Culture Journey: Achieving Sustainable Innovation and Principled Performance in a Morally Interdependent World

Born out of the Clinton Global Initiative, LRN's Practice Forum for Principled Leadership, Performance & Operations is helping institutions move culture to the strategic center

(Justmeans/3BL Media) -- "If the human race wishes to have a prolonged and indefinite period of material prosperity," Winston Churchill declared in a speech in 1954, "they have only got to behave in a peaceful and helpful way toward one another."{1} Considering the fact our society is more interconnected—and in many ways more transparent—than it was sixty years ago, the British Bulldog's prescription for a healthy society is arguably more relevant today. 

Behavior is central to LRN, a good governance company whose research has found that "trust, shared values, and a deep understanding of a purpose-inspired mission are the three fundamental enablers of self-governing behaviors that produce competitive advantage and principled performance."{2} Over the course of its 20-year history, the company—which has offices in Los Angeles, New York, London, and Mumbai—has worked with over 700 companies and some 20 million employees, helping develop strategies to inspire good behavior, strengthen leadership, navigate the complexities of regulation and foster "do it right" cultures, all with a goal of creating sustainable innovation and growth that translates into economic value. As the company says on their website, "We are not a business with a mission, but instead a mission with a business."

In advance of the recent Clinton Global Initiative annual meeting, LRN took some time to reflect on a CGI commitment they made in 2011 to extend their mission to pro bono work with the NGO sector. That commitment entailed launching two very different non-profit organizations on what LRN calls "culture journeys"—journeys to make culture a core part of their strategy for flourishing in the new dynamics of the 21st century.  In a case study released in September, LRN describes their culture journeys with the two selected non-profits—Population Services International (PSI), a global health organization with programs targeting malaria, child survival, HIV AIDS, tuberculosis and reproductive health; and Network for Teaching Entrepreneurship (NFTE), an international organization that provides entrepreneurial training and educational programs to young people from low-income urban communities. The case study explains the commitment, the challenges, the objective of the journey, the lessons learned, progress updates after two years of work.

LRN's $1.5-million commitment is rooted in the launch of the "Practice Forum for Principled Leadership, Performance and Operations," which is designed to help the forum's corporate members "strengthen and advance how they behave, lead, govern, operate, consume, engender trust in their relationships, and relate to others, helping each build out programs that meet their specific needs."{3}

PSI has many strengths, including being highly mission-driven, strongly focused on making a positive and sustainable impact in the world and high levels of employee engagement and passion. But they also have their challenges, including increased regulatory demands that make it more difficult to operate globally, more stringent donor requirements; achieving greater collaboration across organizational boundaries, addressing the cultural factors that limit their capacity for operational innovation, and a mismatch between what sickens and kills poor and vulnerable PSI consumers; and what interventions or disease areas donors are willing to fund.

"PSI’s work with LRN has been eye-opening, provocative and action-forcing," said PSI CEO Karl Hofmann. "We are a large mission-driven NGO that works to save and improve lives, so how could any culture inquiries improve on that, we reasoned. Boy, were we wrong…we can get a lot better at driving our outcomes higher, and I think we are just at the start of an LRN-inspired journey."{4}

I had an opportunity to ask LRN's CEO Dov Seidman and PSI's Director of Learning and Performance Steven Honeyman some questions about the Practice Forum. To learn about the "HOW question," the "human operating system," "moral interdependency" and how a "failure summit" works, read on. 

Because of society's hyper-transparency and interconnectedness, you argued in your 2007 book HOW: Why How We Do Anything Means Everything, we entered what you called the "Era of Behavior," where how we did things matter more than what we did. One of LRN's main objectives is to help institutions answer the "HOW question." Can you explain this question, how it has developed since 2007 and its connection to the Clinton Global Initiative?

Dov Seidman: After it became clear that we weren’t just in the Era of Behavior, but deep inside it, I expanded upon HOW in 2011. Our interconnectedness had led to our moral interdependency, leading to profound implications for organizations and leaders. In the new forward to HOW, President Bill Clinton wrote, "As we settle into the 21st-century with all of its unique challenges, it’s clear that we can no longer regard success as a zero-sum game: one group rising only at the expense of another. In the new century people world-wide will rise or fall together. Our mission must be to think about the how, and to find new ways to take action to solve the global issues that none of us can tackle alone." The Clinton Global Initiative’s mission is to turn ideas into action, to make impact on the world. As we thought about Bill Clinton’s vision, we wanted to do something that we uniquely could commit to that would help mission-based organizations make an even greater impact in the world. And then we had another idea: These organizations could have more impact if they strengthened their "how"—after all, how they operate, lead and govern by tapping into and embedding their values into strategy and practice can make their efforts go further.

What is the idea behind creating the Practice Forum?

DS: By creating a forum of organizations, LRN can provide them education, mentoring and tools to strengthen and advance "how" they behave, lead, govern, operate, consume, engender trust in their relationships and relate to others as their greatest source of innovation, growth, performance, resiliency, progress and significance. Then, impact can be multiplied through leveraging the story of their successes and challenges, sharing it with other members of the CGI community and helping other organizations see the value that this approach to governance, culture and leadership can bring. So, in 2011, we committed to CGI that we wouldn’t just bring the idea of "how" to the CGI community, we would start a practice forum that took non-profit organizations on the same journey as our for-profit client partners—and we would work pro bono to help organizations find competitive advantage through "how" they do business.

How did you choose your partners for the forum?

DS: We took time to select partners who were committed to the deep, ongoing work that this journey requires. I met with Karl Hofmann of PSI and Amy Rosen of NFTE to ensure we were all ready to enter into this partnership together, and after several conversations, we established the forum in 2011. Teams of LRN colleagues spent the following two years helping both organizations assess their cultural strengths and challenges, and map out their unique journeys ahead.

You mentioned that our interconnectedness has led to moral interdependency. Can you explain this idea?

DS: David Hume wrote that “the moral imagination diminishes with distance.”{5} So, it makes sense that our moral imagination should increase as our world shrinks with the globalization of information and capital. Given 21st-century technology, we are now closer than ever before—and our actions impact one another more directly—so we must re-activate our moral imaginations. In this new era, a nine-year-old Scottish girl named Martha Payne can galvanize a global movement called "Never Seconds" that brings healthy food to her own school’s cafeteria and to orphans in Malawi. We are all linked, and our actions affect others around the globe. We rise and fall together. We have the opportunity to build healthy interdependencies—relationships built on trust, mutual understanding, and a shared set of values—so that we all rise. That means our behavior, how we act in the world, matters greatly. We stand out based on how we treat others, how we get things done.

Can you describe the marketplace advantages that organizations with values-based cultures have over those that do not have such cultures?

DS: I staked my career on the idea that in this connected world, those who can forge deep connections with their employees, their customers and their supply chains, win. I’m talking about companies with high levels of trust, who encourage their people to fully express their creativity without surrounding them with bureaucracy or silos. Then, I upped the ante by engaging an independent firm to conduct a quantitative study to test that idea with the "HOW Report"—a global study across 18 countries, with 2 million observations from more than 36,000 employees. Luckily, the bet paid off. Here’s the good news: Organizations that are high in trust—those who forge the most meaningful connections, gain competitive advantage—perform better on the outcomes they want, like financial performance, innovation, customer satisfaction, loyalty. Unfortunately, there’s also bad news: Very few organizations display the levels of trust needed to obtain those outcomes.

What exactly is a "values-based and principled approach to leadership, governance, and culture"?

DS: Nobody is better than business at scaling and systemizing things—that’s what business established in the Industrial Age and perfected in the 20th century. Think of TQM, ERP, CSR, CRM. They are all great systems that scale processes key to doing business efficiently. But we haven’t yet systematized our "hows": We haven't created the kind of human operating system that maps to 21st-century realities. That’s what we are doing at LRN—helping organizations systematize and scale a framework of leadership, governance and culture that is guided by a shared purpose and set of values.

What are the main things that need to happen to get there?

DS: There are three aspects of that "human operating system" that need to change. The first is how you govern: the policies, controls, rules, org charts, goals and objectives that represent the formal structures of governance. The second is how you behave: the values, principles, habits, mindsets, history, lore and legends that make up a company’s culture. And then there’s the leadership model. How do you lead? Is it through command and control, or connect and collaborate? Transparently or on a ‘need-to-know’ basis? And once you have focused on these areas, you have to look at how they work together. The objective here is to build a super-system of governance, culture and leadership. Once you have focused on these areas individually, you have to fit them together into a single system. Are your governance, culture and leadership models fighting or reinforcing one another?

Does this principled approach look different to an employee, a leader and a customer/client?

DS: This is deep work. It’s about becoming deliberate about shaping your culture as fundamental to corporate strategy, and seeing culture itself as a strategy for winning. For leaders, this means asserting moral authority instead of formal authority—listening to employees, responding, creating true dialogues and inspiring them to act based on moral values instead of seeking approval. It also means hiring and evaluating employees based on their behaviors, looking at how they get things done instead of how much they produce. For employees, this means they make principled decisions by consulting this framework instead of a complex—and sometimes contradictory—set of rules. For customer/client relationships, it means approaching the relationship as a true partnership, rather than a transaction—making deep connections and working together for optimal outcomes. As she helps her organization develop its own "human operating system," NFTE CEO Amy Rosen has demonstrated admirable openness to new leadership strategies. NFTE is growing quickly—and so its challenges and opportunities, while also global in nature, differ from those of PSI. The headquarters and program offices experienced some "us vs. them" behaviors, isolating teams from the headquarters and lowering employees’ comfort in speaking up about work-related concerns. With a global organization-wide retreat, leadership coaching, a "North Star" approach to communicating its values and organization-wide multimedia education campaigns, NFTE is bringing its colleagues together and teaching them to speak up.

Why did PSI decide to go on a culture journey?

Steven Honeyman: PSI's CEO Karl Hofmann met Dov at the Clinton Global Initiative two years ago and was intrigued with Dov's premise that "how" you did things matters as much what you do. Karl began a conversation with Dov about how "how" could be applied within the context of international non-profits like PSI. That conversation led to a two-year relationship with LRN working pro bono with PSI and providing us with valuable resources such as expert advisors, access to a wealth of custom online training and membership to subject-based fora in this area. PSI felt that a culture journey could bring new perspectives, approaches and processes to the table that would allow us to unpack our culture in new ways. It was hoped that this would help us discover fresh opportunities to leverage PSI's culture for improved leadership, governance and bottom-line performance in support of our mission.
LRN's goal is to help Practice Forum members to "develop a more values-based and principled approach to leadership, governance and culture." With such qualitative factors, how do you measure the program's success?

DS: As part of systematizing our work, we developed a quantitative tool called the Governance, Culture and Leadership Assessment (GCLA) to objectively measure behaviors that signal healthy organizations, like collaboration, reporting misconduct, efficiency, et cetera. For both PSI and NFTE, this was our first step in our work together—to use this assessment tool to get a clear picture of each culture’s strengths and opportunities for improvement. When we study organizations, we survey everyone in an executive team, a division, or a whole company, to measure the "how:" the habitual thinking and action. We even include their suppliers: "What’s it like to negotiate with them?" We use this instrument to diagnose the level of trust, kind of behaviors and leadership style that a company exhibits. We approached the scope of our work with PSI and NFTE as we would with any for-profit organization and used the GCLA to identify some of the organizational challenges and opportunities that I mentioned. Then, we used the information to determine the direction of each organization’s journey. While journeys are longer and harder than programs, you can indeed bring the same rigor and discipline to them and determine the leading indicators of progress. It really takes three to five years to embed consciousness of shared values, new behavioral habits and new ways of making decisions. PSI and NFTE have both implemented new processes and are starting to see impact, but their journeys are just beginning.

What did the GCLA reveal about PSI and what was the most surprising finding?

SH: The GCLA revealed some things we knew about PSI and others we did not. Most surprising was that leadership thought we were a highly innovative, collaborative and trust-filled organization that communicated well. Our global staff felt much more could be done to improve in these four areas—that there were great opportunities to provide greater clarity around our mission, that our corporate values needed refreshing and that if we could be more open, transparent and inclusive that it would assist individuals in making better decisions faster, help them and their teams drive improved performance and assist the organization overall in achieving our corporate strategic plan. On a very positive note, we were also pleasantly surprised at how highly engaged our staff reported being.

Can you describe the process of working with LRN?

SH: We have had a number of surprises working with LRN. To begin with, we were surprised when LRN requested to meet with our team weekly to move this process forward. Every week for 2 years—we thought that was going to be overkill! LRN explained that we needed to establish a cadence of process and accountability. The weekly meeting did just that. In the end, there were many weeks where once was not enough. Second, the GCLA provided us with the data to move forward and convince both leadership and our 9,000-strong global team that there were opportunities to improve bottom-line performance. Third, we were surprised at how unprescriptive the LRN team was. They did not come with a cookie cutter approach that they were going to try and jam PSI into. Fourth, we were surprised by how quickly and how well the LRN team understood our business. Within months they spoke like us, had nuanced discussions of culture and were really several layers down into our culture—something a new PSI hire normally might take a year or two before fully understanding. Finally, what surprised us was the passion and empathy the LRN team developed for our mission, for the challenges of our global teams and for the hurdles our employees face on a daily basis. That translated into them helping us create processes that worked, outputs that were tangible and workplans that we could and are executing. The entire team at LRN was exceptional in their commitment.

What has PSI changed as a result of the Practice Forum?

SH: We have launched a number of new collaboration initiatives that are positioned to succeed. We recently held a "Failure Summit" that showcased leadership team members sharing personal work failures and what they learned from them as a means to support risk-taking and to be more transparent. We have had a new mission statement approved by our Board of Directors and a new set of corporate values that we are beginning to rollout globally. We have a number of new "Acting with Integrity" programs to develop a culture of trust around compliance and ethical decision-making and we continue to develop innovation programs to drive bottom-line performance.

How is the culture of an organization engendered, reinforced, codified? Is it from the top-down, bottom-up or both?

DS: It is both. It’s critical that top leaders support culture work and reinforce its strategic importance by rewarding and reinforcing the right things. But in order to assess and strengthen corporate culture, all employees must be inspired to participate. One way to cascade messages about values and strengthen certain behaviors is to create a group like the one that the Network for Teaching Entrepreneurship started. This cross-functional Culture Working Group brainstormed ways to encourage colleagues to speak up more in meetings and share information freely, among other things. Culture, in particular, is a remarkably difficult thing to see clearly. If you put all the executives of any company in a room to talk about the culture, they would all have very strong, intense opinions: "People love it here." "They don't like working here." "They don’t see clients enough." "They don’t pay enough attention to their own people." But all of this is conjecture. They don’t have any real facts. We are helping to change that.

SH: PSI has a 43-year-long history of highly decentralized operations. We authorize our country teams to make daily decisions because they live and breathe their nuanced context every day. They are closest to our beneficiary: an archetype we call Sara that includes her spouse and family. In addition, we want to unleash the entrepreneurial spirit and capability of our in-country staff in pursuit of continuous innovation. That means much of our culture bubbles up within each country context. For example, many programs have their own set of corporate values. At the same time, HQ has the responsibility to move the organization forward in appropriate ways given the shifting global context. So there is a lot of thinking at HQ about how to support our field operations to help drive performance: empowering people in developing countries with both the ability and opportunity to improve the health of themselves and their families. And finally, our 67 country offices learn a lot from each other when they can so culture at PSI is driven from all parts of the global network—not top-down, not bottom up, but effectively from any part of the network to any other part of the network.

How do you take sociocultural differences into account when employing and working with people from different parts of the world?

SH: One needs to be sensitive to the fact that not everyone shares your world view. So simple to say—so easy to forget—especially in this go, go, go world of ours. A shared mission and values help to create a common link between us all to remind us of our combined journey and how we have agreed to try and get there. And the importance of how we have agreed to get there cannot be overstated as a critical component of our mission. Joining that united journey—irrespective of where we each of us began—and moving forward together can go a very long way in connecting us and allowing us to see and see past our cultural differences.

DS: PSI’s 60 country offices in some of the toughest regions of the globe—Haiti, Somaliland and Myanmar, to name a few—have a fierce sense of independence and a laser-focus on their day-to-day work of saving lives. But PSI found meaningful peer-to-peer collaboration across country offices difficult—and innovation sometimes elusive. Rebuilding trust by establishing cross-office teams and online resources to connect colleagues across huge geographic distances, among other strategies, PSI is working to map to this new interdependent reality.

SH: A great set of corporate values provides a unique opportunity to recognize our cultural differences while reflecting the universal truths that underpin those differences and that unite us in our global quest. These truths rise above any one culture, any one perspective or any one national identity. But they are born out of the myriad of complexities and the richness of perspective that all of those cultures and values bring to the PSI global family.

How does the PSI mission relate to its culture?

SH: Our mission is to make it easier for people in the developing world to lead healthier lives and plan the families they desire by marketing affordable products and services. Our culture is based upon that common vision of making the world a better place and to develop, nurture and leverage a culture that supports and accelerates the organization's 9,000 global employees to do just that. Our culture tries to provide individuals guidance so that better decisions can be made within a complex, shifting context and within the difficult work environments of each of the developing countries in which we work.

What is the biggest challenge for PSI in trying to move culture to the center of business operations?

SH: Everyone on our global team is running flat out every day trying to help someone in the developing world improve their health or save their life. It’s hard to capture even a small portion of a global team member's mindshare within that context. Everyone knows they should get better, everyone knows they can get better—but how and when? Those simple questions are huge mountains to climb in the daily context. Shifting culture means shifting what people believe and do on a daily basis. Changing people's health behavior is what we do as an organization, and therefore, we recognize that a culture journey is a long-term behavior change initiative—not a short-term fix. However, developing the right level of engagement with our staff, in the right ways that has the potential to produce lasting impact, has proven the greatest challenge to our organization.

How has technology made the concept of culture and behavior more critical for PSI to consider as part of its strategy?

SH: Technology has provided new opportunities for our 9,000 employees to connect to colleagues, acquire new knowledge and work on project teams in real time. For many, this means crossing new national cultural lines in new ways for the first time. Having a framework for engagement and decision-making such as a clear, common mission and using values as the ground rules on how to move forward makes those initiatives more effective more quickly. Teams do not waste precious time and resources trying to figure out how to engage or what is in-bounds and out-of-bounds. That is known in advance. At the same time, how those values are used within a technology-based communication medium is new and employees may require support in first exploring, learning and forming positive habits within a technology-driven environment.

How has focusing on values-based leadership and culture helped PSI carry out its mission?

SH: It is still early days in this journey but PSI has adopted a revised mission statement and corporate values that have benefited from the input of hundreds of employees and that have been approved by PSI's Board of Directors. Initiatives for improving trust, innovation, collaboration, clarity and integrity are ongoing as improvements and activities are main-streamed within daily operations. Some adjustments are small and fast while others are longer term, more complex and more difficult to execute. What is generally agreed, however, is that PSI's revised mission and values as well as many of the activities under this initiative will no doubt lead to more clarity for all employees on who we are, where we are headed and how we will get there. It is believed that this will allow us to do so more effectively and more efficiently than in the past.

What is the biggest misconception that leaders have about values-based culture?

SH: They fail to understand that values-based culture has tangible, measurable impact on organizational performance. While this kind of work is perhaps more difficult to measure than sales or profit, LRN has provided concrete baseline measures with the GCLA to measure progress and impact. These measures may not be perfect but they provide sufficient evidence that a business case can be made to invest precious organizational resources in this initiative versus another. And while there is always the argument that this kind of initiative should only be done in a fair-weather economy there is perhaps a more convincing argument that it is precisely in a weak economy and an environment when organizations are at risk of individuals and teams deciding to cross ethical lines is a more important time to undertake this as employees are required to do ever more with ever less. Knowing what those ethical lines are and what are the rules of the game can enhance an organization's ability to protect itself when it may be most vulnerable.

Americans' confidence in U.S. banks was measured by Gallup at 26% in June, well below its pre-recession level of 41%, measured in June 2007.{6} Has this slump in confidence impacted banks' own view of their leadership, governance and culture?

DS: For years, and accelerating post-crisis, I’ve seen more and more companies proclaim their humanity through enormous marketing campaigns. Banks are no exception. TD Bank is "We Bank Human," Allied Bank is "We Speak Human," Washington Mutual is "More Human Interest." There’s a difference, however, between proclaiming humanity and living it; between announcing culture change and journeying to do the deep, hard, habit-forming work it requires.

What can lawmakers do to help foster ethical business cultures?

SH: Lawmakers can make it a requirement that for-profit and non-profit organizations, at a minimum, articulate their mission and values in their required reporting. Knowing how the organization will achieve its mission is as important as what they are hoping to achieve. While by no means does this guarantee that all individuals will follow how they will achieve a mission, it does very clearly set expectations and provide clear guidance on how they should behave.

DS: Regulatory bodies are starting to call for culture work. Back in 2004, after a wave of corporate scandals, I testified before the U.S. Sentencing Commission and argued that the only way to solve for scandal was by strengthening corporate culture. I was honored when corporate culture made its way into the Federal Sentencing Guidelines—and since, other regulations have also brought in culture as a key piece in fostering ethical business practices.

SH: When one scans the ethical scandals of the last decade that lead to shareholders being robbed of their investment, the environment being ravaged and the vulnerable being given short shrift—all in pursuit of personal gain or the bottom-line—it seems obvious that how we get there is as important as what is the organizational goal. Requiring organizations to articulate that "how" would be an important first step in making all organizations reflect on the importance of the ethical considerations in governance, leadership and culture—and then presumably acting on them.

DS: If this is the lens that even regulators are using, that has profound implications for how leaders must structure their organizations. Everyone—from government officials, to customers, to those in the boardroom—can see deeply into the character, or culture, of an organization. So, as leaders, our chief concern must be to strengthen our organizational characters.

If you were giving advice to a young entrepreneur just starting a business or non-profit, what would you say to them to make sure that culture was at the center of their strategy from the beginning?

DS: In startups, it’s easy to have a shared set of values and mission. An entrepreneur and her business partner are likely to have a similar worldview and a passion to achieve similar goals. But it’s crucial for these pioneers to get intentional from day one about culture, to define that mission and those values. As they scale, they need to scale their values, too—by developing a clear framework inspired by values that helps guide decision-making, by hiring people who share them, and by evaluating their progress on the behaviors (such as collaboration, innovation, sharing information freely) they exhibit that reflect that set of values. Otherwise, an organization can quickly become unrecognizable. Founders have been known to walk away from startups that grew into organizations that behaved quite differently once they scaled.
SH: Having a values-based mission does not guarantee employees will know, understand and act on values in pursuit of that mission. This is especially true when one considers how varied and complex national cultures are in the global context. What may be considered 'OK' in one setting 'this is how things are done here' may not be considered as 'OK' from another country context. Knowing what is expected provides staff with the guidance on how they should behave.

What are the biggest lessons that PSI has learned from its culture journey so far?

SH: First, shifting culture—even ever-so-slightly—is a complex, long term and emotion-bound affair. Those changes need to be led by and committed to by senior leaders across the organization—not just one or two key players. Second, that data is very convincing in making the business case to do something like this. Third, that having expert guides like LRN has proven invaluable—especially when the journey is complex and the organization hits challenges along the way. And finally, it’s really tough to sustain initiatives for over two years in today's complex organization, immediate results mindset, global challenges and our hyper-speed world. Some days we look back and see how far we have come over the last two years and are impressed and then other days we look forward and see how far we still have to travel on our journey of how we can do what we do better for those we seek to help. LRN have been invaluable guides, friends and mentors along that journey.



{1} Winston Churchill. Speech delivered on November 9, 1954, at Guildhall, London, published in The Unwritten Alliance, his last volume of speeches, published April 27, 1961, pp193-5.
{2} LRN. Clinton Global Initiative Case Study. Establishing a Practice Forum for Principled Leadership, Performance & Operations. September 11, 2013. p. 1.
{3} Ibid., p. 7.
{4} Ibid., p. 3.
{5} For more on this concept, see "Hume's Theory of Moral Imagination" by Mark Collier, History of Philosophy Quarterly, Volume 27, Number 3, July 2010.
{6} Dennis Jacobe. "Americans' Confidence in Banks Up for First Time in Years." June 14, 2013.

image: PSI's Oscar Ntakarutimana teaches children in Burundi how to clean their drinking water. (source: PSI)