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How to Improve Your Organizational Culture: Focus on the System, Not People

When something goes wrong, usually, managers react by recommending additional training or firing someone. They try to fix the tree, not the forest.

By Gustavo Razzetti

August 25, 2021

Systems thinking increases results by addressing the forest, not just the tree.

It’s not easy to explain company culture in one sentence. The “how we do things around here” definition doesn’t capture the several components and interconnections – it depicts culture as a tree, not a forest.

People are easy. Culture is hard.

As a consultant, I often see how organizations try to solve problems by fixing people. When something goes wrong, managers usually react by recommending additional training or firing someone. They try to fix the tree, not the forest.

Edwards Deming said, “A bad system will beat a good person every time.” It will chip away at your soul. Bad cultures can turn even the most enthusiastic people into frustrated poor performers.

Every organization has a system that guides the behavior of its employees. Map your current culture. Is it set up to help people be at their best?

Great leaders focus on the system, not just people – they see both the forest and the tree.

Your Workplace Culture Is a System

Are you part of a family?

Systems make up a big part of living. A school is a system. So is a city, an animal, and any organization – including your family. Systems can be embedded in bigger systems. A forest is a system that encompasses subsystems of trees, plants, and animals.

A system is not just a collection of things. It’s an interconnected set of elements that are coherently organized in a way to achieve something, according to Donella H. Meadows.

In Thinking in Systems, she explains how a system consists of three kinds of things: elements, interconnections, and function or purpose.

How does this apply to organizational culture?

Usually, people think that having a set of core values or a purpose statement is enough to define their company culture. They fail to capture the broader system.

A few years ago, I developed The Culture Design Canvas as a visual tool to capture the different components of the culture systems. In my three-year research (and continuous iterations), I identified 10 components or building blocks – all are nested within three key sections: the Core, the Emotional Culture, and the Functional Culture, as illustrated below.

The Core section is the long-term foundation of company culture: purpose, values, priorities, and the behaviors you reward and punish. They define the standards, aligning everyone around a shared aspiration.

The Emotional Culture drives a sense of belonging via psychological safety, feedback, and rituals. This section is critical to developing strong interpersonal relationships, communication, and learning.

The Functional Culture provides agility, helping teams move faster and smarter regarding decision-making, meetings, and norms and rules. This section addresses everyday practices – ¬how people collaborate and work together.  

Although each of the 10 blocks focus on a specific component of your cultural system, they are all interconnected and complement each other.

For example, a low level of psychological safety makes it harder for people to provide candid feedback. However, having clear priorities makes decision-making easier.

Interconnections are the relationships that hold together the elements in a system.

Take Zappos’ Voice of the Employee program as an example. This practice is meant to allow employees from all departments to share issues with top managers.

This feedback method helps “bubble up and bubble down” concerns, issues, and ideas. It’s also a way to increase psychological safety, as representatives from each department can bring up collective tensions in the open. Lastly, Zappos uses a bingo machine twice a month – a ritual – to randomly select those ambassadors.

The purpose of your culture is to define what your company stands for. It provides clarity, context and consistency. Culture is a system that helps people do their best work, resulting in better performances and business results.

The purpose of a system is deduced from its behavior, not from rhetoric or nice statements. How you define your culture doesn’t matter if you cannot demonstrate and demand those standards.  

Systems Thinking reminds us to look at the whole picture. When using the Culture Design Canvas, don’t just map the different elements, but also uncover the interconnections. Remember that frameworks are a representation of reality, not reality.

How The System Runs Itself

The role of a leader is to define the standards by which people can thrive.

No one understood this better than Zappos’ former CEO Tony Hsieh. He defined his job as “the architect of the greenhouse.” Rather than being the plant others aspired to be, he created the conditions for everyone to bloom.

Encouraging people to collaborate, as an example, is not enough. You must design the system that will facilitate collaboration. That’s a big challenge many companies face in a hybrid workplace; they’re drowning in digital collaboration tools.

Colleen McCreary, Chief People Officer at Credit Karma, believes that there is a craving for structure and hierarchy. Even young employees want clarity on where decisions are made and how they can get what they need from others. She sees her role as providing clarity, context, and consistency.

As she told First Round Review, “As Chief People Officer, I'm not the CEO of culture. I’m really not the CEO of happiness,” she laughs. “I think that I am like the product manager of the systems and tools that run the company.  My job is to build the systems that support the work that our leadership team has decided needs to get done.”

Systems can be nested within systems.

According to Alfred Kuhn, subcultures can only be interpreted when viewed relative to all other subcomponents of the system. Furthermore, culture must be viewed as a pattern of behaviors within the system.

Culture is a system: a dynamic whole that creates and is created by people.

Stocks are the elements that you can see, feel, count, or measure ¬– the foundation of any system.

It may be the water in a bathtub, the population in a city, or the money in a bank.

Emotions, mindsets, and practices build the stock of your workplace culture.

Stocks change over time. They are accumulated or depleted through inflows and outflows. We can fill a tub faster not only by increasing the inflow, but also by reducing the drain (the outflow).

The decisions you make inflate or deflate your culture stock.

Feedback Loops Shape Your Culture

Culture is not defined by what leaders say, but by the feedback loops their behaviors perpetuate.

Feedback loops work to keep a stock at a certain level. For example, when the water in the bathtub gets too cold, we add hot water; when a retailer has too much inventory, it cuts prices to lower the stock.

There are two types of feedback loops.

1. Balancing feedback loop:

A change in system state which serves as a signal to start moving in the opposite direction in order to restore the lost balance.

Most systems have some sort of ideal state. Coffee gives us energy, but too much coffee can makes us irritable or anxious. Balancing loops try to bring a system to the desired state and keep it there, much like a thermostat regulates the temperature in a house.

2. Reinforcing feedback loop:

A change in system state which serves as a signal to enhance the initial change. In other words, the system provides a significant change in the same direction.

Reinforcing loops produce both vicious and virtuous cycles – they compound change in one direction with even more change. For example, positive reinforcement from a manager increases motivation and performance, while distrust and blame erode them.

When you observe a pattern that persists over time, something in the system is likely creating it. Rather than blame it on people, look for misalignment between words and behaviors.

A client was struggling to build a culture of collaboration. After multiple stakeholder interviews, we uncovered that all recent promotions were given to the managers that people considered the most self-serving. The loop was reinforcing that the system didn’t really reward collaboration.

You’re asking people to be part of a system. Adapt your norms and rules so they are consistent with the culture you want.

Credit Karma had a traditional compensation system that included a base salary and an annual bonus from 0 to 15%. However, the company culture is an “all for one, one for all” type with values that include helpfulness, empathy, and ownership. McCreary realized that the company was rewarding individual performance instead of promoting collective behavior.

So, the company decided to eliminate the bonus and roll it into base pay.

Your organizational culture is shaped by feedback. Does your company reward those who do good work or punish those who speak up? Are you addressing company issues in the open or just letting things fester?  

How to Change Culture as a System

Peter Senge argues that a key problem with leadership is using oversimplified frameworks to address complex problems. Leaders fail to see organizations as a dynamic ecosystem. They focus on the tree rather than the forest.

Here’s how to improve your company culture by applying systems thinking.

1. Assess the components as part of a system

Mapping and reviewing the building blocks can provide a clear snapshot of your company culture. However, one of the key things we emphasize in the Culture Masterclass is consistency – you need a unified culture, not just a collection of elements.

Take Amazon, for example. It has a lot of unique practices across the different blocks of the Culture Design Canvas: the “Two-pizza rule” (meetings), “disagree and commit” (decision-making), or “PowerPoints are banned” (norms), to name a few.

However, Amazon operates under a single principle that brings all its culture components together: Working backwards.

Rather than starting with an idea for a product, employees work backwards from the customer. For example, a product manager must write a press release announcing a finished product before designing the first prototype.

2. Leverage collective feedback loops

Feedback loops can reinforce positive behaviors or bring the system to the desired state.

Organizations need to adopt collective feedback loops – to shift from individual to team performance.

Atlassian has updated its review system to focus on how people contribute to the company culture rather than how skilled they are. This approach encourages people to contribute to improving the system, not just individual performance.

Etsy and Google practice Blameless Postmortems, shifting the conversation from “Who’s the CEO going to fire?” to “How can we learn from our mistakes as a team?” The practice focuses on improving the system instead of finger-pointing.

3. Leverage interconnections

Approaching culture as a system helps break down silos to deliver positive change. It encourages teams to look at the whole, not just one piece of the puzzle. Rather than focusing on individual responsibilities, everyone plays a role in solving a bigger problem.

The Cleveland Clinic instituted a system of tiered daily huddles to quickly escalate problems to the next level if needed. The first huddle, consisting of front-line workers, begins at the start of the workday. Every 30 minutes, a new huddle meets – each at the next level – supervisors, managers, directors, VP, and finally, the executive team.

Problems are addressed at each possible level, being escalated to the next huddle until they are resolved.

4. Challenge your assumptions about people

Leadership is all about mindset. The assumptions you hold about your employees shape your company culture.

Many progressive organizations have realized that underlying assumptions were sending the wrong message and disengaging people. Whenever Dennis Bakke, AES CEO,  acquired a new plant, he invites employees to reflect on how managers perceive employees.

Summarizing all conversations, Bakke realized that most organizations treat employees as thieves, selfish, lazy, and unable to make decisions. The rules and control systems in place send the message that the company doesn’t trust people.

5. Change your purpose

Changing the leader doesn’t change the system. At least, not unless that leader directs the culture toward a new purpose – one that drives people to do more meaningful work.

A few years ago, Patagonia changed its company purpose to “We’re in business to save our home planet.” The outdoor gear and clothing company realized that talking about “causing no unnecessary harm” was not enough.

Since then, the company has taken its social activism to a new level. Not only does it support political candidates who stand for ‘saving the planet,’ but it has recently made the news for canceling a sizeable corporate client order for supporting conspiracy theorists.

Change Your Culture from the Inside Out

The systems thinking model viewpoint helps you see both the forest and the trees.

Uncover the patterns and mental models. Observe the interconnections among the different elements, not just the individual components. Encourage rich conversations to map your culture – make the invisible, visible.

If you want your team to thrive, look at your systems. Whether it’s compensation, feedback, decision-making, or meetings, ask yourself, is my system setting my team up for success?

A bad system will beat a good person. A great culture will help all the good people play at their best.

Do you want to improve your company culture? Reach out and let’s discuss how we can help you transform the system – both forest and trees.

What do you think?



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