporate cultures: for better or
for worse, they are enduring, stable, hard to change. They can be a source of advantage or
disadvantage.... We never claim that our approach is the right one—just that it’s ours—and
over the last two decades, we’ve collected a large group of like-minded people. Folks who
find our approach energizing and meaningful.”
Building a sustainable culture that drives the right results is not easy. In fact, according
to Insigniam’s latest Executive Sentiment Survey, two-thirds of CEOs and managing
directors report that installing or leveraging the right corporate culture is either not
going well or they are still trying to figure out how to make it happen.
When CEOs do get it right, however, culture can lead to unprecedented
innovation, growth and performance. As Microsoft CEO Satya Nadella told USA
Today, “Ultimately, what any company does when it is successful is merely a lagging
indicator of its existing culture.”
So if your company is coming up short, take a careful look at whether the culture is
supporting strategy. And do not be afraid to make drastic changes.
CULTUREEATSEVERYTHINGFOR
BREAKFAST,LUNCHANDDINNER
LETTER
FROM THE
EDITOR
Shideh Sedgh Bina
Founding Partner, Insigniam
EDITOR IN CHIEF
Shideh Sedgh Bina
sbina@insigniam.com
EXECUTIVE DIRECTOR
Nathan Owen Rosenberg Sr.
nrosenberg@insigniam.com
CHIEF FINANCIAL OFFICER
Jeff Mullican
jmullican@insigniam.com
MANAGING DIRECTOR OF INSIGNIAM QUARTERLY
Alexes Fath
afath@insigniam.com
PUBLISHER
James Meyers
jmeyers@imaginepub.com
EXECUTIVE VICE PRESIDENT & CHIEF
CONTENT OFFICER
Kim Caviness
EXECUTIVE VICE PRESIDENT, DESIGN
Douglas Kelly
VP, EDITORIAL DIRECTOR
Cyndee Miller
CONTENT DIRECTOR
Jeremy Gantz
EXECUTIVE EDITOR
Kelley Hunsberger
EDITORS
Becky Maughan
Julie Ortega
SENIOR ART DIRECTOR
Hugo Espinoza
CONTRIBUTING WRITERS
Donovan Burba, Sarah Fister Gale, Paul Gillin,
Joseph Guinto, Novid Parsi, Rebecca Rolfes,
Richard Walker
Insigniam Quarterly is a thought leadership
publication committed to transforming the
world of business by offering content relevant
to the C-suite and their executive teams at large,
complex, global enterprises.
Insigniam Quarterly is published by Imagination, 600 W.
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SUMMER 2016

Contents
COVERSTORY
ALIFEOFLEADERSHIP
Former U.S. Secretary of Defense
Robert M. Gates shares his hard-
earned wisdom on organizational
performance, culture change and
transformational leadership.
By Joseph Guinto
Q&ASCALINGUP
SUSTAINABLECULTURECHANGE
Dramatic culture change is
possible. Stericycle Chief Culture
Officer Paul Spiegelman describes
how he has pushed far-reaching
changes at a large, diversified
health care organization.
By Rebecca Rolfes
FASTTRACKTO
PERFORMANCE: CULTURAL
TRANSFORMATION
Implementing a company-
wide culture change is easier
said than done.
By Paul Gillin
SPECIALSECTION
LEADINGFORACORPORATE
CULTUREOFDESIGNTHINKING
To gain competitive advantage,
companies should embed design
thinking into their corporate
cultures. Three Insigniam partners
explain how.
By Nathan Owen Rosenberg Sr., Marie-
Caroline Chauvet and Jon Kleinman
INSIGNIAM’SANNUALEXECUTIVE
SENTIMENTSURVEY
What keeps executives up at night?
From corporate culture to customer
experience, the answers are in the
results of our latest survey.
By Shideh Sedgh Bina, Nathan Owen
Rosenberg Sr. and Gregory C. Holt
24
44
32
61
38
FEATURES
SUMMER 2016
PHOTOBYLISAALLENPHOTOGRAPHY
SUMMER 2016

“Culture change goes much faster
when all the executives say we
need to work together to move in
this new direction.”
—Yann Barbaux, CIO, Airbus
GAMECHANGERS:CHANGINGCOURSE PAGE50
On the Cover
Former U.S.
Secretary of Defense
Robert M. Gates
Photo by Ron Wurzer
04 THETICKER
News and trends affecting the C-suite
08 NUMBERS
Breaking down corporate culture
12 BROWSERHISTORY
Reviews on books, websites, videos and more
76 IQBOOST
Are you building the right culture? Take this quiz
and find out.
16 BLOOD,SWEAT&TEARS
How enhancing company culture
helped biotech firm Ardea
Biosciences meet an ambitious drug-
development goal.
20 FROMTHEBOARDROOM
The roles, mindsets and makeups
of boards around the world are
changing.
56 PERSPECTIVES
To succeed in China, companies
must understand what local talent
looks for in an employer.
DEPARTMENTS
INSIGHT
SUMMER 2016

he discovery last year that Volkswagen had installed “defeat
devices” on more than 11 million vehicles to skew emissions results
cast a harsh spotlight on the German firm’s corporate culture, where
subordinates were reluctant—at best—to admit failure or contradict
superiors. In fact, German newsmagazine Der Spiegel famously called
Volkswagen “North Korea without the labor camps.”
Questions remain over the extent to which Volkswagen’s top
executives were aware of the emission-
test cheating, but there is little doubt that
the cutthroat culture made gaming the
system seem like the lesser of two evils. Former CEO
Martin Winterkorn was known for openly berating
employees; his predecessor, Ferdinand Piëch, wrote in
his memoir, “My need for harmony is limited.”
To repair the dent in the company’s profit margin
post-scandal, Volkswagen is shifting gears to foster a
new kind of culture. New CEO Matthias Müller has
said he will decentralize decision-making and give
regional brands—such as Czech carmaker Škoda—a
more prominent voice. A new North American group
will oversee operations in the United States, where
Volkswagen has seen its market share steadily decline.
Mr. Müller has also demonstrated his commitment
to change in the C-suite and the boardroom. So
far he has cut three management board positions
and replaced more than a dozen top executives, including the CEOs of
Volkswagen’s Škoda, SEAT and Lamborghini divisions. New executives are
granted more autonomy than their predecessors: They’re encouraged to
“follow their instincts, and are not merely guided by the possible consequences
of impending failure,” Mr. Müller said in a December 2015 press release.
“The difference is like night and day,” Andreas Renschler, the board member
running Volkswagen’s truck business, told The Wall Street Journal. “We all realize
that the crisis gives us a huge opportunity to change the company.”
T
THE
TICKER
NEWCULTURE
WANTED
“The difference
is like night
and day. We
all realize that
the crisis gives
us a huge
opportunity
to change the
company.”
—Andreas Renschler,
board member,
Volkswagen
SUMMER 2016

insigniamquarterly.com | INSIGNIAM QUARTERLY 5
11 MILLIONThe estimated number
of cars in Europe and
the United States that
were outfitted with
software to cheat
emissions tests
¤16.2 BILLION(US$18.2 billion): The
amount Volkswagen has
agreed to pay for the
emissions cheating scandal—
more than double the amount
the company originally
estimated
¤5.5 BILLION(US$6.2 billion):
The company’s net
loss for 2015
THE COST OF SCANDAL
Source: CNN Money
SUMMER 2016

THE
TICKER
Creating an organizational culture
that drives results is not just
about making people feel good.
Leadership consultancy KRW
International found that CEOs who
got high marks for character from
their employees outperformed their
low-scoring counterparts by nearly
five times on return on assets.
The KRW survey identified
four characteristics that separate
high-performing “virtuoso” CEOs
from the less popular and lower-
performing “self-focused” CEOs.
Employees graded their executives
on a scale of 1 to 100 (see sidebar,
“4 Dimensions of Leadership”).
According to Harvard Business
Review, employees reported that
virtuoso leaders “frequently
engaged in behaviors that reveal
strong character—for instance,
standing up for what’s right,
expressing concern for the
common good, letting go of
mistakes (their own and others’)
and showing empathy.” Self-
focused CEOs, in turn, were
described as “warping the truth for
personal gain and caring mostly
about themselves and their own
financial security, no matter the
cost to others.”
QUANTIFYINGCHARACTER
4 DIMENSIONS OF LEADERSHIP*
*CEOs were graded on a scale of 1 to 100.
4. Compassion3. Forgiveness2. Responsibility1. Integrity
Virtuoso Self-focused
70 70 70 65
87 91 82 87
SUMMER 2016

CLEANINGUPTHEGAME
Last year will likely go down as the worst
in the 112-year history of the Fédération
Internationale de Football Association (FIFA),
the sport’s global governing body.
Not surprisingly, the 2015 scandal has
many—including employees, players and
fans—calling for change. A reform committee
put forth a number of new principles aimed
at transforming the organization’s culture,
including humility, candor and responsibility.
In February, 179 of the 207 FIFA member
associations present and eligible at the
organization’s Extraordinary Congress in
Zurich approved them.
“We stand united in our determination to
put things right, so that the focus can return to
football once again,” said Issa Hayatou, acting
FIFA president. “The hard work of restoring
trust and improving how we work begins
now. This will create a system of stronger
governance and greater diversity that will give
football a strong foundation on which to thrive.
It will help to restore trust in our organization.
And it will deter future wrongdoing.”
FIFA also elected Gianni Infantino as its
new president at the Extraordinary Congress.
Mr. Infantino spent seven years as general
secretary at the Union of European Football
Associations, European soccer’s governing
body. “We will restore the image of FIFA
and the respect of FIFA. And everyone in the
world will applaud us,” he said.
Australian Moya Dodd, a former player
and current member of the Asian Football
Confederation executive committee, led the
charge to increase the number of women on
FIFA’s top decision-making committee as part
of the reform package. It currently has just one
female voting member on its 25-person board.
Now the association has committed to the
“promotion of women as an explicit statutory
objective of FIFA to create a more diverse
decision-making environment and culture,”
per the official language of the reforms.
Additional guidelines in FIFA’s new
reform plan include term limits for the FIFA
president as well as the members of the
FIFA Council and judicial bodies, a shakeup
of the governing board and other structural
changes.
“It will be a very big step forward, but not
the last,” Ms. Dodd told The Huffington Post.
“What you’re talking about here is culture
change. That takes time.”
TIME TO CHANGE
“We are now one Time Inc.”
That is the message Joe Ripp, CEO of the
global media company, delivered at the 2016
American Magazine Media Conference. Mr.
Ripp is leading a push to reinvent the com-
pany’s culture to better compete in the 21st
century digital world, according to Ad Age.
Onewayitisdoingthatisdecidedlyold
school:givingallemployees“culturecards”de-
tailingthecompany’smission,vision,strategy
andbrandmanifesto.Thebackofthecardlists
“expectedbehaviors”atthenewOneTimeInc.,
which fall intofourcategoriestospelloutTIME:
teamwork, innovate,motivateandexecute.
Among the expected behaviors, the card
encourages employees to foster new ideas,
creativity and optimism; empower others
through delegation; and take ownership and
accountability.
It remains to be seen whether the culture
card and its declarative aspirations can power
success in the brave new media world—Time
Inc.’s stock has continued a downward
trend that began before the cards were
distributed to employees in September.
“Unfortunately, telling people
what the right thing to do is does
not work,” says Shideh Sedgh Bina,
Insigniam founding partner and
editor in chief of Insigniam Quarterly.
“Prescribing the right action does not
change behaviors. What drives behaviors
is the context that we think inside of: the
assumptions, beliefs and presuppositions
that form the nonphysical setting. To cause
any meaningful change, to invent and
implement a powerful culture, that has to
get revealed and unhooked.”
“The hard work of
restoring trust and
improving how we
work begins now.
This will create a
system of stronger
governance and
greater diversity
that will give
football a strong
foundation on
which to thrive.”
—Issa Hayatou, acting
FIFA president
Joe Ripp,
CEO,
Time Inc.
SUMMER 2016

INVISIBLE AND INDISPENSABLE
A recent survey of 1,400 U.S. and Canadian CEOs and CFOs reveals the importance of
culture—and the challenge of building it.
CULTURE CHECK
A snapshot of the influencers and effects of organizational culture.
50of executives said culture directly
influences productivity, creativity,
profitability, the value of a firm and
growth rates.
92believe improving their firm's corporate
culture would improve the value of
the company.
78said culture is among the top five things
that make their company valuable.
But
only
15%said their company’s
culture is exactly
where it needs to be.
0
20
40
60
80
100
READY FOR THE DIGITAL AGE
A global survey of nearly 1,000 executives reveals what kind of culture a digital strategy thrives within.
46%of executives believe
that in less than five
years digital will have
an impact on more
than half their sales.
But only
21%say they already have a culture
in which their digital strategy
will thrive.
$
0 0
0 0
0 0
NUMBERS
SUMMER 2016

.
What are the cultural characteristics of a corporation where digital strategy is set to thrive?
According to the survey, an organization must:
1. Be an open, innovative
and collaborative
environment
2. Be risk-tolerant
instead of risk-averse
3. Use customers to help
reduce risk by involving
them in the design
stages of new products
and experiences
4. Continuously
consider customer
feedback when
making plans
THE CULTURE OF BRANDING
More and more, consumers are making buying decisions based on their perceptions of a company’s culture.
That has gotten the attention of senior marketing executives. They increasingly have to create a culture that
positively reflects on their brand, according to a survey of 80 senior leaders.
Sources: Forrester Research Inc., The State of Digital Business, 2015 to 2020, 2015; Duke University's Fuqua School of Business; Egon
Zehnder, The Intersection of Brand and Culture, 2015
60of marketing leaders
said they claim
direct responsibility
for corporate culture. 21said culture
undermines
their brand.
18said culture is irrelevant
to their brand.
95believe a company's
perceived culture
affects consumer
buying decisions. 61believe their
organization's
culture supports
their brand.
0 0
0 0
0 0
0 0
0 0
SUMMER 2016

Note: To appear on the list of the World’s Best Multinational Workplaces, a company must first appear on a Great Place to Work national Best
Workplaces list, which are compiled using the results of the Trust Index Employee Survey and the Culture Audit Management Questionnaire.
Two-thirds of a company’s workplace culture assessment is based on employee comments and feedback, and the remaining third is based on
the company’s policies and practices, as measured in the culture audit.
DOING SOMETHING RIGHT
These are the 25 best multinational companies to work for in the world, according to
Great Place to Work's annual rankings.
Rank Company Industry Country
1 Google IT USA
2 SAS IT USA
3 W.L. Gore & Associates Manufacturing & Production USA
4 NetApp IT USA
5 Telefónica Telecommunications Spain
6 EMC IT USA
7 Microsoft IT USA
8 BBVA Financial Services & Insurance Spain
9 Monsanto Manufacturing & Production USA
10 American Express Financial Services & Insurance USA
11 Marriott International Hospitality USA
12 Belcorp Retail Peru
13 Scotiabank Financial Services & Insurance Canada
14 Autodesk IT USA
15 Cisco IT USA
16 Atento Professional Services Spain
17 Diageo Manufacturing & Production United Kingdom
18 AccorHotels Hospitality France
19 Hyatt Hotels Hospitality USA
20 Mars Manufacturing & Production USA
21 Cadence IT USA
22 Hilti Manufacturing & Production Liechtenstein
23 EY Professional Services United Kingdom
24 H&M Retail Sweden
25 Novo Nordisk Biotechnology & Pharmaceuticals Denmark
NUMBERS
SUMMER 2016

A MISSTEP AT ZAPPOS?
Once celebrated as one of the best places to work, Zappos may now be experiencing some growing pains. In
2013, CEO Tony Hsieh announced the online shoe and clothing seller would build its corporate culture around
the concept of holacracy: “a manager-free operating structure that is composed, in theory, of equally privileged
employees working in task-specific circles, often overlapping,” according to Business Insider.
For the first time in 8 years, in 2016 Zappos did not make Fortune’s
100 Best Companies to Work For list.
18of employees
chose to
leave.
But the shift has not gone so smoothly.
When Zappos announced the new holacracy structure,
employees were given two options: embrace it, or
leave with a generous severance package.
0 0 30The company’s 2015
attrition rate
—10 percentage
points higher than
its typical annual
turnover rate
0 0
0
5
10
15
20
25
30
FINDING THE BALANCE
According to a report by Kelly Services, 31 percent of employees worldwide are considered “free agents”:
workers who choose flexible work styles over traditional employment arrangements. More than half of those
free agents choose that path because of the freedom and flexibility it allows.
In order to keep top talent, organizations must make work-life balance a valued part of their culture. According
to Kelly Services, the “most wanted” elements of work-life balance include:
Sources: Great Place to Work, World’s Best Multinational Workplaces 2015; Kelly Services, Work Life Design: The New Balance; Fortune and The Atlantic.
54% Flexible
schedules/hours
and remote work
options
44% Exposure to
latest technologies
and top-notch
equipment
37% Limitations or
restrictions for
working beyond
designated
business hours
32% Rapid pace
with constant
change; always
something new
37%
Virtual
teams
17% Restrictions
for email commu-
nications during
nights, weekends
and vacations
SUMMER 2016

BROWSER
HISTORY
CREATINGCULTUREA roundup of books, websites, videos and other resources from and for the C-suite.
Joy, Inc.: How We Built a Workplace People Love by Richard
Sheridan. The Penguin Group, 2013.
This is a book about falling in love. Richard Sheridan, CEO of
software design firm Menlo Innovations, fell in love with software
as “the ultimate sculpting material” at age 13, and the love affair
continued throughout his computer science and engineering classes
at the University of Michigan. But after moving up the ranks in the
workforce, his passion for software became strained.
The way things were done in the workplace was so soul-destroying that
he decided he either had to change it or divorce his one true love. “The
software industry, after all, defined the term ‘death march’ in a business
context: programmers pulling all-nighters, bringing sleeping bags to work,
jettisoning time with loved ones, canceling vacations,” Mr. Sheridan recalls
in his book. “These death marches often lead to the saddest story of all:
projects cancelled before they ever see the light of day.”
That is when Mr. Sheridan decided to start his personal and
professional “journey to joy.” At Menlo Innovations, he has built an
organizational culture that creates trust, accountability and results
through key tactics like removing “manufactured fear” from the
workplace and implementing structure without bureaucracy.
“[T]hese get you to joy,” he writes. The love affair can live on.
At Menlo
Innovations,
Richard
Sheridan
has built an
organizational
culture that
creates trust,
accountability
and results.
SUMMER 2016

Uncontainable: How Passion, Commitment,
and Conscious Capitalism Built a Business
Where Everyone Thrives by Kip Tindell.
Grand Central Publishing, 2014.
If you have ever shopped at U.S.-based retailer
The Container Store, you may have asked
yourself: Why is everyone who works here
so darned happy to be selling organization
materials and empty boxes? Kip Tindell,
the retailer’s CEO, explains that the store’s
contagiously positive culture starts with hiring.
He believes that when it comes to employee
acquisition, 1=3: One great person equals the
productivity of three good ones at a minimum. So, if the company can
find those great people, it can afford to pay them 50 to 100 times the
industry average.
The approach seems to be working: The Container Store has made
Fortune’s list of top 100 companies to work for during the past 16 years,
including 2015.
Mr. Tindell helps ensure the positive culture feeds into customer
service by training employees on three principles—and you do not
have to be in sales to use them:
1. I believe this customer needs and wants my help.
2. I know I am capable of helping them.
3. I want to do everything I can to help them today.
The Circle by Dave Eggers. Knopf, 2013.
The fictional company in Dave Eggers’ novel
would make a perfect profile in a business
magazine about building an outstanding
corporate culture. If you work for the
Circle—a tech company that has subsumed
Facebook, Twitter and all the other big tech
companies around today, according to Mr.
Eggers—you get fantastic benefits and perks
far beyond a fully funded 401(k) and a parking
spot. There is free education, creativity on
steroids and the chance to be one of the
coolest of cool kids. Best of all, as far as the company is concerned, the
employees work all the time. Literally, all the time.
The Circle’s goal is to know everything, and its corporate culture
allows it to creep insidiously into every aspect of its employees’ and
customers’ lives. The book proves that culture is not about perks, but
about how people think and act. This company is creating the future
and we are helping them do it. You OK with that?
HOW TO RUN A
COMPANY WITH
(ALMOST) NO RULES
In this TED talk, Ricardo
Semler, CEO of Brazil-based
Semco Partners, describes
how his organization’s
culture is based on complete
transparency, autonomy
and a democratic structure.
The goal is to organize for
what he calls “an age of
wisdom.” It is a structure that
encourages employees to cut
their workweek short if they
meet their goals early in the
week, does not track where
or when they are working
and allows the cleaning crew
to vote on the board.
Mr. Semler’s approach to
culture does not end with
where he works, however.
He also discusses how he
extends these ideas
to his personal
life and even
to some of
the schools
in Brazil.
Ricardo
Semler,
CEO, Semco
Partners
The book proves that culture
is not about perks, but about
how people think and act.
SUMMER 2016

BROWSER
HISTORY “I would say that if [your
staff turnover is] under about
8 percent, you have a very
good company culture. If
you’re in the 8 to 12 percent
range, you’ve got a good
culture. If you’re in the 15
to 20 percent turnover
range, you’ve got something
wrong.... [G]enerally
something is not right if the
turnover is that high.”
—David Ossip, CEO of Ceridian
“Too many
Asian
CEOs lock
themselves in
their offices. I
would rather
have 17,000
brains working
for me than
10 guys telling
me what is
going on.”
—Tony Fernandes,
CEO of AirAsia
“A company
that retains
the loyalty of
its employees
solely
because of
compensation
is a company
that gambles
with its
institutional
culture.”
—Jes Staley, CEO
of Barclays
“The way I think
about culture is that
modern humans have
radically changed the
way that they work
and the way that
they live. Companies
need to change the
way they manage
and lead to match
the way that modern
humans actually work
and live.”
—Brian Halligan, CEO of
HubSpot
“One of my fears is
being this big, slow,
constipated, bureaucratic
company that’s happy
with its success.”
—Mark Parker, CEO of Nike Inc.
SUMMER 2016

Chipotle
predicts it will
open between
220 and 235
new restaurants
in 2016.
The last quarter of 2015 was the most
challenging in Mexican restaurant chain
Chipotle’s history, according to the com-
pany’s founder, chair and co-CEO, Steve
Ells. And who would argue with him?
The company suffered several hits after
two E. coli breakouts were discovered in
its restaurants, including a federal crim-
inal probe into its food safety practices
launched earlier this year.
To reverse course, Chipotle has
announced a cultural transformation
around food safety. Among its proposed
new practices: high-resolution DNA-
based testing of ingredients before
they are shipped to Chipotle locations,
changes to how some items are washed
and new internal training.
“[B]y staying true to our food
culture and unique people culture, and
layering on our rigorous food safety
program, we are confident that we
are now in a position to aggressively
welcome customers into our restaurants
and restore customer confidence in
the things that make Chipotle great,”
co-CEO Monty Moran said in a February
press release.
FOODSAFETYCULTURECHECK
PHOTOBYPROSHOBVIAWIKIPEDIA
SUMMER 2016

PRESCRIPTION
FORSUCCESS
To bring a major new drug to market as quickly as possible, biotech firm Ardea
Biosciences relied on its entrepreneurial culture as much as its expertise.
By Novid Parsi
hen James Mackay
became president and
COO of biotech firm Ardea
Biosciences in 2013, he
immediately recognized the
potential lying within the
company’s culture.
“I saw an energized
environment that allowed
things to move more rapidly
than in a big company,” he says.
Dr. Mackay also saw the opportunity to
secure a big win for San Diego-based Ardea by
capitalizing on its subject matter expertise—
specifically its focus on drugs that treat gout, an
inflammatory arthritis affecting more than 16
million people worldwide. A new approach to
treating gout had not come to market in over
half a century, creating a significant market
gap with an underserved patient group. So
Dr. Mackay issued a companywide challenge:
Submit a new gout drug to the U.S. and
European regulatory agencies in far less time
than large pharma companies typically take.
The period between the last clinical visit
of a patient during a drug trial and the
W
Quick Hits
The Challenge:
Address an
underserved and
neglected medical
need by enhancing
Ardea Biosciences’
company culture and
significantly shortening
drug development
timelines.
The Plan: Empower
the entire company
to feel responsible
and accountable for
the success of the
drug development,
submission and
approval process.
The Execution:
Maintain Ardea’s
structure and culture
while continually
challenging staff to
question how long
a given task should
take. Create an open
environment in which
anyone can safely flag
potential delays.
The Result: The Ardea
team submitted its
gout drug to U.S. and
European regulatory
agencies in roughly half
the time the process
typically takes.
INSIGHT
BLOOD, SWEAT
& TEARS
submission of the drug to regulatory bodies
normally ranges from 250 days to a year. Dr.
Mackay challenged the team to cut that time
down as much as possible, even though it
would be the company’s first time conducting
a regulatory submission.
A SHARED SENSE OF PURPOSE
Dr. Mackay was confident the Ardea team
could meet the bold challenge for two rea-
sons: The company’s culture would support
it, and the staff was united in a mission to
improve the treatment of gout. “Gout is prob-
ably one of the most misunderstood and ne-
glected diseases we have,” he says. “It has this
stigma of being a disease that is the fault of
the patient, a disease of excess.” Yet while diet
does contribute to the disease, a genetic defect
leads to the kidneys’ inability to excrete uric
acid, causing buildup of uric acid crystals and
painful inflammation of the joints. Whereas
traditional gout medication inhibits the pro-
duction of uric acid, Ardea’s new drug would
increase the kidneys’ excretion of uric acid.
Dr. Mackay knew that Ardea’s shared sense
of purpose led to a high job-satisfaction rate.
SUMMER 2016

That was something he wanted to hold onto
even as he increased employee count by 70
percent. “They really enjoy working here,
and they are really passionate about helping
patients,” Dr. Mackay says. “That passion gives
them a focus to drive the project forward as
rapidly as possible, because they know that
every day they take developing the drug is
another day the patients don’t have access to it.”
To support the effort, Dr. Mackay worked
to retain Ardea’s entrepreneurial culture,
while making some tweaks to boost ROI.
This meant introducing two key changes.
First, he continually asked the staff to
question how long a given task would take.
Second, he created an open environment in
which staff members felt they could raise any
issue without getting blamed for it.
“I challenge hard, but I’m also very
understanding if the staff comes back to
me and says, ‘We can’t do it in that time
frame, but we can do it in this time frame,’”
Dr. Mackay says. “That’s very important
in ensuring you have a project plan that’s
challenging yet achievable.”
While Ardea had previously operated
under a top-down leadership style in which
the CEO made the decisions and the rest of
the organization carried them out, Dr.
Mackay knew Ardea could only get the
drug submitted as speedily as possible if he
empowered everyone to feel responsible and
accountable. They could not wait on him to
call all the shots.
“I set out to create an environment where
the people who work with me can excel in
what they do and have accountability for the
areas they’re responsible for,” Dr. Mackay
says. He knew that sense of empowerment
would allow his team members to achieve
more than they ever thought possible. “The
culture prior to James taking the helm was a
‘sit and wait’ mentality. The majority of the
Building a
Partnership
When global biopharmaceutical company
AstraZeneca acquired biotech firm Ardea
Biosciences in 2012, it could have been a
simple matter of the big guy taking over—
and imposing its will upon—the little guy.
But James Mackay, who led the acquisition,
envisioned a different path, one where the
two organizations could work together to
the benefit of both.
First, however, Dr. Mackay had to assure
the Ardea team that acquisition did not
mean a new staff. “When we arrived,
everyone thought they’d get fired and
we’d close the company,” says Dr. Mackay,
now president and COO of Ardea. So
he made a few important decisions to
quell the staff’s fears. Ardea Biosciences
would keep its name and its entire senior
executive team, and every employee’s title
would stay the same.
As he assured everyone of the company’s
continuity, Dr. Mackay also introduced the
idea of AstraZeneca as a friend, not a foe. “I
wanted to retain Ardea’s biotech culture but
also tap into the significant expertise that
exists within a large pharmaceutical with a
global reach, and then meld the two togeth-
er to get the best of both worlds,” he says.
While Ardea was accountable for the
development of the gout drug, it was free
to tap AstraZeneca’s resources when it
needed them. That could mean a consul-
tation with an AstraZeneca expert, once
or over many months. It also meant that
Ardea, which did not have manufacturing
capabilities, could use AstraZeneca’s
manufacturing plant in Sweden.
“Large-scale manufacturing requires a
significant investment, and AstraZeneca had
significant capacity available in its Swedish
manufacturing plant,” Dr. Mackay says. This
available resource eased some of Ardea’s
logistical needs, as well as some of the
financial burden.
James
Mackay
“What you have to
do as a leader—and
I’ve seen so many
leaders fail to do
this—is that when
you lay out your
vision, every single
action you take and
every single word
you say has to be
aligned with that
vision.”
—James Mackay, president
and COO, Ardea Biosciences
SUMMER 2016

employees had little or no experience with
this type of submission and therefore they
were ‘waiting’ to be taught or instructed,”
says Jen Zimmer, a partner at Insigniam.
Dr. Mackay challenged his team to reduce
project timelines by reimagining them entirely.
“The team asked, ‘How much time do we
need to shave off the plan?’” he recalls.
“And I said to them, ‘What you need to
do is tell me why we can’t submit the
day after we close the trials.’”
While Dr. Mackay recognized that
would be impossible, he wanted his team
to stop assuming that certain tasks required
specific lengths of time and instead think
critically and creatively about how long any one
task should take. He knew there was no magic
bullet to save a big chunk of time, but small
amounts of time saved from many steps would
have a cumulative impact. “James constantly
provided bold, inspirational leadership. He
created an environment where committed
action trumped experience, and innovation
about how the work was done was respected.
This in turn catalyzed the team focus and
infused ownership of the timeline, which led to
the breakthrough result,” Ms. Zimmer says.
For example, at one point the team had
to check and analyze a large portion of
data from the clinical trials—a process they
estimated would take two weeks. “We said,
‘We’ve got a building full of scientists. Why
don’t we get everybody to work on this?’”
Dr. Mackay says. So for one weekend, the
entire organization spent 14 hours quality-
controlling the trials’ data. “We called it 14
days of work in 14 hours.”
ENCOURAGING ESCALATION
That can-do, all-hands-on-deck work ethic
stems partly from the no-blame environment
Dr. Mackay established. “Normally the issues
that cause delays to projects are issues that
have been known for a long time but haven’t
been made visible. And when they are made
INSIGHT
BLOOD, SWEAT
& TEARS
250-365
DAYS
Standard period
between the last
clinical visit of a
patient during a
drug trial and the
submission of the drug
to regulatory bodies
159 DAYSPeriod between the
last clinical visit of
the drug patient
trials for Ardea’s gout
drug Zurampic and
when the company
submitted it to
U.S. and European
regulatory agencies
Division of Labor
To streamline the submission process for the
development of Ardea Biosciences’ new gout
drug—and ensure potential problems were
flagged early on—Ardea President and COO
James Mackay created a dual-team structure.
LEADERSHIP TEAM RESPONSIBILITIES
n Take accountability for the delivery and
quality of the regulatory board submissions
and supporting deliverables.
n Provide leadership, guidance and direction
to the delivery team in the context of project
objectives and critical success factors.
n Support the delivery team by providing
rapid issue resolution for all things related to
regulatory submission, including timelines,
content, approach and resources.
n Own the risk and opportunity management
for the submissions.
DELIVERY TEAM RESPONSIBILITIES
n Take accountability for the ownership
and maintenance of the submission
plan, including components such as
activity duration, dependencies, start
and completion dates, key decisions and
milestones.
n Drive delivery to plan, and report progress
to stakeholders.
n Identify cross-functional and
interdependent issues, shifts in activities,
resource constraints and risks that may
impact target dates and resolve conflicts.
n Define actions and points of escalation as
needed to leadership team for exceptions
to plan.
SUMMER 2016

visible, it’s too late to do anything about
them,” he says.
Dr. Mackay encouraged all of his team
members to come forward as soon as they
detected an issue that might delay the
project—even if they did not need anyone
else to do anything about it. That way, team
members who raised a concern did not feel
immediately disempowered—or blamed—for
doing so. But if they needed help, they got it.
“In many organizations, when something’s
escalated, people feel like they’ll just get
in trouble, and often leaders act in a way
that reinforces that,” Dr. Mackay says. “I
encourage people to use escalation as a
positive behavior, not a negative behavior.”
This attitude came in handy when, during
Ardea’s statistical analysis of the clinical trials,
staffers identified an error in a contractor’s
programming that threatened to throw off
a large amount of the data. “My guys were
throwing their hands in the air, saying we’ll
miss the submission date,” Dr. Mackay says.
“This could’ve completely derailed the project.”
Rather than mirror his team members’
anxiety, Dr. Mackay calmly took action,
bringing his team to meet with the contractor’s
team. “If the leader doesn’t stay calm, all
that does is increase the tension,” he says. “It
became a very collaborative win-win, when it
could’ve been a real finger-pointing situation.”
In the end, the analyses were corrected
and the team stayed on track.
THE FINAL VERDICT
Along with the cultural adjustments, Dr.
Mackay also implemented a structural
change. Traditionally, a single team works
to submit a drug. Ardea created two teams:
a submission leadership team, which
consisted primarily of senior executives,
and a submission delivery team. The latter
included members from every department
of the organization, such as regulatory and
clinical, and reported directly to the leadership
team (see “Division of Labor,” page 18). This
integrated structure allowed each department
to identify an issue in another department
that could have a knock-on effect—and to take
action sooner rather than later. “A problem in
one area then becomes everybody’s problem
to solve,” Dr. Mackay says.
The delivery and leadership teams each met
weekly and, as the project progressed, daily.
The leadership’s standing meetings could last
from five minutes to five hours, depending on
the problems at hand, but nothing was ever left
to the next day. “The innovative team structure
was a key piece in the project’s success. At
Ardea, many of the worker bees are also the
key leaders of work groups, so maximizing
people’s time was critical,” Ms. Zimmer adds.
In December 2014, Ardea submitted
its gout drug, Zurampic, to the U.S. and
European regulatory agencies just 159 days
after the last clinical visit of a patient—about
half the length of time the process typically
takes. A year later, the U.S. Food and Drug
Administration approved the drug, followed
just two months later by approval from the
European Commission. The product is now
being manufactured in Sweden with technical
guidance from the Ardea team.
The benefits of the success spread beyond
one individual drug—it was a confidence
builder for the entire organization.
“This organization now believes it can
take a drug to market and patients,” Dr.
Mackay says. “People here got to experience
something most hadn’t experienced before:
getting approval for a drug and then seeing it
on pharmacy shelves.”
Ardea could not have realized that success
without strategic alignment—starting from
its leadership. Dr. Mackay says, “What you
have to do as a leader—and I’ve seen so many
leaders fail to do this—is that when you lay out
your vision, every single action you take and
every single word you say has to be aligned
with that vision.” IQ
“In many
organizations,
when
something’s
escalated,
people feel
like they’ll just
get in trouble,
and often
leaders act
in a way that
reinforces that.
I encourage
people to use
escalation
as a positive
behavior, not
a negative
behavior.”
—James Mackay
SUMMER 2016

THEEVER-
EVOLVING
CULTUREOF
BOARDS
A look at the changing roles, mindsets
and makeups of boards around the world.
By Donovan Burba
ow more than at any other time
in modern business history, the
culture of the boardroom is
evolving. Increased scrutiny in
the form of stakeholder activism
and government regulation is
forcing shifts in three key areas:
whom the board serves, its role
in execution and its structure.
And while it is hard to predict
exactly where these changes will lead, one
thing is clear: In the end, the mindset and
makeup of boards will not look the same.
WHOM DO BOARDS SERVE?
Stakeholders or shareholders? For years,
business leaders, academics, economists
and even governments have debated
which should be the primary concern of
a corporation’s board of directors. But in
practice, a board’s focus is often determined
by where the company is located.
In the United Kingdom, Australia and
the United States, for instance, companies
have a long-standing tradition of adopting
the shareholder model of corporate
governance. The board’s primary job is
straightforward: Represent shareholders’
interests by maximizing profits and setting
direction. Companies in the rest of Western
Europe and many in Latin America, on the
other hand, tend to build their corporate
governance approaches around the
stakeholder model. Boards are typically
more concerned with the interests of many
parties—customers, employees, creditors
and the community at large, as well as
shareholders.
“European boards spend a lot of time
looking at the accounts in detail and looking
at stakeholders as well as shareholders,”
says Michel de Fabiani, vice president of the
Franco-British Chamber of Commerce and
Industry. Also former chairman and CEO of
BP France, he serves on the boards of Valeo,
Ebtrans Luxembourg, Valco and BP France.
INSIGHT
FROM THE
BOARDROOM
N
SUMMER 2016

“The personality and culture of the board to me is more important
than how many independent directors it has. If there’s trust, there’s
likely to be good collaboration and open communications.”
—Michel de Fabiani, vice president of the Franco-British Chamber of Commerce and Industry,
director at Valeo, Ebtrans Luxembourg, Valco and BP France
“Their time is more split between strategy
and ongoing [operational matters] that in the
United States are more in the hands of the
executives.”
The pendulum seems to be swinging
away from the shareholder-centric modus
operandi, though—especially in the United
States. Writing on The Huffington Post last
year, Salesforce CEO Marc Benioff signaled
why: “The business of business isn’t just
about creating profits for shareholders—it’s
also about improving the state of the world
and driving stakeholder value.”
THROW OUT THE RUBBER STAMP
In KPMG’s September 2015 Global Boardroom
Insights, 80 percent of the 1,000 responding
directors and senior leaders from around
the world said that over the past two to
three years their board had deepened its
involvement in not just the creation of
strategy, but also the monitoring of its
execution, the consideration of strategic
alternatives and the recalibration of strategy
as needed.
Examples abound for why this change is
occurring.
Take Australia-based supermarket giant
Woolworths. Facing increased competition
from rivals Aldi and Wesfarmers-owned
Coles, then-CEO Michael Luscombe pushed
Woolworths into the hardware business.
Starting a hardware chain (which the
company ultimately named Masters) would
boost the bottom line, Mr. Luscombe said,
while simultaneously striking a blow to
Bunnings Warehouse, a leading hardware
store chain also owned by Wesfarmers.
But the plan backfired. Instead of seeing a
drop in market share, Bunnings continued to
expand. In January, the company announced
it would purchase U.K. home improvement
chain Homebase. The same month,
Woolworths announced it would close all
63 of its Masters stores. The failed chain has
seen combined losses of more than AUD600
million, according to The Australian Financial
Review. That includes a loss of AUD245.6
million in fiscal year 2015, according to
Woolworths’ financial reports.
What went wrong? Critics say Masters
suffered from poor product choices,
inconvenient locations, high prices and
a marketing campaign that alienated
instead of attracted the tradesmen who
comprise Bunnings’ core customer
base. But ultimately, critics point to
the Woolworths board of directors’
insufficient engagement with monitoring
execution and its inability or unwillingness
SUMMER 2016

Boards by the Numbers
France Germany Italy South Spain Switzerland United United
Africa Kingdom States
Number of boards
in sample 40 30 100 79 95 20 150 486
Supervisory or two-tier board/
Unitary board of directors 4/36 30/0 3/97 0/79 0/95 20/0 1/149 0/486
Combined chairman and CEO 62.5% 0% 22% 5.1% 57% 0% 1.3% 52%
Average number of members
on a board 14.3 16.2 11.9 12.5 10.9 10.3 10.3 10.8
Percentage of independent
board members 58% 60% 49.2% 58.1% 39% 88.3% 60.5% 84%
to change course when the initiative
showed signs of failing. “When you look at
who’s accountable, the board has ultimate
responsibility for the management,
direction and performance of a business,”
Alex Malley, CEO of CPA Australia, wrote
in The Australian Financial Review.
With the board’s backing, for nearly five
years the company poured money into a
strategic error. “At what stage was there
enough light shone on the strategy by the
board when there were doubts about it?”
fund manager John Sevior asked in another
Financial Review article. “... [A]t what point
do you put your hand up and say we’ve got
this wrong?”
In the end, both the CEO and board
chairman who oversaw the failed Masters
gambit resigned. Several other board members
who served during that time followed
suit, making way for the new chairman to
reinvigorate the board with fresh blood.
Major missteps are not the only factor
driving boards’ increased role in strategy and
execution, however. Greater shareholder
engagement is also playing a part, says
Walt Rakowich, former CEO of Prologis,
current lead independent director of Host
Hotels & Resorts and chairman of the audit
committee at Iron Mountain. “It’s nothing
for an investor to call a board member today.
That never happened in the past,” he says. “I
see a lot more involvement. The world is an
open book. That’s the power of the Internet
and social media. Boards have faced far more
scrutiny over the last couple of decades.
They’re not there to rubber stamp. They’re
truly there to govern and provide advice to
the company.”
It is a change that is also reflected in how
INSIGHT
FROM THE
BOARDROOM
Source: Spencer Stuart, 2015 International Comparison Chart. All data is taken from individual country board indexes published by Spencer Stuart in 2015.
SUMMER 2016

“Boards have
faced far more
scrutiny over
the last couple
of decades.
They’re not
there to rubber
stamp. They’re
truly there
to govern
and provide
advice to the
company.”
—Walt Rakowich,
lead independent
director of Host
Hotels & Resorts and
chairman of the audit
committee at Iron
Mountain
board members, at least in the United States,
prepare for meetings. “Seventeen years ago,
when I was in my first board meeting as CFO
of a large public company, I would say maybe
half the board members didn’t really read the
materials before the meeting,” Mr. Rakowich
says. “Now I prepare at least eight to 10 hours
before all board sessions.”
Mr. Rakowich notes that board meeting
books when he started were maybe 30 pages
long; now they are the size of a major-
metropolitan-area phone book. That indicates
both management and the board are putting a
lot more time into preparing for each meeting.
That preparation, along with committee
meetings, has increased collaboration between
board members and management, particularly
around strategy, capital allocation, risk and
talent management, and communications, he
says. “I think there is a lot more collaborative
discussion between management and the
board surrounding these objectives than there
has been in the past. That change is certainly
better for everyone.”
INDEPENDENCE WANTED
Board independence is continuing to garner
more and more attention around the globe
as shareholders call for boards to fight
for their interests above the CEO’s, and
as governments look for more corporate
transparency and accountability.
One response to this pressure has
been the addition of more independent
directors to boards. According to a report
from EY, as of 2014 more than 90 percent
of Fortune 100 boards had some form of
independent board leadership. In many
countries, the push for more independence
is being led by government regulation.
Last year, for example, Japan’s government
established a Corporate Governance Code
for all companies listed on the Tokyo Stock
Exchange, mandating that they add at least
one independent director to their boards.
But the prevalence of such independent
board members varies by country. Public
boards in the United States differ from those
in Europe or Asia in that the U.S. boards have
almost all independent directors, with only
one or two insiders, according to Robert
Pozen, senior lecturer at MIT Sloan School
of Management, independent director
of Medtronic and Nielsen, and chairman
emeritus of MFS Investment Management.
That said, boards in some European
countries are far more likely to be headed by
an independent chairman, Dr. Pozen says.
In the United States, the CEO is frequently
also chair of the board. The trend is starting
to shift slightly, with EY reporting that 41
percent of Fortune 100 companies have
separated the roles of chair and CEO. But
even in those cases, only 27 percent of the
chairs are independent.
At the same time, independence in theory
does not mean independence in practice,
Dr. Pozen says. “Some people would argue
that having an independent chairman lets
the board hold the CEO more accountable,”
he says. “Other people would argue that the
lead independent director could play the
same role. I think it’s a functional matter. It
depends on what roles they actually play and
the personality of the people.”
In the end, there is no ultimate right
or wrong for how boards should be built.
“The personality and culture of the board
to me is more important than how many
independent directors it has,” Mr. de Fabiani
says. “If there’s trust, there’s likely to be good
collaboration and open communications.
That’s not to say they have to be collegial.
There can be a lot of harsh decisions, but
if they trust each other to make the right
decisions, a lot can get done.” IQ
SUMMER 2016

A Life of
LeadershipFormer U.S. Secretary of Defense
Robert M. Gates shares what he has
learned about transformational leadership
in 50 years of public service.
BY JOSEPH GUINTO PORTRAITS BY RON WURZER
SUMMER 2016

SUMMER 2016

before he led a massive reform of Texas A&M
University and before he became what some
have called a “revolutionary leader” of the U.S.
Department of Defense (DoD), Robert Gates
was a leader in Boy Scout Troop 522 in his
hometown of Wichita, Kansas.
That was in 1957, when Dr. Gates was just
13. His challenge: Find a way to get other kids
to follow him when they faced no real conse-
quences if they chose not to. “I’ve never for-
gotten it,” says Dr. Gates, now 72. “Nothing
develops or tests leadership skills like trying
to get people to do what you ask when they
don’t have to.”
This early lesson in leadership foreshad-
owed a central theme of Dr. Gates’ long and
celebrated career in public service. Whether
he was helming the Pentagon when the United
States was fighting two wars or becoming an
unlikely advocate for gay rights, Dr. Gates has
never been afraid to take uncharted paths—
and persuade others to join him. Insigniam
founding partner Nathan Owen Rosenberg Sr.,
who serves on the executive board of the Boy
Scouts of America with Dr. Gates, observed,
“Bob has a strong moral compass and sense of
what will work. Once he sees the right direc-
tion, he has an uncanny ability to have others
see that direction as the right one and to want
to take the journey with him.”
For Dr. Gates, leadership and enterprise
transformation go hand in hand. When inter-
viewing to become president of Texas A&M
University, he told the school’s board of re-
gents: “I am an agent of change. If you don’t
want change, you don’t want me.”
In his new book, A Passion for Leadership:
Lessons on Change and Reform from Fifty Years
of Public Service, Dr. Gates contends true
leaders must engage in a continuous battle
for reform and transformation of their orga-
nizations. And that is true whether they are
in the public sector, where Dr. Gates spent
most of his career, or in the private sector,
where he has served on 10 corporate boards,
including Starbucks.
“The leadership challenges are very similar
in the public and private sectors when you’re
aiming at transformational change,” Dr. Gates
says. “People, for the most part, are comfort-
able with the status quo. That affects every
organization. And any time you have a leader
who believes change is necessary, that leader is
going to have to deal with tremendous inertia,
with tremendous resistance to change.”
Few leaders know about overcoming insti-
tutional inertia better than Dr. Gates. But, de-
spite the headwinds he often faced, Dr. Gates
prevailed—winning rave reviews in the pro-
cess. The New Yorker dubbed him “one of the
shrewdest public servants of his generation.”
And staffers in President Barack Obama’s
White House, impressed by Dr. Gates’ pre-
scient thinking and adroit leadership skills,
nicknamed him “Yoda.”

Building Support
Change does not happen in a bubble. To build
support for massive transformation, Dr. Gates
says leaders must show respect for subordi-
nates by making them part of the process.
For Dr. Gates, lasting change only occurs
after everyone’s voice has been heard. “You
have to open the process of change to input,”
he says. “Let people have a part. Give them a
chance to air their views and opinions. Lead-
ers have to step up and make tough decisions
about change, and some people are going to
Before he led
the U.S. Central
Intelligence
Agency (CIA)
during the end of
the Cold War,
SUMMER 2016

be unhappy. But that’s why the process is so
important. Even people who are unhappy will
at least feel they were respected enough to
be consulted. They will have had a chance to
make their case. That mitigates resistance to
change.” No matter the role, Dr. Gates made a
concerted effort to reach out to all employees.
When he was heading the CIA’s analysis
division in the 1980s, for instance, Dr. Gates
visited with the analysts themselves at weekly
brown-bag lunches. As secretary of defense,
he would make trips to the Pentagon’s mail-
rooms and loading docks. The visits came as
a surprise to staffers of these often-overlooked
areas; he was told no previous defense secre-
tary had ever visited them. And, of course, he
went out to the battlefields.
“The people on the front lines probably
have a better idea of what’s working and
what’s not than anyone else,” Dr. Gates says.
“They’re face to face with the customer or
with the citizen or with the enemy.”
“When I would visit the front lines in Af-
ghanistan, I would have breakfast or lunch
with young enlisted troops or junior officers,”
he continued. “I always learned a lot from
those sessions because they knew what was
and wasn’t working, down to the specific de-
tails. That was unlike some of the more se-
nior officers who would paint a rosier picture.
And I think nothing matters more in an orga-
nization than for people on the front lines to
know the people at the top have their back.”
Dr. Gates’ meals with soldiers were not
about idle chitchat. He would often assign
a lieutenant colonel from his office to take
notes during meetings with soldiers and
follow up on issues raised. “That way they
would know this wasn’t just for show,” he
says. “It’s important for leaders, when they do
get a suggestion or concern from somebody,
to not leave the person wondering whether
anybody took it seriously.”
Just as leaders must be accountable for en-
suring the changes they have promised will be
carried out, engaging employees in a change
process means making them accountable for
their role in that process. “Leaders have to rec-
ognize people who share their agenda and will
carry it on,” he says.
“IworkedonaprojectforBoblastyear,”Mr.
Rosenberg says. “He specified the outcome
that he wanted with great detail including by
when he wanted it. He then described how he
was going to use the work product, painting a
picture in words so that I fully understood his
intent. That was the end of the conversation,
until months later when Insigniam delivered
the report. Then Bob was generous in his ap-
preciation for what was delivered. His manner
and ways of working inspire—not demand—
excellence, having us want to fulfill his intent.”
Power of the People
Along with face-to-face meetings, Dr. Gates
often relied on task forces, councils and re-
view groups to empower employees to be
part of a change. “Basically, you need an ad
hoc structure that breaks down the walls in-
side an organization and allows people from
one part of the organization to criticize
another or to express ideas as to how to fix
the organizational structure as a whole,” he
says. “In every organization I’ve worked at,
there were always individuals who had great
ideas of how things could work better. But
“People, for the
most part, are
comfortable
with the status
quo. That
affects every
organization.
And any time
you have a
leader who
believes change
is necessary,
that leader is
going to have
to deal with
tremendous
inertia, with
tremendous
resistance to
change.”
—Robert Gates
Then-Defense Secretary
Robert Gates and U.S. Vice President
Joseph Biden at the National Defense
University in 2010, in Washington, D.C.
SUMMER 2016

“I believe trying to
achieve consensus
on the path forward
should be a very
low priority. If
consensus is what
you’re after, you’re
never going to get
significant change.
You’re going to get
the lowest common
denominator.”
—Robert Gates
SUMMER 2016

there was almost never a vehicle through
which they could express those ideas.”
Virtually every task force he appointed
throughout his career “improved on and en-
riched my ideas and often expanded the scope
of the change,” Dr. Gates writes in A Passion
for Leadership. It was an ad hoc review group
that prompted a watershed moment in U.S.
history: the repeal of the U.S. military’s “don’t
ask, don’t tell” policy, which barred openly
gay, lesbian and bisexual citizens from serving.
Dr. Gates, who testified before Congress in
favor of the repeal and ultimately oversaw its
demise as secretary of defense, convened a re-
view group that gathered information crucial
for effectively implementing a repeal and that
helped win support for overturning the law.
“A leader has to understand why people
feel a certain way if they’re going to make
changes,” Dr. Gates says. “But you can’t rely
on old assumptions. On ‘don’t ask, don’t tell,’
nobody had ever asked the people in uniform
what they thought about the issue. Everything
we had was anecdotal. And yet, it was thought
that not allowing gays was a fundamental
part of the [military] culture. Lo and behold,
when [the review group] surveyed 400,000 ac-
tive duty troops and 150,000 military spouses,
much to everybody’s surprise two-thirds said
[allowing gays to serve openly in the military]
wouldn’t make any difference or that we’d be
better for doing so.”
In 2010 the U.S. Congress voted to repeal the
policy, and Dr. Gates believes the review group’s
work helped change many minds. The alterna-
tivewasapresidentialexecutiveorder,whichDr.
Gates writes, “would have had a much more di-
visive and disruptive result, harming those with
the most at stake, including military command-
ers dealing with readiness and discipline issues
and gay and lesbian troops seeking to come out
in a more tolerant environment.”
As president of the Boy Scouts of America
(BSA), Dr. Gates again found himself in the
position of leading change for the rights of
gays in the United States. In July 2015, fearing
potential legal issues, according to The Atlan-
tic, he led BSA’s 80-member board to repeal
the ban on gay scoutmasters and volunteers.
“I truly fear that any other alternative will be
the end of us as a national movement,” he said
at the time.
From Hard-liner to Statesman
Forging these connections went a long way in
winning over the skeptics.
“I know there were people who disagreed
with some of my decisions,” Dr. Gates says,
“particularly cutting some of the big weapons
programs [at the DoD]. But because they were
included, because I listened and gave them a lot
of time to talk about their concerns, because I
Fight the
Reorganization Instinct
When Robert Gates arrived at the Pentagon for his first day of work in December
2006, he walked in alone. No team of former U.S. Central Intelligence Agency
leaders came with him. He did not bring his own personal assistant. It was just Dr.
Gates and his briefcase.
Dr. Gates wanted to avoid engendering bad feelings on his first day. But he also
had another objective in arriving alone: speed. “We were in the middle of two wars,
neither of which was going well,” he says. “So we couldn’t afford to lose a lot of
time. It was important for me to communicate that I had confidence in the people
who were there and that I was going to take for granted they were all able to do
their jobs well—that the problem to date had been one of leadership.”
This was partly a practical decision. “It takes time to replace people, particularly
at the senior level,” Dr. Gates says. “And if you’re too draconian in the changes you
want to make, you can quickly deprive yourself of people who have the background
and perspective you need.”
Dr. Gates thinks that too often organizations going through a transformational
change process do not provide the opportunity for employees to prove themselves.
He says they often assume reorganization (the process of changing titles and
reporting structures) will, in and of itself, produce different results. “For a long
time,” Dr. Gates says, “I’ve felt that leaders whose first instinct is to reorganize
everything—to get out the organizational chart and move the boxes around before
they do anything else—don’t really understand what’s wrong with the organization
or how to fix it.”
“Reorganization has an immediate, negative impact on morale. If you’re going to
change how people do their work, and get them doing the kind of work you want
them to be focused on, it’s best not to add on to that worries about where they’ll
be. If their organization is going to stay the same and their desk is going to stay the
same, then they can focus on how best to change the organization.”
SUMMER 2016

told them where I thought we were headed,
and so on, I think—almost uniquely among de-
fense secretaries—I really didn’t have anybody
going around me to create problems with the
media or Congress or the White House. That
was very important to my success.”
But Dr. Gates learned that lesson the hard way.
In 1981, at the age of 38, Dr. Gates was pro-
moted to his first senior position in the CIA.
He was put in charge of the analytical side of
the agency, a division with several thousand
people. Within days of his appointment, Dr.
Gates assembled most of those people in an
auditorium to announce the changes he in-
tended to make in how foreign-threat analyses
would be conducted under his leadership.
“I then proceeded to tell them all what they
had done wrong, where they had fallen short
and how we were going to do things differently
in the future,” Dr. Gates says. “I immediately
antagonized everybody who worked for me,
even the people who agreed with the changes
I’d proposed.”
Despite the fact that many of Dr. Gates’ dic-
tates were eventually implemented (and even
deemed necessary), he says resentment smol-
dered for a long while. “I learned a powerful
lesson from that meeting, and never repeated
that mistake. You can’t just parachute into the
A Man for
All Sectors
Dr. Robert M. Gates has had a long and
distinguished career in public service: He served
under eight U.S. presidents, receiving numerous
awards for his service. But he has taken on
leadership roles in the private sector, too. He
holds a doctorate in Russian and Soviet history
from Georgetown University and has lectured
at universities including Harvard and Yale. He
has served on 10 corporate boards, including
Starbucks, as well as boards of nonprofits
such as the American Council on Education
and the Association of Public and Land-grant
Universities. A snapshot of Dr. Gates’ key roles
includes:
n 1966: Joins the U.S. Central Intelligence
Agency (CIA).
n 1967: Commissioned as a second lieutenant in
the U.S. Air Force and serves as an intelligence
officer at Whiteman Air Force Base in Missouri.
n 1986: Named CIA deputy director under
President Ronald Reagan.
n 1989: Named assistant to the president and
deputy national security adviser at the White
House to President George H.W. Bush.
n 1991: Named director of the CIA.
n 2002: Becomes the 22nd president of Texas
A&M University (then the seventh-largest
university in the United States).
n 2006: Appointed U.S. secretary of defense
by President George W. Bush. Dr. Gates serves
as defense secretary under President Barack
Obama until mid-2011.
n 2012: Assumes office as the 24th chancellor
of the College of William & Mary.
n 2013: Elected to the national executive board
of the Boy Scouts of America (BSA) and named
president-elect.
n 2014: Begins his two-year term as BSA
national president.
SUMMER 2016

top job and say, ‘I’ll fix this, follow me.’ That’s
going about it with a ‘ready, fire, aim’ attitude.”
So Dr. Gates reinvented himself over time
as a leader, morphing from a “brash and some-
times obnoxious young hard-liner” into a “cool-
headed elder statesman,” as the New Republic
once reported. But he was never a pushover.
After President-elect Obama asked Dr.
Gates to remain on as secretary of defense,
Dr. Gates assembled teams of analysts to
conduct an extensive review of the $500
billion defense budget. The results of that
analysis were laid out in Dr. Gates’ 2009
budget address. It included eliminating,
scaling down or capping nearly three-dozen
major programs, such as the highly touted
F-22 Raptor fighter jet and the Future Com-
bat Systems program. At the same time, Dr.
Gates requested more money for drones
and designated more funding for helicop-
ters and maintenance crews, cyberdefense
training and theater missile defense. These
changes represented a fundamental shift in
focus from preparation for the large-scale
conflicts expected in the Cold War era to
the “asymmetrical conflicts” against ter-
rorists and insurgent groups that define the
contemporary era.
Some of the changes—especially to pro-
grams like the F-22, a favorite among some
Air Force leaders—sparked anger among a
few members of the top brass. But that did not
faze Dr. Gates. “I believe trying to achieve con-
sensus on the path forward should be a very
low priority,” he says. “If consensus is what
you’re after, you’re never going to get signif-
icant change. You’re going to get the lowest
common denominator.”
Beyond the Status Quo
Ask Dr. Gates what he is most proud of in all of
his years of public service, and he does not hes-
itate: “working to save the lives of our troops.”
But even while pushing for such a worthy goal
at the DoD, Dr. Gates discovered how many
people are biased toward the status quo.
For instance, when he worked to halve the
average time it took to fly wounded soldiers
by helicopter from combat areas to field hospi-
tals from two hours to one, top military advis-
ers said the time reduction was not necessary
because the additional costs associated with
the project (more field hospitals, helicopters,
crews and hospital staff) would not necessarily
save more lives. But according to Dr. Gates, all
the information and numbers presented by his
opponents failed to account for morale, which
is why he overruled them.
Dr. Gates says this is proof that “even if the
issue at hand is literally a matter of life and
death, the answer is almost always that ‘things
are just fine as they are.’”
Most leaders do not face issues of life and
death, of course. But in a rapidly changing
business environment, a growing number will
have to deal with challenges that could ulti-
mately prove the downfall of—or lifeline for—
their company. Dr. Gates’ remarkably long and
varied career is testament to the fact that no
matter the organization or sector, “it is the job
of a leader to push for change.” IQ
“It’s
important for
leaders, when
they do get a
suggestion or
concern from
somebody,
to not leave
the person
wondering
whether
anybody took
it seriously.”
—Robert Gates
Clockwise from top left: Dr. Gates
meets with graduates of Texas
A&M University at Camp Fallujah,
Iraq; with President-elect Barack
Obama as he introduces members
of his National Security Team in
2008; with President George W.
Bush in 2009; and with members of
the Boy Scouts of America.
SUMMER 2016

SUMMER 2016

Implementing a
companywide
cultural
transformation
is not easy—
especially at a
multinational
giant like Lenovo,
Scotiabank or Intuit.
BY PAUL GILLIN
ILLUSTRATION BY MIGUEL MONTANER
Fast
Track to
Performance:
SUMMER 2016

The pivot comes on the heels of declin-
ing smartphone profits at Samsung, which is
now under pressure to foster innovation and
growth in new areas. So, according to The
Korea Times, beginning midyear the nearly
80-year-old company is planning to move
away from a top-down culture in favor of a
less hierarchical, more dialogue-driven work
environment that offers more training and
learning opportunities.
If history is any indication, however, the
Samsung executives spearheading culture
change may soon encounter turbulence de-
spite their best intentions. “It has been esti-
mated that only about 1 in 4 efforts to change
an organization’s culture are successful,” says
James L. Heskett, UPS Foundation professor
emeritus at Harvard Business School and au-
thor of The Culture Cycle: How to Shape the Un-
seen Force That Transforms Performance. Insig-
niam’s latest executive sentiment survey (see
page 38) similarly found that two-thirds of
CEOs and managing directors either believe
that installing and leveraging the right corpo-
rate culture is not going well or are still trying
to figure out how to do it.
So chances are that Samsung is in for a
bumpy ride. According to Shideh Sedgh Bina,
Insigniam founding partner and Insigniam
Quarterly editor in chief, far-reaching, long-last-
ing corporate culture change is possible—if
managed intentionally and collaboratively.
That means there must be a commitment from
executives to drive change, a willingness to bat-
tle the status quo, a channel for employee en-
gagement and an ability to maintain that cul-
ture so it stays strong and effective long after
the initial transformation has taken place.
Leading Change
For proof that culture change is possible,
look at Lenovo. A little over a decade ago, the
company was a blip on the industry’s radar, a
Chinese company serving a mostly Chinese
market. But all that started to change in 2005
when Lenovo acquired IBM’s personal com-
puter division and began a meteoric rise.
The acquisition fast-tracked the organiza-
tion to become a global player—Lenovo in-
stantly moved to the No. 3 spot on the list of
the world’s largest PC manufacturers. But it
also created a major challenge: How does a pri-
marily regional organization that spent its first
20 years operating within a culture based on
Chinese values and hierarchy go global?
The answer: slowly and intentionally.
For the first couple of years after the acqui-
sition, Lenovo operated as one company with
two systems, according to Yolanda Conyers,
vice president of global human resources and
chief diversity officer for Lenovo. (Ms. Co-
nyers co-authored The Lenovo Way, a book that
delves deep into the organization’s massive
culture change, with Gina Qiao, the compa-
ny’s senior vice president of human resourc-
es.) But the company was losing some of the
cohesion that made it successful in China, and
the usual way of doing things was not tenable.
“In the early days of the integration, it was
very tough for both sides—East and West—to
align,” Ms. Conyers says. “We had to have the
difficult conversations about trust and inten-
tions, and our leadership team had to help the
company figure out a way for the very differ-
ent perspectives to coexist and then eventually
blend. It was a confusing, frustrating time for
our leaders and our organization, and it reflect-
ed in our morale and our bottom line. But quite
frankly, we had no choice. We had to succeed at
this integration or fail as a company. ”
To turn the tide, Ms. Conyers and the rest
of the senior leadership had to build a new
corporate culture that bridged Eastern and
Western mores—and executives had to lead
Theworld’sbiggestmanufacturerofsmartphonesand
memorychipsisonthevergeofmajorchange.InMarch,
Samsungexecutivesannouncedthecompanywill
transformitsculturetoembraceastartupmentality,
accordingtoReuters.Itisaninterestingdeclarationfroma
companywhoseculturehaslonghadareputationofbeing
rigidandstaid—theoppositeofanagilestartup.
“Companies that
handle culture
change well are
those in which
leadership is
trusted, usually
because of a
‘no surprises’
approach to
decision-making
and a willingness
to share
information
across the
organization.”
—James L. Heskett, UPS
Foundation professor
emeritus, Harvard Business
School
SUMMER 2016

the way. The biggest mistake in putting to-
gether two firms is to assume you will some-
how just add the best of each culture together.
In reality, you have to invest in deliberately
constituting a new culture, Ms. Sedgh Bina says.
To set the new tone, CEO Yang Yuanqing
moved his family from Beijing to North Car-
olina, which became the co-headquarters for
Lenovo. “The intention was to create a world-
class global enterprise,” Ms. Conyers says.
“Our leaders wanted nothing less than to re-
construct Lenovo’s entire cultural DNA. They
wanted to create a new way of thinking inside
one unified Lenovo company.”
Leadership also worked to break down tradi-
tional hierarchies that existed within the organi-
zation. As Ms. Conyers describes in The Lenovo
Way, for instance, Mr. Yang wanted to change
thewaylong-standingemployeesaddressedhim.
Previously,theywouldcallhim“Chief Executive
Officer Yang,” or Yang Zong in Mandarin, but he
felt this would not work for a company looking
to build a culture that embraced the norms of
a global workforce. So he and his senior leader-
ship team spent a week meeting and greeting
employees in the office lobby, introducing them-
selves with their given names, not their titles.
Today Lenovo employs some 60,000
people and is the largest PC manufacturer in
the world. In 2015, it jumped 55 spots on the
Fortune Global 500 list to reach 231. Its now-
established position as a global organization
with a global culture has also helped it
transition in major new lines of business,
including its 2014 acquisitions of Google’s
Motorola Mobility and IBM’s x86 server
division. “One of the things we did with the
x86 and Motorola phone business was perform
a cultural survey and understand the strengths
of both cultures—what we do and don’t have
in common,” Ms. Conyers says. “It takes time,
but we’ve done this so much that we have a
process where we sit down and talk about it
and create interventions where we need to.”
“It’s necessary to have corporate culture
that’s clear about what it is,” she continues.
“We’ve created a culture that respects differ-
ences. In some cases we may compromise or
adopt a practice that we think will work best.
We’re global-local.”
Banking on Change
Faced with major disruption and evolution,
companies in some industries look to cul-
ture as the lever that can differentiate them
in the marketplace. And hardly any industry
has seen as much disruption over the past
few years as banking.
Executives at the Bank of Nova Scotia (com-
monly known as Scotiabank) took a hard look
at this disruption and responded by re-center-
ing the organization’s culture to become more
customer- and performance-oriented, rather
than centered on transactional efficiency.
Under the leadership of CEO Brian
Porter, it was identified that all bank
employees (not just those on the front lines)
needed to recognize how they could put the
customer first—and that meant evolving
the way they do business. His goal: Simplify
Lenovo’s Steps to Cultural Transformation
Amid multiple major acquisitions, Lenovo has found a way to successfully merge East and
West to create a global culture that touts its diversity as a primary feature. According to
Yolanda Conyers, who literally wrote the book on Lenovo’s cultural transformation, these were
some of the key factors of success that the organization’s leadership still abides by today:
n Adopt a “zero-mindset” mentality. Employees were asked to let go of the ways things
were done in the past, even if they were successful, and realize that they may have to
do things differently moving forward. “We never start from the place of being a Chinese
company and we’re going to do things the Chinese way. We continue to merge the best
practices and thinking of all those countries and business cultures,” Ms. Conyers says.
n Start with an understanding of how each organization and culture operates.
Rather than garnering this understanding secondhand, Lenovo’s executives experienced
it for themselves. CEO Yang Yuanqing moved his family from Beijing to North Carolina,
which became the co-headquarters for Lenovo. And Ms. Conyers spent time working out
of the company’s Beijing office.
Today, the organization remains committed to building a workforce of employees who
understand each other by providing training across cultures and mentors who work with
key individuals.
n Identify early adopters. Ms. Conyers says that early adopters really self-select by
displaying a willingness to go above and beyond. Some of Lenovo’s early adopters vol-
unteered to swap offices to advocate for the culture changes coming, and they became
go-to trusted advisers.
n Be transparent about the differences and expectations the culture change will
bring. It will not only ease employee tension about where the organization is going but
also open leadership’s eyes to employees who will not be a good fit.
SUMMER 2016

the organizational model to be closer to
customers and more agile.
“Bank employees needed to recognize how
they could put the customer first,” says John
Doig, the bank’s chief marketing officer. “One
way that we recognized we could do this was by
evolving the way we do business. We want cus-
tomers to be able to do their business with us,
how they want—branch, phone, tablet, com-
puter—where they want and when they want.”
Ms. Sedgh Bina is clear that “the most
high-performing corporate cultures put the cus-
tomer at the center and invest in the employees
as the most powerful access to the customer.”
Scotiabank is seeking to recast traditional
bank branches as inviting and comfortable
places to meet with staff members who can
advise customers on big issues like saving
for retirement or paying for college. It is
also retraining many front-line employees
in financial advisory skills. One major bank
initiative, a tech foundry called the Digital
Factory,ismeanttohelpmakedigitalinnovation
part of the bank’s culture. The initiative was
launched in late 2015 and will eventually
employ more than 350 programmers, user-
experience designers and data scientists. Its
purpose is to provide a space where teams can
be empowered and challenged to design and
deliver a game-changing customer experience,
Michael Zerbs, the bank’s co-head of IT, said in
a statement.
A big focus of the Digital Factory will be
delivering a distinctive mobile experience.
When the bank analyzed which customers
were downloading its mobile app, it found
that half of them never took the next step and
signed up for an online account. “Scotiabank
should be in their pocket,” Mr. Doig says.
“We need to make that mobile experience as
easy as possible so they want to use it.”
In order to make these shifts in culture
stick, it was imperative that all employees
see this top-level support. As Mr. Doig sums
it up, “If the CEO’s tone doesn’t support the
change, there will be no change.” But it was
also important to give Scotiabank employ-
ees a voice, because it was their culture too.
Harvard’s Dr. Heskett agrees: “Compa-
nies that handle culture change well are
those in which leadership is trusted, usual-
ly because of a ‘no surprises’ approach to
decision-making and a willingness to share
information across the organization.”
To do so, the bank has engaged in exten-
sive conversations with its employees, asking
for ideas, curating suggestions and creating
action plans in response. One such conver-
sation was the Scotiabank Jam, a three-day
online discussion held earlier this year among
the company’s 88,000 global employees in
which they vetted values, beliefs and ideas for
improving the customer experience. “People
were free to comment, criticize or just view,”
Mr. Doig says. “We had more than 1 million
page views over three days.”
The feedback session was more
than just an open forum—bank
leadership is also working to
implement some of the sug-
gestions. The input helped
management hone the
“One of
the key
features of
[our] culture
is that we
believe
innovation is
everybody’s
business.”
—Kris Halvorsen,
chief innovation
officer, Intuit
SUMMER 2016

values (including integrity and accountabil-
ity) that now define the bank’s new culture.
And management curated employee feed-
back into a set of action plans with time
frames assigned for each. Mr. Doig notes
that putting some of the employee sugges-
tions into action was a critical part of the
change process. Asking for feedback with-
out using it will only set your efforts back.
The Long Game
Transforming a culture is not a one-time ef-
fort. It has to be constantly nurtured and en-
couraged. Financial software company Intuit,
for example, has long established its culture of
innovation, which has helped it produce pop-
ular applications such as TurboTax. Despite
that success, however, it is not one to rest on
its laurels. Instead, according to Kris Halvors-
en, the company’s chief innovation officer,
Intuit keeps its culture fluid and responsive
by maintaining a relentless focus on customer
experience (all employees are encouraged to
visit customers in their offices to watch how
they work) and offering breaks from routine
for pure ideation. By cultivating new ideas, the
organization promotes receptivity to change.
“One of the key features of Intuit’s culture is
that we believe innovation is everybody’s busi-
ness,” Mr. Halvorsen says.
Employees are encouraged to take unstruc-
tured time each week to brainstorm and try
out new ideas. Selling the concept of a break in
routine to line managers was no picnic when it
was instituted in 2006, but the innovation team
remained persistent, using successful examples
of this time of experimentation to win over the
skeptics. Importantly, the time does not mean
goofing off. Intuit puts guardrails in place to
channel ideas toward useful results, and em-
ployees are asked to apply their efforts to a
defined set of strategic goals. There is even a
framework—called “Design for Delight”—that
sets out a methodology for innovation.
Intuit’s commitment to driving that innova-
tive culture has been especially key as the orga-
nization strives to transition away from pack-
aged software to a cloud model. “Our CEO
Brad Smith set a grand challenge to the com-
pany: Transform from a North American desk-
top software company to a global, cloud-based
software-as-a-service leader,” Mr. Halvorsen
says. “And just as important as what we would
change is what we didn’t change: our mission
and values.” Embracing this change means
encouraging experimentation, risk-taking and
receptivity to new ways of doing things, Mr.
Halvorsen says.
Intuit leadership also nurtures its culture of
innovation by making it a key topic of the in-
terview process. This allows leadership to en-
sure new employees will be supportive of—and
assets to—the environment Intuit has worked
hard to create. “We have a craft demonstration
as part of the interview process,” Mr. Halvors-
en says. “You’re asked to solve a problem and
present the results. Then we see people explain
how they’re thinking, show how they went
about solving this problem, and you get a dif-
ferent view of their ability to be intellectually
flexible. These kinds of things don’t come up
if you’re just asking questions in an interview.”
Intuit’s methods seem to be working. Ac-
cording to Mr. Halvorsen, the company now
has about three-fourths of its 37 million cus-
tomers using its cloud-based products, and
its connected-services customers are driving
more than 70 percent of Intuit’s revenue.
Because culture change is no quick and easy
process, Dr. Heskett says leaders need to cele-
brate forward progress. “Improvement should
be measured and rewarded one step at a time,
with every effort made to recognize small wins
along the way.” IQ
“It’s necessary
to have corporate
culture that’s clear
about what it is.”
—Yolanda Conyers, vice
president of global human
resources and chief diversity
officer, Lenovo
SUMMER 2016

BY SHIDEH SEDGH BINA,
NATHAN OWEN ROSENBERG SR.
AND GREGORY C. HOLT
Insigniam’s
Annual
Executive
Sentiment
Survey
What keeps
executives
up at night?
Corporate
culture and
customer
experience.
SUMMER 2016

SUMMER 2016

skCEOswheretheycanfindacompetitiveedgetoday,andmany
willtellyouthesamethings:Buildandleverageauniquecorporate
culture,andelevatethecustomerexperience.Thesetwo
objectives—whicharemoredirectlyconnectedthanmanypeople
realize—mattermoreinthemarketplacenowthaneverbefore.
Yetmanyexecutivesdonotfeeltheirorgani-
zations are making much progress developing
culture and the customer experience. There is
a lot of consternation around the world: Two-
thirds of CEOs and managing directors either
believe that installing and leveraging the right
corporate culture is not going well or are still
in the process of trying to figure out how to
do it. At the same time, half of executives say
they are either not doing enough to elevate
their current customer experience or are not
doing well in their current efforts.
These are just two of the major themes that
emerged from the latest Insigniam Executive
Sentiment Survey conducted in late 2015. The
annual survey asks executives from a variety
of industries to rank major concerns in several
key areas of operations and report how well
they think their companies are performing in
those areas. The survey, which taps into Insig-
niam’s global network of large-cap companies,
also polls executives for their outlook on the
key challenges they face both internally and
from competitors.
Leveraging Culture to Drive Success
The new survey results show a perception we
have seen building for years becoming even
more widespread: Culture is a key driver of
performance. More and more, executives are
realizing that culture is about much more
than fun office perks. Engraining the right cul-
ture means getting people to think and act in
a manner that will lead them to take actions in
support of the overall organizational strategy
that produce the desired results.
As such, culture is woven into nearly ev-
erything executives told us they were most
concerned about. For instance, CEOs and
managing directors said having the right
people on staff and recruiting, training and
retaining talent are key competitive advan-
tages. These points all come back to a com-
pany’s culture.
Likewise when it comes to elevating the
customer experience: That is also primarily
done through culture. Customers are more
likely to have a positive experience with com-
panies that have engaging cultures.
Unfortunately, our survey suggests that
while executives are increasingly recognizing
that their organizational culture plays an in-
tegral role in the performance of their busi-
ness, many are still unsure how to cultivate,
SUMMER 2016

Insigniam Quarterly Summer 2016 - Corporate Culture

Insigniam Quarterly Summer 2016 - Corporate Culture

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Insigniam Quarterly Summer 2016 - Corporate Culture