A researcher known for his work on competitive advantage and strategy, American professor and consultant Jay Barney came to Brazil in mid-May for a project quite different from his usual: to launch a book with two Brazilian co-authors (executives Manoel Amorim, known for having led the transition of Telesp, a state-owned company bought by Spain’s Telefônica at the time of the privatization of telecommunications, and Carlos Júlio, a former leader of several companies, professor and lecturer).

 

It’s a different project because, in his articles, Jay tends to favor mathematical models. “I don’t really like examples, they take the attention away from the theory,” he said in one of his lectures at Insper. In the case of the book “The Secret of Culture Change – How to Build Authentic Stories that Change Your Organization”, the opposite is true. “The strength of the book lies in the stories, which are enlightening and very entertaining,” he said.

 

The way this work came about was also peculiar. When he retired in 2014, Manoel Amorim settled in the small town of Park City, a ski resort in Utah, United States. That’s where Jay Barney lived. The two attended the same Mormon service on Sundays and ended up getting to know each other. “When he told me that he had been the chief executive of several companies, I said we should talk and we set up a one-hour lunch,” recalls Jay. “Four hours of conversation later, I told Manoel that he wasn’t a CEO, he was a cultural change agent.”

 

Until then, Jay didn’t really believe in the possibility of cultural change. Of course, cultures evolve, but transforming them on purpose… “I’d been thinking about this since the 1980s, and I didn’t think it was possible,” he said in an interview shortly before the book launch. Even the organizational change guru John Kotter, a leadership professor at Harvard, believes that culture is not easily manipulated, and attempts to change it always fail.

 

Manoel convinced him, noting that the transformation at Telefônica Brasil was so dramatic that it even became a case study at Harvard Business School. And so, the idea for the book was born.

 

Over the next few months, with the help of Carlos Júlio, the two collected dozens of narratives from leaders of organizations. “Not all of them have brought about change,” Jay warns. And of those who tried, half failed. The rest make up the 60 stories in the book.

 

The model for promoting cultural change is based on building stories that challenge the organization’s usual behavior and characterize a new way of acting. “When these stories start circulating, people get confused,” says Jay. “Which is a good sign.” After a while, they begin to make sense of the stories and the new culture is born. For this process to be successful, the stories essentially have to have six attributes:

 

1) First and foremost, the change must reflect the leader’s authentic personal values. Otherwise, employees will perceive hypocrisy and will not adopt the new culture.

 

2) The leader, whether the chief executive or a department head or supervisor, needs to be the protagonist of the stories, and they have to be radically different from the old culture.

At Telefônica, for example, Manoel invited customer service employees to present the executive committee with a list of issues that made the service poor; he then gave the executives two weeks to formulate a corrective action plan, which was to be presented to the technical support staff. As long as the problems were not resolved, the sale of an internet service subscription – to which the executives’ bonuses, including Manoel’s, were tied – was suspended.

Another story in the book tells of the president of a technology company that had suffered losses that forced it to lay off hundreds of employees. The leader invited the board of directors to a celebration at an upscale restaurant in San Francisco, but instead of the regular menu, they were served only bread and water. “This is what we deserve,” he told them. But he added that he had already booked the same venue for the following year, when he was sure they would have results to celebrate. And they did.

 

3) The stories need to challenge the current culture and build a path towards the new culture.

 

4) They must engage employees’ minds – because there is a solid business reason driving the culture change – and also their hearts: they need to be in line with their core values and aspirations.

 

5) Stories must be theatrical and dramatic. This guarantees that they will spread more quickly throughout the organization and will be remembered and repeated for a long time.

 

6) It’s not enough for leaders to create their own stories; they need to create a chain of stories, getting other members of the organization to also create stories in line with the culture they want to establish.

 

The following are edited excerpts from an interview with Jay Barney

 

About coming to Brazil:

 

I’ve been a few times. Many years ago, in Rio de Janeiro, I had an afternoon off and my host asked me what I would like to do… go to a soccer match, of course! It was a wonderful experience.

 

About the book’s appeal here:

 

Because they are companies that are well known to Brazilians, we always thought that the book would be beautiful to the public here. I’ll be in France, Japan… all over the world. It’s a global message. However, the examples are mainly Brazilian and South American.

 

How the theme of culture relates to its usual themes, competitive advantage and strategy:

 

For me, they are independent projects. My other work is generally purely academic. But the themes are connected. One of the signals a company can send to stakeholders to show that it is truly committed to its purpose is to invest in a culture consistent with their values. So, absolutely yes, culture can make a difference.

 

Back in 1986, I wrote an article: “Can an organization’s culture be a source of competitive advantage?”. The answer is yes. It can also be a source of disadvantage. This is because culture is difficult to change – because it is diffuse throughout the organization, intangible.

 

I started paying attention to culture as a strategic issue in the 1980s. At the time, I was consulting for HP, a company with an extraordinary, open, innovative culture. Then I was contacted by a competitor, known for having the opposite culture, one that was averse to mistakes, with a rigid structure. They wanted me to change their culture… in six weeks. I replied that I didn’t think it was possible. When I met Manoel (Amorim), he gave me a structure to think about how to do it.

 

On what is the best culture for a company:

 

The first thing to clarify is that we don’t say in the book what the ideal culture should be, as happened in the 1980s and 1990s, when authors advocated a perfect culture. That doesn’t make any sense to us. Because the value of a culture depends on the strategy you have.

 

If your business strategy requires top-down control, your culture must be hierarchical. If it’s an innovation and customer connection strategy, you need a bottom-up culture.

 

On when to change the culture of the organization:

 

We also don’t say that you have to change the culture when the strategy changes. Often, culture and strategy are out of sync. This can happen for several reasons: a change in management, new technology, etc.

 

Sometimes you can tweak the strategy a little, or adjust the culture slightly, to realign the two. We’re only interested in cases where you can’t change your plan and the misalignment continues. In that case, you have to change the culture.

 

On the risks involved in cultural change:

 

Yes, it’s risky to try to change the culture. Research shows that 90% of all changes in companies fail. This rate must be even higher in the case of cultural change, because people have no idea how to go about it. Read the book and you’ll get it. But it’s not a guarantee, there’s always risk.

 

About changing only part of the culture:

 

Culture is a package. In principle you might be able to separate values around how to treat employees from operational efficiency values. But that’s not real life. Real life is a tangle of norms, values, affections, feelings about how people work together. We have almost 60 stories in the book, and they’re not changes made with a brush and a scalpel; they’re changes made with an axe. We have to go from local to global, from top down to bottom up. They are more absolute, more dramatic changes.

 

On whether it is possible to change the culture of an organization rationally:

 

If by rational you mean always maximizing return, being fully informed, that sort of thing, then the answer is no. But if by rational you mean a manager who proactively changes his culture, then the answer is yes.

 

About authenticity:

 

There’s a lot going on in a company at any given time. And a lot of it is not in the direction of the culture you want. That’s why the effort has to come from the top – from the head of the division, the CEO, the rector of the university…They engage in activities that others observe and these observations then become stories that are shared throughout the organization.

 

But the first step is authenticity. Leaders have to understand what values they have. If you conclude that your organization needs to be less risk-averse, but you’re not, it won’t work.

 

Our conclusion is quite radical: sometimes,, you are not the right person to bring about change. You may have people who have always been loyal to you and the company, who have generated incredible value over time, but who are not suitable for the culture that needs to be set up. If they are not willing to change, you may have to let them go.

 

About acting instead of talking:

 

We have zero examples where the change started with the CEO saying he was going to change the culture. It’s nonsense. It’s bullshit. What you do is start behaving in a very different way from usual, and consistent with the culture you want to implement. This confuses people for a while, then they begin to understand the point.

 

About stories vs. rules:

 

The standard model for implementing a cultural change is: let’s reorganize the structure, change the incentives, change how we measure performance, who we hire, how we train them…

 

Our research shows: there is no example where changing HR policies has led to a change in culture. You change the culture by replacing the stories that supported the old culture with stories that support the new culture. Once you’ve done that, over time a tension arises between the new culture and the old HR policies. That’s when you change the policies.