I just returned from Stockholm, Sweden where I presented a paper at the 2017 International Academic Conference on Business on how enduring companies manage to both stay true to their culture and traditions while also managing change. Though these companies have very strong commitment to their values and culture and the core strengths that enabled their success, they would not have survived the changing economic, social, and cultural conditions taking place over 100-200 years if they hadn't found a way to change and adapt. So how do they manage this balancing act?
Roger Martin, one of the people whose opinions I value (director of Monitor Group consulting, dean of the Rotman School of Business, author) and asked to review my book, suggested that I needed concrete examples of how companies manage this balance since it is so difficult - that the failure to successfully navigate change is the downfall of many previously successful companies. So last summer I spent my time (in between chemotherapy treatments) doing case studies of Century Club Companies on how they manage this balance between longevity factors #1 (strong corporate culture and values) and #2 (protecting & developing core strengths/change management). This paper is the result. I hope you enjoy it!
Managing for Long-Term Success: Balancing Tradition and
Change
Vicki R. TenHaken
Hope College
41 Graves Place, Holland, MI
49423
tenhaken@hope.edu
Introduction
A
longevity model developed from research on companies over 100 years old in the
United States and Japan (Kanda and TenHaken, 2014; TenHaken 2016) describes
five factors underlying these organizations’ long-term success:
1.
Strong
corporate mission and culture;
2.
Unique
core strengths and change management;
3.
Long-term
relationships with business partners;
4.
Long-term
employee relationships; and
5.
Active
members of the local community.
Century
Club companies have strong corporate cultures and unique strengths that lead to
a consistent sense of purpose over the long term. But these companies would not
have survived over 100 years of economic, social, cultural, technological, and
other challenges without adapting and changing. So how do they then manage to change
and adapt with the times while maintaining their culture and the very
capabilities that enabled their longevity in the first place? Longevity factors
#1 (strong corporate culture) and #2 (unique core strengths and change
management) require a delicate balancing act: One cannot build a strong culture
and protect unique strengths without dedication to a broadly supported purpose,
but such laser-like internal focus can get in the way of the transformations
needed to stay relevant with changing realities.
How do
Century Club companies achieve this balance of continuity and change? How do
strong culture companies avoid becoming too internally focused? Are there
actionable practices young companies could employ to help them navigate this
delicate equilibrium? One company managing to do a rather remarkable job at
this balancing act is Herman Miller, Inc. (founded in1905), a recognized
innovator in furnishings for work, healthcare, education, and living
environments. Following are the results of case study interviews conducted with
several company executives on this topic (TenHaken 2016).
Herman
Miller CEO Brian Walker started the conversation: “In part we are able to
balance our commitment to tradition and the need to change by relying on our
business partners, specifically outside designers. They come from many
different backgrounds and fields of knowledge and prevent us from being too
internally- or industry-focused. Second, our design tenets and corporate values
play a major role, since they enable us to manage forward while being grounded
in the principles that enabled our success. Though certain practices may
change, the principles behind them stay solid and absolute. Last, we work hard
to have a congruent culture but are insanely open to any and all ideas.
Therefore, the most important job for our leaders is often to be good editors.
We work as a team to come to a consensus when evaluating ideas based on many
differing fields of expertise. We don’t rely on financial goals or market
research to make the decisions, which would certainly be easier, but not nearly
as robust. This healthy collaboration is a key balancing practice.”
So, stay
grounded in the organization’s culture, values, and core strengths, but avoid
an overly internal focus and remain open to challenging ideas—easier said than
done. Subsequent conversations with Ben Watson, Herman Miller’s Executive
Creative Director, and Don Goeman, the company’s Senior Vice President of
Research, Design, and Development, elaborated on these ideas. Their very
backgrounds exemplify one of the practices they feel is important in maintaining
the company’s balance between tradition and change: Goeman is a lifelong HMI
employee (30-plus years) and Watson is fairly new to the company (5 years).
Though these executives sometimes pull each other in different directions, they
agree it is important for the company to have a combination of new blood and
long-term employees in leadership positions. Rather than bringing in a new
leader and wiping the slate clean or having a leadership team filled only with
lifetime employees who have not experienced other companies or industries, they
believe a combination enables a good balance of tradition and change. This mixture
of old and new works only if the new leaders make a point of learning the
culture, respecting and honoring past traditions, and are committed to becoming
good stewards of the company. If an executive from the outside comes in with a
personal agenda that challenges the culture, intending to make a name for
him/herself, the corporate white blood cells will kick in and expel the infection.
As Watson remarked, “the culture itself is more important than the leadership.”
Conversely, long-term employees need to be open and willing to listen to
suggestions from the new people about things that need to change if the company
is to succeed into the future.
Protecting the Culture and Building Core
Strengths
As with
many Century Club companies, Herman Miller spends a great deal of time teaching
its history and culture to employees, as well as with all their business
partners. Organizational culture is described as a system of assumptions,
values, norms, and attitudes developed and adopted by members of an
organization that help them determine acceptable behavior—or “how things are
done around here” (Schein 1984). At Herman Miller, one can find these “Things
that Matter,” their corporate values, all over the company website and in
various pieces of information, including product literature and sales proposals.
These principles are taught in new employee orientation and management
development programs. Managers reference the principles daily, particularly in
decision-making. Adherence to the principles is part of a manager’s performance
evaluation. Every few years company leaders gather to discuss these values to
make sure they have a common understanding of them and to enhance or elaborate
on certain ones, if necessary, to make them relevant for current conditions.
“These are things we all believe in and principles we can imagine D.J. De Pree
[the company’s founder] would sign his name to,” says Watson.
Some
Herman Miller traditions, such as the Watercarrier celebration, are designed
specifically to ensure the continuity of the culture. This event celebrates
employees who have served the company for 20 years or more. Herman Miller uses
the term Watercarrier because “in the life of an American Indian tribe, the
Watercarrier was one of the most important and respected positions. Water, like
food and air, is essential for survival. Corporations…can become sustaining
institutions like tribes. They can be the source of belonging; they can be the
locus for achievement; they can be a real life- and work-support system” (De
Pree, 1992). During the celebration, all company Watercarriers are reminded
that it is their obligation to be tribal storytellers, teaching other employees
about the company culture by sharing their own experiences. “Brian [the company CEO] spends a lot of time
planning what he says at these events, because this is something special that
needs to be protected—it’s like a movement, sort of spiritual in a way,” says
Goeman. “These ceremonies extend the culture and bring renewed attention to the
things that matter.” In 2015, there were over 1,700 Watercarriers at Herman
Miller, a little less than one-fourth of all employees worldwide.
Companies
can construct training programs, disseminate speeches by the CEO, and sponsor
other programmed activities, but Goeman says what really maintains the culture
is a lot of people telling personal stories in their own, genuine way as they
have casual conversations in the course of doing their work. He references
author and consultant Larry Prusak, who says the greatest impact on
transferring culture occurs through storytelling, something former Herman
Miller CEO Max De Pree recognized when he began the Watercarrier tradition in
1987. This practice of encouraging and honoring long-term employee
relationships is a good example of a program any company could initiate to
carry out factor #4 in the longevity model. The inscription next to the
Watercarrier sculpture at Herman Miller’s corporate headquarters states this
intention: “The tribal watercarrier in this corporation is a symbol of the
essential nature of all jobs, our interdependence, the identity of ownership
and participation, the servanthood of leadership, the authenticity of each
individual.”
Identifying the Need to Change
OK, so
define, protect, and build your culture and core competencies. But how does a
company with a strong culture resist the tendency to become so comfortable with
the way things are that they miss the need to change? How do these companies
avoid becoming insular and overly focused on internal behaviors and practices? Especially
when things seem to be going fine, why rock the boat by seeking change?
Many
Century Club companies, especially smaller firms without the luxury of in-house
research groups, rely heavily on long-term relationships with their business
partners and others in their community (longevity factors #3 and #5) to help
keep them attuned to changes on the horizon that could affect their business.
Even with a robust internal research capability, Herman Miller is no different
in this regard: “I think it is extremely important to be open to provocation,
to listening, to looking outside the company or outside our industry, not
getting too stuck inside our walls,” says Watson. “The leadership team spends a
lot of time with customers,” explains Goeman. “We are assigned to different
accounts, customers, markets—and are responsible to bring knowledge back to the
team.” The organization expects everyone, not only the leadership team, to have a
significant and rich network, says Watson. “So I’m networking with external
designers, and IT people are networking with leaders in that realm, as are our
social media people, and so on. And that’s everyone’s responsibility. We expect
people to share what they learn, and they can expect they will be listened to.
We are dedicated to design and innovation and developing networks, and every
aspect of our business has a creative, outward reach.”
Herman
Miller’s ability to identify when change is needed is certainly aided by two of
its core competencies—research and design. These values not only
institutionalize the search for innovation and the expectation of change, but
also provide a natural connection to the creative world. “Creative people are
the best assimilators of cultural change,” says Goeman. “We have a company that
looks to evolve and abandon itself to new ideas from the outside in—this has
been a big reason for our longevity.” Organizations such as Herman Miller have
been described as possessing constructive organizational cultures (Kotter and
Heskett, 1992). Constructive cultures promote individual curiosity, motivation,
cooperation, and adaptability. So part of the puzzle of how strong culture
companies are able to survive and change is likely the type of culture and core
strengths that are at work.
Despite
this predisposition for research and innovation, the company leaders readily
admitted that many of the major changes at Herman Miller over the last 100
years were born in times of crisis. Change is easier to embrace when survival
is at stake. Whether it was the changing way people lived and worked in the
early 20th century that pushed the company into modern design or the
company’s imminent bankruptcy that forced the need to try something different
in 1930—moments of crisis provide pressure to change. Whether the company was
moved to diversify in the early 2000s because of an over-capacity in the office
furniture industry or because of the far-sightedness of the company’s
leaders—who’s to say? The combination of
a pressing external need and an internalized willingness to consider change
yielded a transformation in both cases.
Recognizing
a need to change and figuring out what to actually do, however, are two different things. How does the company make
these very difficult decisions about which
new ideas to pursue? “There are so many aspects to consider when evaluating
new ideas,” says Goeman. “We’re pretty good at deferring, or allowing some of
the voices that are strong in certain areas to be vocal there—and other areas
self-balance around them. I always want to know what problem is being solved.
Ben adds an understanding of our brand, artfulness, and beauty. Other team
members add other perspectives. We recognize each other’s strengths, but that
doesn’t mean we don’t push back. Only a healthy collaboration allows a balance
of forces.”
Watson
adds, “For this approach to be successful, you have to ask all the voices
around the table to participate, to have an open conversation. We realize there
are many experts in different domains at any table, and you have to realize
when you’re not the expert and let the appropriate people make those decisions
or lead in those moments. There’s a comfort in the ebb and flow of
collaboration rather than a dictatorial control.”
The
company’s nearly 70 years of experience with participative management helps
make collaboration a productive process at Herman Miller (Frost 1996). Leaders
understand they can’t just dictate something and expect it to happen—or to have
it become accepted and repeated. “Decisions come out of consensus, but we’re
not a democracy,” says Goeman. “Not everyone has an equal voice on all
matters—we each need to know when to defer to people who know more than we do.”
Watson explains that a consensus culture “means you may be asking 97 people
around a table what they need. Many things will be in conflict, but in the end
a decision needs to be made. Editing, by its very nature, means you have to
make a decision. If all you do is listen and gather information, you end up
with a stagnant mess. Not making decisions gets you nowhere. But at the same
time you have to be clear that you are making decisions based on principles and
not on a whim or some personal bias or opinion.”
Building
consensus takes time and patience and the ability of individuals to engage in
productive dialogue on important issues with differing viewpoints. But taking
this time up front pays off in the long run. Most Century Club companies say
they take a long time to change, but it is this up-front investment in
consensus building, rather than a leader dictating change, that makes the
difference in successfully implementing and sustaining innovations,
particularly those that may challenge tradition. A decision process based on
things such as financial measures or market research can be clearer and certainly
easier than a consensus-building process. For many organizations financial
goals or constraints become the main factors considered when editing ideas and
proposals. “To get deeply engaged in the values of the company and constantly
revisiting the founding principles is a time-consuming endeavor, but it’s
necessary to make sure the principles forming our culture actually guide
decision-making, not just at the top, but throughout the company,” observes
Watson.
At one
point in the conversation, the Herman Miller executives were asked to respond
to typical research questions about ways various authors have suggested
companies generate innovative ideas. Using a standard Likert-type survey scale
of 1-5, they were posed questions such as:
·
To what
extent does the company invest in exploration of new ideas vs. exploitation of
current strengths?
·
To what
extent are ideas for new products/markets/etc. generated internally vs. coming
from business partners outside the company?
·
To what
extend does the company have a tolerance for “experiments on the edge” by
business units or individual employees vs. central control?
·
To what
extent does the company practice a “little bets” approach to innovation vs.
going for the big idea?
Watson
remarked that no matter how hard he thought about these questions, he always
ended up answering with a 3. He said, “For instance, we have to make long-term, big bets that are
risky; but we also have to do many—many—
little bets. It’s a teeter-totter, and though you’re never 50/50 at any one
point in time, it goes back and forth and you find the equilibrium. But you must keep the balance, and achieving
this becomes part of our decision-making process because we recognize the value
in both ends of the scales.”
Clark
Malcolm (Herman Miller’s long-term writer, editor, and storyteller) observes
that it is this very “both/and” nature of the company’s culture that enables
such balance. Answering a 3 on these questions is not an average of the two
ends of the spectrum, but truly a process of including both positions in one
answer. “Both/and” isn’t an easy or comfortable place to reside for an
individual or an organization. Many companies and their leaders don’t have the
patience or the fortitude to try to maintain such a precarious stance. (One
question the company often asks when interviewing potential employees is “How
comfortable are you with ambiguity?”) Living with “both/and” takes intent, an
understanding of all the complex factors involved, and a willingness to address
the difficulties that will be encountered.
Herman
Miller’s core competency of design has given them a history of experience with “design
thinking” as a way to solve problems—long before it became a popular term used to
describe a formal method of organizational innovation and change—and it certainly
helps them with this process of both identifying the need to change and
deciding what new initiatives to implement.
Implementing Change While Protecting the Culture
History is
replete with examples of firms in the same industry where some survive and
others have been unable to compete because they are unable to adapt to changing
conditions. The ability of an organization to systematically adapt itself to
changes that take place in the business environment is one of the primary
sources of a sustainable competitive advantage (Kotter and Heskett, 1992). Many
companies know they need to change, certainly when faced with a crisis. And
most come to a decision, one way or another, about what needs to be done. But
how do Century Club companies implement new ideas while staying true to their
culture and tradition? Can any culture stay constant over time, given the
changing environment experienced by a company that has been in business for
over 100 years?
As
discussed earlier, having a clear statement of company values that everyone
understands is a crucial component in bringing about change in Century Club
companies because it provides the baseline of stability from which to launch
new initiatives. However, Herman Miller’s executives agreed that in order to
implement certain changes, there are times when they need to question and
challenge the practices stemming from their values. Watson explains: “How we
carry out our principles may vary, but the values that form our culture cannot
be compromised.” When modification of a practice is necessary, the leadership
team spends significant time discussing and reaffirming, sometimes elaborating
on, the intent and values behind the company’s basic beliefs. “Then we come to
the table and have a debate, balancing our differing perspectives and trying to
understand why some of the practices we have used to carry out those core
principles might need to change,” says Goeman. “Our core principle of
transparency and openness tells us we have to engage and be thoughtful about communicating
the ‘why’ behind a new way of doing things,” adds Watson. “Over 100 years ago
Herman Miller began as a small furniture company in West Michigan. Today, with
more than 8,000 people, less than half of them in Michigan, how we implement
the company’s principles needs to vary but the principles themselves are sacred
cows—the ‘Things That Matter.’ For the company to survive, the practices used
to carry out our values may differ by geography, by type of business, and over
time,” says Watson. All the “discussion around the table” is to make sure the
changing practices are in alignment with the core principles.
Once a
decision is made to implement a major new initiative, especially one that
involves altering a practice some might see as challenging a core principle,
the hard work begins. Having what is termed a constructive corporate culture
may predispose an organization’s members to be flexible and adaptive in
response to changing environmental conditions, but care must still be taken in
how a change is implemented. Herman Miller’s leaders make of point of
communicating the change (sometimes ad
nauseam, according to Watson), being as transparent as possible—at every
level in the company and at every step along the way—about what needs to be
done and why. They build the case for
change, explain the rationale behind the selected solution, and describe how
the new approach will be implemented—including who will be affected and what accommodations
will be provided.
Goeman
says the company does a fair amount of research about how organizations learn,
always trying to improve this process. Former long-time company consultant Carl
F. Frost constantly preached to leaders of the company that they need to first
build understanding of why a change
is needed and what the new practice involves, and then provide good rationale
for why employees should accept the
new way of doing things, before they can ask for employees’ commitment to a new initiative (Frost
1996). “We also have the benefit of [former CEO] Max De Pree being a great thinker
about leadership,” says Watson. “We are able to learn from him, not just
through his actions, but through his writing (De Pree 1989 & 1992). This
helps future company leaders tremendously.”
Summary
What
actionable practices can help a company achieve the tricky balance between
tradition and innovation if it wants to survive over the long term? Here are a
few:
·
Protect,
build on, and strengthen your core competencies—those things that make your
company special.
·
Nurture
and pass on your traditions and culture, both at the top and throughout the
organization.
·
Build
corporate memory and preserve culture through employee tribal storytelling.
·
Have
employees throughout the organization develop external information networks.
·
Be open to
new, even radical ideas and develop ways to bring them into the organization.
·
Listen to
all voices that have something to say.
·
Develop
collaborative decision-making skills in your leaders.
·
Be clear
about your core principles that will not change, and make sure management
behavior and decisions reflect them.
·
When new
initiatives are to be implemented, particularly if long-accepted practices must
change, take the time to explain why the change is necessary but reinforce
commitment to key values and principles.
·
Communicate,
communicate, communicate—yes, over-communicate—in order to build organizational
understanding, acceptance, and commitment to new realities.
Leaders of
Century Club companies see themselves as stewards of the organizations
entrusted to them. Their ambition is first and foremost for the successful
survival of the company, not personal recognition. Protecting the traditions
and culture of the company while navigating the changes needed to move the
company into the future is a delicate balancing process. Drawing on the web of
relationships that form the very essence of these companies, it is truly the
interplay of all five factors in the longevity model that enable a Century Club
company’s long-term success.
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