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Speaker 1
leadership presence is a

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Speaker 1
a lacking skill in this day and age in

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Speaker 2
so if you want to, change in organization to talk, you got to change the stories that your employees share with each other.

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Speaker 1
this this.

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Speaker 2
Is turning this into an upside down.

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Unknown
Welcome to start with a win where we unpack franchising, leadership and business growth. Let's go.

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Speaker 1
And coming to you from area 15 ventures and start with the win headquarters. It's Adam contest with. Start with a win. Do you ever wonder how some companies maintain a competitive edge while others struggle to keep up? Today I'd start with a win. We're delving into the world of strategic management with Jay Barney, a true powerhouse in the field with over 100 articles, eight books, and countless accolades under his belt, Jay's insights are like gold for anyone seeking to understand what sets successful businesses apart

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Speaker 1
from his tenure at prestigious institutions like the University of Utah to his extensive consulting work

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Speaker 1
with top organizations, Jay brings a wealth of expertise to the table. So if you're ready to unlock the secrets behind sustained competitive advantage, you're in for a treat with Jay. Barney Jay, welcome to start with a win.

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Speaker 2
Good to see you too.

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Speaker 1
You've I mean you've been traveling all over. I know you just got off of an international trip talking about the new book that I want to talk about today. The secret of culture Change. Here's here's the magic, folks. How to build authentic stories that transform your organization. The key word there stories. I mean, this is a a really cool thing because, you know, we've always seen storytelling as a big part of culture.

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Speaker 1
you know, you go back to the, you know, cave dwellings and people would draw stories on cave walls or you look at, you know, like Native American culture was always about the storyteller in the tribe, telling stories to the young braves and how they can carry forth the, the culture of their tribe. But you dug into business, and I want to I want to get into that extensively.

00:02:08:22 - 00:02:24:23
Speaker 1
But first of all, you are a business school professor. Also, this is, a lot of factual information that has gone into this. It's not just somebody going, hey, you should tell a story. It's just your culture. So give us a little bit of your background in why you wrote this book.

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Speaker 2
That's a great question. I'm actually a professor of strategic management, and, and and interestingly enough, I don't think you notice in the book I take a pretty economic approach to analyze and strategies. And so my, my training and my predisposition is economics. That said, as I work with companies, and and helping them choose and modify and implement their strategies.

00:02:51:03 - 00:03:12:14
Speaker 2
I, I have routinely over the years bumped into the problem of a mismatch between a new strategy. We've been working to implement and a firm's organizational culture. I first, had this experience in the 80s, so I spent, at the time, I was doing a lot of work with, with a well known company. I won't mention his name, just the initials HB.

00:03:12:15 - 00:03:37:14
Speaker 2
And, and at the time, I can't say anything about it now, but at the time, HP had an amazing organizational culture. It was so ennobling and enabling and, and at HP, when, when when a person, when a business leader, developed a new technological idea and invested in and didn't work, that was treated as an opportunity to learn.

00:03:37:16 - 00:04:04:00
Speaker 2
So I'm very impressive place. As I was working with them, I got a phone call from another company, that will go truly unnamed. And they they asked me, they said, we understand, you know, a lot about HP s and. Yeah, but we compete with them. I know we're not doing very well. I know that too. And and I, they said, so, what we like, we just finished it.

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Speaker 2
They said we just finished a six month study of our organizational culture, and we decide cyber risk averse. Now in the Valley, they were known as the most risk averse firm in this industry. It's a six minute conversation, not a six month conversation. But in fact, it took him six months to figure out if they were risk averse is, in fact, an indicator of just how risk averse.

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Speaker 2
And and so they they said what we want to do is we want you to hire we want to hire you to help us get rid of our old culture and put a new culture in place. And we want you to do that in six weeks. I knew that was absurd on his face. Okay. I knew that they really weren't.

00:04:42:00 - 00:05:10:16
Speaker 2
Isn't changing their culture changes that set up, but I haven't. I also had to be honest with myself that I didn't have a theoretical tool or a methodology, that I could use a liquid actually, that I could legitimately say is designed to change your organization's culture. In fact, we talked about it in the book, people Who are who I respect, who are really, change management scholars of the highest order, really?

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Speaker 2
are very skeptical about the ability to change an organization's culture. and so, and so I was sort of in that same mode. I'm not sure how to do it. I don't have, the tools to do it. Culture is diffused. It's intangible. All those things that make it difficult to change. No one's in charge of culture, you know, everyone's in charge of culture.

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Speaker 2
They're for nobody's in charge are culture. And that's, And yet I just kept bumping into it as a problem and as a challenge that's mismatch in strategy and culture. Then what happened is, I met, Manuel Amir, and, we haven't got the same church, and I. And he was just he just had moved to really different parts of Utah.

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Speaker 2
And he said, and, he's, he was a, he was a, recently retired four time CEO. So as I often do, I said, hey, I'm a business school professor, let's have lunch together. So I think are what's going on. And so that start that lunch was, scheduled for an hour. And four hours later, we had basically debriefed his career.

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Speaker 2
And what he had specialized in was culture change. Wow. and he had done this four times. he didn't know that he was being called to change. I label that he he really understood what it meant. And he also had a methodology that he had developed also not explicitly was just that this is what he did. and it was have to do with building storage, to replace all the.

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Speaker 2
So you take old culture stories and you build new stories that replace those old stories and you change the culture. Wow.

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Speaker 1
So you guys studied a whole bunch of different companies?

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Speaker 2
Yeah, we did for.

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Speaker 1
This book and pulled out some of the best stories or the results that you were looking. You know, obviously, comparatively speaking, you don't have a story. You you really don't have a great path for your culture, I would assume.

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Speaker 2
Well, well, well, this is what we know. We know that, that cultures are created and maintained through the stories that employees tell each other about what's expected. Affirm the norms, the expression, expectations of the firm. And so, and so, so the stories are already there. They may not be the stories you want to be there, but they're already being shared.

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Speaker 2
And then and there it's, you know, that's and with, social media, they're sharing even more efficiently than they ever were in the past.

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Speaker 1
So you mean it's not the employee handbook? That's.

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Speaker 2
I'm glad you're sitting down. I know that's a shocking conclusion. Well, one of our stories is a version of the employee handbook. An entrepreneur, generates this list of values that he thinks his company should have. And he writes it up and it goes off, sticks deeply and writes it out and puts on the wall. And a week later, he asks one of his subordinates, and so what are people saying about my list of values?

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Speaker 2
And you said they're mocking them. He said, they're shit my values. Yeah, because the values of the organization, the values you list are unrelated. And, and besides, some of those values you think are so important, we don't think are important. And so, yeah. So yeah, there was a, there's a, there's not very little to do with I will say this, going back to HP, the HP handbook actually reflected their culture very, very well.

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Speaker 2
It's called the HP way. I don't know if you remember that. Okay. Yeah. it was unusual in that way. But most of the time the, the handbook is sort of independent of, what's going on culturally.

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Speaker 1
Okay. So I want to I want to bring up, something that, I mean, I think this is probably overplayed and under or misunderstood a lot, and that's this Drucker quote of culture eats strategy for breakfast. Right? There's I mean, having spoken with you before, obviously there's more to it than that. Can you tell us? Because everybody always goes culture eat strategy for breakfast.

00:09:01:13 - 00:09:04:17
Speaker 1
But that's that's where the conversation stops.

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Speaker 2
Yeah. Well so we should know, I have spoken to the people at, the Drucker Institute, and they actually say that Drucker never said that, but that's necessary. He could have said it, but apparently they couldn't find it. I couldn't find the source. But, nevertheless, I qualify that book. I think the fact that culture is each, strategy to breakfast really shows that if there's a mismatch between your strategy and, and the culture, the organization, the culture will dominate.

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Speaker 2
But that statement is useless. It has no measurable impact. If you can't change culture now, one way you can do is you can modify your strategy to make it a little more consistent with your culture. But if your strategy is market determined, that is, you've gone from a regulator to an unregulated market and you've gone from a local to a global market, whatever is going on, and you've had to change your strategy in order to keep up with and to gain competitive advantage, keep up with competitors and and to gain competitive advantage.

00:10:05:16 - 00:10:22:12
Speaker 2
then, then, since then you're going to have to if you're going to have to change your strategy. But that implies the need to change your culture. And the Drucker quote points out the need to change the culture, but does not provide a methodology for doing so.

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Speaker 1
So you've figured out a methodology? Well, it seems.

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Speaker 2
No, I think what we did is we we described what people were already doing. I don't think they invented anything here. I mean that, as I've said to you before, the heroes in this book are the business leaders who shared their experiences on changing culture with us. we we were able to describe it, label it, make some logical sense out of it.

00:10:47:14 - 00:10:56:23
Speaker 2
But yeah, I mean, this is this is very much a inductive kind of study where we find out what these people were doing. and then we describe it.

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Speaker 1
Well, let's dig into that then. give me a, give me a basis for the study and what, you know, how you got to proving your, you know, or finding your outcomes, I guess.

00:11:06:04 - 00:11:28:00
Speaker 2
Sure, sure. So the logic is actually incredibly simple, I think, which is we've already established that we know that, culture is created, maintain an organization is by the stories employees tell each other. so if you want to, change that organization to charter, you got to change the stories that your employees share with each other. That's pretty straightforward.

00:11:28:02 - 00:11:54:07
Speaker 2
And how do you do that? Well, you got to have new stories to replace the old stories because, you know, social structure abhors a vacuum. So, so you have you have to build new stories. So what you want to do is you want to engage in as a business leader, you want engage in activities that are, that are different than the contradict, in fact, the old culture, but are consistent with a new culture.

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Speaker 2
engage in those activities. Then what happens is your employees see you doing those things and they start building the stories. They start saying, do you see what's going on here? Our CEO is doing this all of a sudden, which is inconsistent with the way we've been doing things historically. And that, that then, leads to the diffusion of new stories, right?

00:12:14:05 - 00:12:33:22
Speaker 2
An organization that replaced those old stories. And, and in that process, while the business leader engages in the activities that lead to the stories being built, the diffusion of stories means that the new culture is co-created with a business leader and with employees as they replace old stories with new stories.

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Speaker 1
Okay, so something I've noticed about businesses most people in an executive role are not very, I guess, aggressively present in order to star in these stories, if you will. You know, we've got I always say we have leaders and we have haters. Let's right the leaders lead, the haters hide.

00:12:57:05 - 00:13:12:21
Speaker 2
And I have to say, I was just working with a company, and I was talking about culture change. This is really an issue of the company as there's no doubt about that. And one of the subordinates of the CEO I was talking to said, you know, it turns out in order to build a story, you have to leave your office.

00:13:12:21 - 00:13:15:14
Speaker 2
Everyone's bets are higher.

00:13:15:16 - 00:13:40:03
Speaker 1
Right. Interesting. But I mean, and it's it's fascinating because leadership presence is a, a a lacking skill in this day and age in so many different businesses, you have leaders who are on video and physically present, who constantly set that that tone and come up with those stories and, and frankly, I mean, leaders here's, here's a cheat code for you.

00:13:40:04 - 00:13:43:07
Speaker 1
If you are present, you're going to develop stories that's.

00:13:43:07 - 00:14:05:17
Speaker 2
Going to happen. What that what do you why do you want them. We're not that's the question. And so they will happen by presence. Well we we actually I use a slightly different language but I think it's very consistent with your observation. Our, our our first criteria, we identified six attributes. And stories have to have in order to be likely to, generate culture change.

00:14:05:19 - 00:14:30:20
Speaker 2
And the first one is authenticity. and that what by that we mean that the values that and beliefs and expectations that you're trying to create with a new story have to be consistent with the business leaders personal values. that this sounds like a pretty straightforward idea. It's actually quite important in its implications and counterintuitive in some ways as well.

00:14:30:22 - 00:14:56:17
Speaker 2
So for example, if, if you believe that your in order to implement a strategy, your, culture needs to be transparent and risk taking. And you as a business leader are either transparent or risk taking, you may not be the right person. Lead culture change. so so we're in or another version of that is let's suppose you've hired a senior manager who's worked with you for years, and he was hired.

00:14:56:18 - 00:15:17:18
Speaker 2
He or she was hired in the old culture and is completely successful. That called culture one of the high performers, but is very reluctant to go to new culture. It's not authentic to them. And so they're very concerned about the way that that you may have to let that person go because they're not helping you build that new culture.

00:15:18:00 - 00:15:46:15
Speaker 2
So authenticity is actually a it's actually it's it's what leads you to be present in a way that actually is, has a positive impact on culture change. our experience, the data show overwhelmingly that, employees can smell cultural hypocrisy from miles away. And so, by the way, that doesn't mean you have to be perfect in terms of, you know, implementing culture change.

00:15:46:17 - 00:16:11:15
Speaker 2
We have a story you may have read. This is about a really interesting guys and, an entrepreneur in located in Singapore. And, he's trying to build a culture. it's a consulting district. A business is a consulting kind of business that really respects the client and respects the consultants and tries to build a really high level of personal integrity, respect.

00:16:11:17 - 00:16:30:19
Speaker 2
And he's been working long hours and traveling all over a lot of stuff. And he's he's leading, he's leading his office, and, late at night, tired. And this subordinate comes up to me and says, hey, I just finished that report you wanted. Here it is. And he came, and he has it to me. He looks at it.

00:16:30:21 - 00:16:53:10
Speaker 2
This is B.S. but see everything there's this is B.S. and throws it back at the guy and starts off home completely inconsistent with the culture he's trying to correct. Right. And, later on that night, it's now, you know, nine after nine, 10:00 at night that somebody calls him on the phone, says, listen, I really didn't like what happened there.

00:16:53:10 - 00:17:15:11
Speaker 2
I didn't like that. You said my work was B.S.. Listen, I may have made mistakes. It's not perfect, but you were not being respectful for me. I mean, you were being supportive and called him out on it, and and that and this, this entrepreneur said, you know, you're right, I blew it. I personally apologize for doing that. I will look at your report tomorrow and new and new ways.

00:17:15:13 - 00:17:38:07
Speaker 2
And would you do me an additional favor. This is this is the building story part. Will you tell everyone that I screwed up and you called me on it? Tell everyone that story. Because that's exactly what the kind of organizational I have. So that's taking a mess up. I mean, he messed up. He did. And turn it into a story that actually helps build a culture change.

00:17:38:09 - 00:17:40:05
Speaker 2
Wow. Very clever guy.

00:17:40:07 - 00:17:41:23
Speaker 1
Yeah. I mean, talk about authenticity.

00:17:41:23 - 00:17:58:11
Speaker 2
All right. There, a man right there. If you're not if you're not, because you know, you know how easy it is to get the ego involved here and how you respond by saying, well, I'm your boss. Shut up. You know, that's very effective. I mean, it's it's problem.

00:17:58:13 - 00:18:04:02
Speaker 1
That is, I, I guess you can't go past step one if you don't half step one. I mean, that's it.

00:18:04:02 - 00:18:28:03
Speaker 2
It is, it is. And this is bad news for some, some CEOs I've worked with who say, yeah, I know we need to change our culture. I know we need to go in this direction, but, you know, that's not who I am. we need a really outgoing, charismatic person. By the way. That's a little oversold. You don't have to be outgoing and charismatic to be to build stories, but it could help.

00:18:28:05 - 00:18:29:17
Speaker 2
But but it's not a requirement.

00:18:29:17 - 00:18:39:12
Speaker 1
But. Okay, so let me take you to the question of, you know, we always hear, you know, the top doesn't create the culture, but culture starts at the top. Is that kind of where that comes from?

00:18:39:12 - 00:19:04:02
Speaker 2
So I, we would agree with that. I think, listen, we we have no examples in our data. We have a data set of overheard 70 stories, from from or almost 70 interviews that we did. And not all of them are positive outcomes. Not all of them are negative outcomes. There's some mix, but we have no data, no examples in our data of successful culture change that didn't start at the top.

00:19:04:04 - 00:19:24:20
Speaker 2
That doesn't mean there isn't some discontent. There isn't some mismatch. People are are not happy. But the CEO starts it. The business leader could be a business general manager or division general manager or, functional vice president or whatever. Our CEO, it starts at the top. And the reason for that is culture change is so difficult, so risky.

00:19:24:22 - 00:19:51:12
Speaker 2
You can't expect some subordinate to take all the personal risks associated with that. We have examples in the book. We can talk about them, where, someone tried to change the culture, a manufacturing culture, for example, in a plant level, at a plant level, and was just absolutely squashed by corporate and so. Well, that that that event delayed that culture change for almost 20 years, 20 years, one of that.

00:19:51:12 - 00:20:15:15
Speaker 2
So so it's a very, very risky thing. Amazing. We also, by the way, we have no. So it starts at the top. but then includes other people, includes everyone as you, as you, as the story building process precedes. We can talk about that later in something we call that story cascade. But, another thing that's interesting is we have no examples in our data set.

00:20:15:15 - 00:20:37:14
Speaker 2
I mean, zero, this is kind of an amazing sense that the finding that wasn't there, it doesn't a successful culture change doesn't start with the announcement of a culture change, right? No. The CEO doesn't get up and say, okay, ladies and gentlemen, we're going to have a new culture in a year. And that's because there's just cheap talk.

00:20:37:14 - 00:20:58:08
Speaker 2
It's just it's a it's like, okay, absolutely, boss. Thanks for the heads up. I now know where to put my head down. I'll find out. I'll find all the things, I'll go to the training, blah, blah, blah. But it just cheap talk. And so, what matters is what, the CEO does, not what that the CEO says later on.

00:20:58:08 - 00:21:01:16
Speaker 2
There's a lot of talking, but it's all about action in the beginning.

00:21:01:16 - 00:21:06:02
Speaker 1
Yeah, totally. So all right, we've got number one. Authenticity.

00:21:06:02 - 00:21:07:18
Speaker 2
Yes. Authenticity. Yes. Right.

00:21:07:20 - 00:21:16:07
Speaker 1
I mean, it's obviously, you know, you've got to it's credit, it's critical. And you got to be consistent as a leader because if you're inconsistent, you're just going to confuse the hell out of everybody.

00:21:16:07 - 00:21:36:17
Speaker 2
But not but but by the way, confusion is good. I mean, when you say, when you first when you first start implementing these, engaging these new activities are inconsistent with the old culture. People who are very familiar with the old culture. Well, look what you're doing. So what do you do? I this is very confusing to me.

00:21:36:19 - 00:21:39:20
Speaker 2
That's a sign that you that you've that you're moving in the right direction.

00:21:39:20 - 00:21:43:22
Speaker 1
So I love it, I love it. Awesome. Take me to number two.

00:21:44:00 - 00:22:08:03
Speaker 2
number two is you got to start your own story. So this this this paper is, this book is about not about storytelling. and there's nothing wrong with storytelling where, you know, you talk about, you know, some entrepreneur or some incredible athletic achievement. All that stuff is great motivational, fine. And it's great. It's probably good for communication.

00:22:08:05 - 00:22:27:16
Speaker 2
It has nothing to do with culture change. so this is a this is about, about the, the, the business leader engaging in activities that are inconsistent with the old. And this is a new culture. And and so for that to happen, the business leader has to star in this story that starts.

00:22:27:21 - 00:22:30:07
Speaker 1
So that mean star in your own story.

00:22:30:09 - 00:22:35:08
Speaker 2
it means, well, let me give you an example. Let me tell you a story.

00:22:35:10 - 00:22:35:22
Speaker 1
There we go.

00:22:36:03 - 00:22:58:09
Speaker 2
So it's, so, so the seminal story in of the book is the one that I heard at that lunch with, with my coauthor, Manuel Amorim. he's going from an organization. This is a telecommunications company in Brazil that was in a in a regulated monopoly. And, and and they had developed a, a very top down, hierarchical culture.

00:22:58:11 - 00:23:23:22
Speaker 2
And they were moving towards a deregulated monopoly in telecom with new telecom competitors, plus the internet, mobile telecom. It's just a radical change. And the old top down culture was not going to work. You needed to have a customer oriented, innovative, risk taking culture, opposite culture for good strategic reasons. The old I mean, we can go into that later too.

00:23:24:02 - 00:23:46:14
Speaker 2
But, so, one of the products they have is is, telecommunications internet connection product and it's not working very well. And, and and Manuel is the CEO, he, he buys this for his home, and he doesn't make him. Can't make it work. So he calls up the help line. There's a story there, too.

00:23:46:14 - 00:24:02:13
Speaker 2
But again, I'm looking to keep things short. He calls up to help line, and he gets hooked on it. Is hooked up with this guy, is a part time call center employee and and they're on the phone for over an hour and a half trying to get this thing to work. And it never works. You can't get to work.

00:24:02:15 - 00:24:20:11
Speaker 2
At which point Manuel says to the guy, you know, I'm I'm the CEO of a company. And the guy says, yeah, right. Yeah. To you spend an hour and a half of me. You're not the city. I said, no, I really am. And there's a story there too. But, finally, Manuel says, what were you need to know in order to have solved my problem?

00:24:20:13 - 00:24:41:16
Speaker 2
And the guy says, you're the 14 things. The list of 14 things that I would have needed to know to be able to solve. And I don't know them. We don't have access and information. He said. Okay, next week is the executive committee meeting of the corporation. Would you and a couple of your colleagues be willing to come to that executive meeting and present this list of 14 things?

00:24:41:16 - 00:24:54:18
Speaker 2
Okay. Remember this is top down hierarchical culture. I give you some sense in the old culture, no employee can get on the same elevator as the CEO. Okay. Yeah. That's right.

00:24:54:20 - 00:24:59:03
Speaker 1
And this is a call taker getting invited by the CEO. They just turned.

00:24:59:03 - 00:25:22:09
Speaker 2
The thing for an upside down. Are you kidding me? It's the this hourly employees, part time employees are lecturing the senior management team and and, about what needs to happen. and here are the 14 things. And they think that they think that the call center guys, they go away and the CEO says, how many of these 14 things did you know about?

00:25:22:11 - 00:25:44:06
Speaker 2
He said, well, we knew about seven. I said, okay, here's what we're doing. Step one, we're suspending product sales in this of this product. We're not going to sell a product that we can't support. And by the way, all of their bonuses, including the CEO's bonus, depended on sales of that product. So he basically said, this is this is authenticity, right?

00:25:44:10 - 00:26:00:07
Speaker 2
So we're not messing around. We're not going to sell a product that we know that we can't support. Step two I want you guys you to in charge of this to, tell us how we're going to get information on these 14 items. And I want you to present at our next executive meeting, which was two weeks away.

00:26:00:09 - 00:26:30:05
Speaker 2
And we're here, by the way, you're going to present to these call center employees as well as to us and all that happens. And, they turn it around. And that's the beginning. That's the beginning of this fundamental shift. now, if it could have how this has it could have been the case that the way you saw that, that the CEO solved that problem is you could have called up the IT guy, the VP of IT in the company that has a good assignment for for two hours, couldn't get to say no work.

00:26:30:07 - 00:26:51:04
Speaker 2
Right. There are 14 things you need to know. Get this fixed. Could have done that way. But then he's not building a story. He's not changing the culture. He's he's solving the problem, which is the narrow problem, which is the technology's not working. But he's not solving the bigger problem, which is it's got the cultural mismatch. So he does it in a public setting, this executive committee.

00:26:51:04 - 00:27:18:20
Speaker 2
And he's there. He is making a happen. So he stars in that story that he's building. That's all that's existing is a classic. Just that all these six attributes are very, very common. It's up to almost all of them. There are very few stories where, successful culture changes did not did not include the, the, the the business leader, starring story.

00:27:18:20 - 00:27:21:05
Speaker 2
I can tell you another one would go on to so.

00:27:21:07 - 00:27:22:01
Speaker 1
Well, okay.

00:27:22:04 - 00:27:26:13
Speaker 2
So I got I got 60 stories in the book, so. All right.

00:27:26:15 - 00:27:46:04
Speaker 1
So we'll tell you what this is, this is a two part podcast. This is the end of part one on part two. Everybody make sure you tune in next week for more. Jay Barney on how to change the culture in your organization. Remember, there are six attributes we've been through. Two of them. The first one, authenticity. The second one.

00:27:46:04 - 00:27:52:16
Speaker 1
Start in your own story. We will see you back on part two of two with Jay Barney and start with a win.