Changing Organisational Culture

Culture is deeply embedded in an organisation's identity. While leaders may recognise that the existing culture is no longer fit for purpose, changing it is one of the most difficult challenges in management. This lesson examines why cultural change may be necessary, how it can be approached, and the problems that inevitably arise.

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Why Change Organisational Culture?

Several scenarios may trigger the need for cultural change:

Trigger	Explanation	Example
New strategy	The current culture does not support the new strategic direction	A risk-averse bank launching a fintech subsidiary
Merger or acquisition	Two different cultures must be integrated	Daimler-Chrysler merger clash of German and American cultures
Poor performance	Cultural factors are identified as root causes of underperformance	A blame culture preventing honest reporting of quality defects
External pressure	Regulatory, legal, or societal expectations demand change	Post-financial-crisis culture change in banking (moving from a bonus-driven to a customer-focused culture)
New leadership	A new CEO brings different values and expectations	Satya Nadella transforming Microsoft from a competitive, siloed culture to a collaborative, growth-mindset culture
Crisis or scandal	A cultural failing is exposed and must be addressed	Volkswagen's emissions scandal revealing a culture of deception
Changing workforce	Generational shifts bring different expectations	A traditional firm adapting to attract and retain millennials and Gen Z talent

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How Can Culture Be Changed?

Cultural change cannot be achieved through a single initiative. It requires a sustained, multi-dimensional approach over an extended period (typically 3–10 years for deep cultural change).

Leadership

Leaders are the most important drivers of cultural change. They must:

• Model the desired behaviours — employees watch what leaders do, not just what they say
• Communicate the vision — articulate what the new culture looks like and why it matters
• Make symbolic gestures — actions that signal the seriousness of the change (e.g., a CEO sitting in an open-plan office to demonstrate accessibility)
• Hold people accountable — reward behaviours aligned with the new culture and address those that are not

Recruitment and Selection

Hiring people whose values align with the desired culture accelerates the shift. Over time, the composition of the workforce changes, and the new culture becomes self-reinforcing.

Training and Development

Programmes that develop new skills and mindsets help employees adapt. Training should go beyond technical skills to include the values, behaviours, and attitudes the organisation wants to promote.

Reward Systems

What gets rewarded gets repeated. Aligning pay, bonuses, promotions, and recognition with the desired culture sends a powerful signal.

Old Culture Reward	New Culture Reward
Individual sales targets	Team-based performance metrics
Hours worked (presenteeism)	Output and outcomes
Seniority-based promotion	Competency and values-based promotion
Short-term financial results	Long-term customer satisfaction and sustainability

Organisational Structure

Structural changes can enable cultural change:

• Moving from tall hierarchies to flat structures encourages collaboration
• Creating cross-functional teams breaks down silos
• Decentralising decision-making empowers employees

Symbols and Rituals

Visible changes to the working environment, communication style, and organisational rituals reinforce cultural messages: