Spring 2003

Sarbanes-Oxley Act Drives Changes in Organizational Culture

In its series on the recent failure of organizations like Enron and Arthur Anderson, Fortune magazine said, “Rotten cultures produce rotten deeds.”  The aim of The Sarbanes-Oxley Act of 2002 is to drive the rot from corporate culture.

Considered by many to be the most significant legislation affecting corporations in the past 50 years, implementation of  Sarbanes-Oxley is gathering steam.  The sweeping changes in corporate governance outlined in the act are intended to make sure that companies are managed ethically and that corporate governance is both “effective and efficient.” 

One desired outcome of the law is to gain investors’ trust by instituting grassroots standards of accountability.  This includes the distribution of responsibility and the empowerment of employees in matters of reporting financial misdeeds and risk-management.  Having an effective “control environment” is a crucial part of compliance with the law.  The environment incorporates such things as direction from the board and management’s philosophy and style. Delegation of authority and responsibility and the organization’s competence, values and integrity are part of the environment as well.

With Sarbanes-Oxley, the board of directors will become more involved in setting the direction of the company and monitoring the control environment. The CEO and CFO will become personally liable for their claims on financial performance and corporate governance.  With these very substantive changes, the importance of having a valid and reliable means of measuring and monitoring the corporate culture becomes clearer.  The Denison Organizational Culture Survey is a tool capable of helping companies evaluate their current status and leading the charge to be more effective, efficient, and ethical.         

Strategic Partnership with Katzenbach Partners LLC

Tracking Change and Moving the Needle: A Case Study
 

One question we often hear after the survey process is “What’s next?”  Organizations are usually very capable of running a survey project and analyzing the results.  However, it is tracking change over time and actually moving the performance needle that presents the largest hurdle to organizations.  Here is an example of a global reinsurance firm that drove change in their organization by leveraging their culture survey results.

This company was suffering financially with a net loss of $200 million in 2000.  They decided to perform a culture survey of their America’s division in 2000 in an attempt to target aspects of their business culture that they could impact, which in turn would influence their bottom line to create a more sustainable business.   The culture survey results revealed that this division was in the lowest quartiles on all of the culture indices.  Based on the results of the survey, the organization worked with OD consultants to define crucial areas in need of improvement and to develop several key strategies for creating organizational culture change.  Some of these areas of development and key strategies are briefly outlined below:

• Identification of Leadership Development Needs: Evaluating the indices comprising the cultural trait of consistency revealed that the management team worked in isolation and spent little time together.  They had lost credibility and didn’t know where to find it.  Team members didn’t have an understanding of the business as a whole.

• Strategic Hiring:  A new Head of America’s Division came with previous experience in turnaround situations and was able to address the mission and adaptability improvements that were necessary.

• Strategic Personnel Changes: Addressed low consistency and involvement scores in their organization by making several personnel changes in areas that weren’t working very well and they brought together a team of highly capable people who worked well at solving problems together and weren’t afraid to make hard decisions.

• Clarified Organizational Goals: Focused on the low scores on the mission trait to develop a strategy for emphasizing bottom line results, rather than top line growth.  Changed cross-functional collaboration, reporting structures, and reward systems to reflect this strategic change.

• Restructured Processes:  Focused on improving the consistency part of the culture model by implementing strategies that allowed client representatives, underwriters, and actuaries to work together as equal peers, to build the bottom line.

• Put Words Into Action: Slowly built a sense of trust and accountability when people saw that management was doing what they said they were doing.

• Perspective: Always kept sight of the fact that the changes required to improve the organization were in nearly all cases simple matters of good execution

After two years of working towards these goals and making change efforts, this organization re-evaluated their organizational culture.  As seen in the figure, the survey results revealed that they improved substantially on all culture indices; additionally they realized a net profit gain of $500 million that same year.  This is just one example of how organizations use their survey results as a starting point for creating long-lasting change that impacts their bottom-line business performance.

Click on thumbnail for larger view

Upcoming Workshops and Conferences
 

Denison Consulting is an exhibitor at the upcoming ASTD International Conference and Exposition in San Diego, California, May 19-21, 2003.  Please visit us at Booth #1719.  Come visit our new booth & latest product information!  If you are interested in a ½ or full day meeting and/or workshop on-site with Bill Neale, please Contact Us Online for more details.  If you have already registered for the conference, look for an upcoming article from us in the conference e-newsletter, “Get Connected.”

Denison Consulting will be hosting a number of our 2-day workshops, “Linking Organizational Culture and Leadership to the Bottom Line: A Workshop for Leveraging Change.”  These workshops are on-site at our Ann Arbor, Michigan headquarters and will run periodically throughout the spring and summer months.  Space is limited, so please Contact Us Online to register.  Our current schedule includes the following dates:

May 6 – 7, 2003 (Tuesday and Wednesday)
July 15 – 16, 2003 (Tuesday and Wednesday)
September 18-19, 2003 (Thursday and Friday)

Also, look for Denison Consulting at these upcoming conferences -
Linkage: The 5th Annual Best of Organizational Development Summit: June 9-12, Chicago, IL
Academy of Management: August 1-6, Seattle, WA
 

We hope to see you soon!