Anatomy of Change - How Organizational Culture Forms

We discuss the interplay between organizational culture, relationships, and operational models, using the metaphor of states of matter. It emphasizes that these elements are interconnected and should be addressed simultaneously for effective change. Organizational culture is shaped by external and internal factors, including history and dramatic events, which can create opportunities for cultural shifts. Self-organization is key during crises, allowing organizations to reestablish equilibrium. External events like economic changes or internal events like leadership shifts can disrupt equilibrium, providing chances to influence culture. These moments require careful management to effect meaningful cultural transformation. #organizationalculture, #changemanagement, #leadership, #selforganization, #culturaltransformation, #equilibrium, #operationalmodels

Episode Transcript

(00:00):
Welcome to the Colig Experience episode. Get ready to dive into bold insights, innovative

(00:09):
experimentation and groundbreaking leadership strategies. Today, we're exploring the intricate
dynamics of organizational culture, its interconnectedness with relationships and operational models,
and how leaders can guide transformative change. Let's start.
In our previous episode, we used Tiki's model that distinguishes between organizational

(00:33):
culture, relationships and operational models through the metaphor of different states of
matter. We explained that while this distinction is convenient and organizing, reality is much
more complex. The boundaries between culture, relationships and the operational model aren't
so sharp, and it's not always possible to distinguish between them. We also mentioned

(00:58):
that to lead organizational changes, we can't work on each component separately according
to some order or hierarchy. Instead, we must work simultaneously across all organizational
states of matter. This means managers need to expand their language to include concepts
from the operational world, the dynamic field of relationships and organizational culture.

(01:24):
One of the interesting questions regarding organizational culture is how it forms and
what shapes it. If we know which factors create this elusive thing we call organizational
culture, perhaps we can find ways to influence it. We can start from the areas external to
the organization, for instance, the social field in which the organization operates,

(01:47):
beginning with the country where it's located. A European organization, for example, inherently
has a different culture than a Chinese organization, and both are obviously different from an Israeli
organization. Those who have worked in global organizations recognize the presence of local
culture within each site of the organization. Beyond cultural gaps between different countries,

(02:13):
there's also the gap between different sectors. The culture of companies in the construction
field, for example, differs from law firms, and both differ from tech companies. In other
words, the professional arena also influences organizational culture. Let's dive deeper
into what the organization does. There's a cultural difference between, for example,

(02:36):
an organization that provides products, one that provides services, and one that executes
In a product organization, only a small layer of the organization connects with customers,
unlike companies that do projects for clients where most employees live the client. We witnessed
this first hand while consulting for a major software company, transitioning from a product-based

(03:00):
model to a services approach. Their engineering teams accustomed to working in isolation on
well-defined features suddenly needed to interact directly with clients and adapt to changing
requirements. The cultural shift was profound. Engineers who valued technical perfection
had to learn to prioritize client satisfaction and flexibility, causing significant friction

(03:26):
until we helped establish new cultural norms that valued both technical excellence and client
responsiveness. Everything we've said so far is perhaps interesting but lacks significance. Why?
Because we have no ability to influence the country where the organization operates,
its field, or its operational nature. What else influences organizational culture?

(03:51):
The organization's history. Every organization has an organizational memory that encompasses
important events, positive or negative, that shaped it. Crises experienced by the organization
can certainly impact its perception of reality and shape the culture that will exist within it.
This may seem like another insignificant point because we cannot influence the organization's

(04:16):
history. What happened? Happened. But that's not entirely accurate. We cannot influence what has
already occurred, but we can influence the narrative of the story, the way historical events
shape the present. Addressing historical events as culture shapers can shed light on how

(04:37):
organizational culture forms. To understand this point, we need to know another concept,
organizational equilibrium. Organizational equilibrium is a state where the organization
expends minimum energy on change. It's in stagnation. This means the organization has
stabilized around a point where it manages to produce maximum output without changing and

(05:01):
without adapting itself to external reality. Organizational equilibrium is the organization's
comfort zone. It's comfortable not changing. It's gotten used to the situation. There are no
surprises. The organization aims to reach a state of equilibrium. Always. That's its tendency.

(05:23):
Every time something diverts the organization from equilibrium, it will strive to return there as
quickly as possible. The organization develops defense mechanisms that prevent it from leaving
equilibrium, which is why removing an organization from equilibrium requires a very large amount of
organizational energy. This is why leaving the organization's comfort zone doesn't happen often.

(05:48):
We saw this clearly while working with a biotech company after a failed clinical trial.
For years, their culture had been built around a single promising molecule.
When the trial data showed unexpected safety concerns, the entire organization was thrown
into disarray. Rather than forcing a quick pivot, we worked with leadership to acknowledge the

(06:11):
collective grief, then gradually helped teams navigate through the crisis. By allowing the
natural self-organization process, while providing a framework that emphasized resilience and
scientific curiosity, a new equilibrium formed that valued diverse research pathways rather than
single molecule focus, dramatically changing their culture in ways direct intervention never could.

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Sometimes due to dramatic events, the organization moves far enough from its equilibrium state.
In such situations, the organization can either disintegrate or reorganize around a new
equilibrium point. This process happens spontaneously. The professional term is self-organization.

(07:00):
The organization reorganizes independently and creates a new order and a new equilibrium point.
In this process, the system stabilizes around perceptions and beliefs, habits,
moods and patterns, and fixes them. This is also how organizational culture forms.

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Organizational culture develops along with the organization as it finds its equilibrium point.
There are organizations where this event occurs only once in their lifetime, and there are those
that undergo several changes throughout their lives. This depends, of course, on the frequency of
dramatic events that the organization experiences. What is that dramatic event that can produce so

(07:46):
much energy that it will succeed in removing the organization from equilibrium? One possibility
could be a process of growing discomfort in the style of the boiling frog mentioned in the article
on disruptions found here. This discomfort creates frustration and anger that may roll into a crisis
point that can translate into energy which, if large enough, will remove the organization from

(08:10):
its equilibrium. The thing is, for enough energy to accumulate, the pain involved in not changing
needs to be much greater than the pain involved in changing. We're less into pain, but sometimes
that's the situation. The second possibility resembles the turkey we mentioned in that article,

(08:30):
a short event that takes the system out of equilibrium. This can be an external event,
COVID, the bursting of an economic bubble, etc., an internal event, unexpected replacement of a key
figure like the founder, sharp cuts in personnel, etc., or an event that is somewhat internal-external,

(08:52):
such as the acquisition or merger of the company with another company.
As mentioned, the organization's self-organization around a new equilibrium point may change
paradigms, perceptions, and behaviors that can pull organizational culture in one direction or another.
It's important to remember that self-organization, as its name suggests, is self-directed, uncontrolled,

(09:17):
and consequently its cultural products are also such. But that doesn't mean we can't influence it.
We definitely can take advantage of situations of crisis or dramatic change to pull the organizational
culture in one direction or another. The timeframe we have to perform this action is limited,

(09:38):
and the way in which this change can be made is also limited. But it is indeed an opportunity to
create change. In the next article, we'll present another, less radical way that can influence
organizational culture. And that's a wrap for today's podcast. We've delved into how organizational

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culture is shaped by both external and internal factors, highlighting the role of leaders during
times of change. Don't forget to like, subscribe, and share this episode with your friends and
colleagues so they can also stay updated on the latest news and gain powerful insights. Stay tuned
for more updates.