Why Storytelling Matters When Changing Company Culture

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0:20Welcome to HBR on Leadership. These episodes include case studies and conversations with the world's top business and management experts. Hand-selected to help you unlock the best in those around you. I'm HBR Executive Editor, Alison Beard. Stories and storytelling are at the core of many aspects of the corporate world. Consider a great brand campaign or the ability to sell yourself in a job interview. It's also an extremely important skill for managers who want to win support for new strategies and initiatives. In this HBR IdeaCast episode from 2023, Professor Jay Barney explains why leaders who engage in the right kind of storytelling are more successful in achieving transformational change.

0:59He also outlines the tactics that work best for developing and circulating a narrative that prompts true cultural shifts.

1:17Welcome to the HBR IdeaCast from Harvard Business Review. I'm Kurt Nikesh.

1:28Many great companies set out to transform their businesses. They come up with new strategies, they restructure, maybe even change industries, go digital. But many times those well-thought-out efforts end up falling flat. Why? The company culture. If it doesn't fit the new strategy, you're toast. So the obvious thing to do is to change the culture, right? Well, we know that's really hard. It's bigger than a CEO. It's not about what is written down on paper in HR documents. It's not easy to define, much less change. But today's guest has studied leaders who were able to change their culture to fit a new strategy.

2:08The takeaway is how they told stories to reinforce that shift. Stories that circulated around the workplaces. because a lot of what creates a culture is the way that employees and managers talk to each other, about each other, and about the company and what it does, the stories they tell. Jay Barney is here to tell us more. He's a professor at the Eccles School of Business at the University of Utah, my alma mater. He's a co-author, along with Manuel Amarim and Carlos Julio, of the book The Secret of Culture Change, How to Build Authentic Stories that Transform Your Organization. They also wrote the HBR article, Create Stories That Change Your Company Culture.

2:50Jay, glad to have you on the show. I'm very excited about it.

2:59So you spoke to dozens of CEOs, some who failed at changing their culture, those who succeeded. And it sounds like it's more than just luck or random success.

3:14Jay Barney:Yeah, I wouldn't discount that. There is a little bit of luck and timing in these things. There's always something that goes on. But we found there are many of the business leaders we talked to. Many of them were CEOs. Some were like plant managers or division general managers or office managers of large offices. Some of them have a pattern of being able to change their organization's cultures that they repeat over time, which suggests that it's not just luck, that there's actually a skill involved. And our task was to try to understand what those set of skills were that enabled them to make culture change happen.

3:48Well, it's really interesting because you have this very hard problem and then you have a very simple solution.

3:56Jay Barney:Yes. You want to change the culture and you say create stories, which seems easy. Well, let me start with an example. And my co-authors' experience at Telesp, which was a Brazilian telecom that was operating in a highly regulated environment, was about to move into a deregulated environment, facing whole new competitors and whole new technologies at the same time. Also, all that was going to happen at once. They had developed a very, very top-down culture, aggressively top-down culture. So much so, for example, that one of the cultural values was that no one in the organization could ride with the CEO in the same elevator car, which is like sort of bizarre, I admit.

4:38Jay Barney:But nevertheless, that was sort of the symbol of just how top-down that organization had become, but successful. So yeah, you're going from a top-down culture, which makes sense in a world where you kind of have a regulated monopoly, essentially. Sure. That's basically what it was. And you're going to a much more still regulated but competitive market where faster, more innovative companies could eat your lunch, right? Absolutely. Not a slam dunk at all that the monopolist would be the survivor in a much more competitive market. Yeah. So what did Manuel do? Well, the first thing is you have to change your strategy.

5:18Jay Barney:You can't be just worrying about addressing government-defined goals. You basically have to go to a culture that values customer service and that values satisfying, delighting customers on their telecommunications needs. So the specific thing that he did, he bought a new technology, a new product that the company was coming out with, and it was a new technology. It didn't work very well. And so he called the helpline. So he got on the line with a part-time worker at the helpline. Now, previously, by the way, consistent with the old culture, there had been two helplines, one for senior managers in the firm and one for everyone else, well, consumers.

6:00Jay Barney:And so the first thing he did is he eliminated the one for senior managers and said, hey, we've got problems with technology. We have to go to the helpline that everyone else has to go to. So then he is in this two-hour conversation with this young man, and they're still not having success. And so finally, after two hours, he says, I want to let you know, I'm the CEO of the company. And, of course, the guy doesn't believe him, so it takes a few minutes to convince him. And then what happens is he asks, Emmanuel asks, so what would you have needed to know in order for you to be able to solve my technical problem with this product?

6:32Jay Barney:And this young man generates a list of 14 things, this, this, this. And how much of this information do you have access to at this point? And the answer was two or three things. And then it gets interesting. And then Manuel says, would you be willing with a couple of your colleagues to come to our next executive committee meeting? This is a senior group in the organization. And explain what those 14 things are and what needs to be done in order for us to support this new product technology. Remember, this is a deeply hierarchical organization. And he's just flipping it. Yeah, this is skipping a few levels.

7:07Yes.

7:07Jay Barney:Oh, just a few. This guy is not even an employee of TELUSB. He's an outsourced employee. He's a part-time. It turns out he's a college student. Anyway, he and his colleagues come to this meeting. Sort of, here's what we need to do. Here's the problems. Here's the 14 things. Manuel thanks him. They leave the room. He turns to the people and says, okay, so here's the deal. In two weeks, we're going to have a plan. We're going to have a plan ready to execute that will help us collect all 14 bits of information we need to support this product. Until we have that plan, we're going to suspend the sales of this product because a customer-oriented company doesn't sell a product they can't support.

7:46Jay Barney:And then you're going to present a plan for us about how we're going to get this information that we need. You're not going to present it to us. You're going to present it to these people from the call center we just talked to. So you're going to be reporting to the call center employees. And two weeks later, sure enough, it happens. They get the information right, and the product turns out to be very, very successful. So it's all good news. Yeah. But from a cultural point of view, it just literally is a revolution in the way of thinking about organizational culture, about who's in charge, about what we value in this company.

8:20Jay Barney:It's about valuing customers and customer relationships. It's not about hierarchy and bowing to the boss and doing whatever the boss has to say. Gotcha. Now you have just told this story to me and to our audience, but in that story, there was no storytelling happening, right? No, that's right. That's correct. There was action. There was something that was done maybe differently. It was effective because it was strategic. But where does the storytelling part of it come in? No, it's interesting. Yeah, so what you do is you engage in actions, and the actions create stories that other employees share.

8:59Jay Barney:Over time, you may come back and actually tell the story again and again. So that may happen later on. But when you're in the process of creating the story in the first place, you act. You do things that are inconsistent with the old culture but are consistent with some new culture. That's one of our criteria for being a successful story. It's got a break with the past, with a path to the future. And this example is just a classic of this, a clear break with the past. We saw no examples. We interviewed 60 or so business leaders across multiple industries, multiple firms, et cetera. We saw no examples, zero, where successful culture change started with the announcement that we were going to change our culture.

9:44Jay Barney:It's just cheap talk. It's just another thing. Here it comes. CEO wants to change the culture. Okay. And everyone says, sure, we'll change the culture, sir. But no one believes that it's really a commitment. Because it's cheap talk. It's easy to back off of it. But action is much harder to back down, back off of, walk back than words. So, yeah, you act first. The stories then follow. But these business leaders don't write down the stories. They don't plan them out in detail or anything like that. They emerge in an authentic way because they reflect their deeply held beliefs about what the organization needs to do.

10:21Jay Barney:And then those stories start getting shared. And what happens is those new stories that support a new culture replace the old stories that supported the old culture. And then as that diffuses the organization, that's how we see culture change. Yeah. I mean, if you want to change the story of that's not how we do things around here, you do it differently. and then people say this is how you do things around here. That's exactly right. So it seems very important not to make up the story, but to make the story. It's got to be one of our first criteria. We studied enough of these so we could actually describe stories that seem to actually facilitate cultural change and those that don't.

11:02Jay Barney:And the first criteria is that the story has to be authentic to the person who's building the story. So, for example, if your values as a business leader are not customer-oriented, and you say, we're going to build a customer-oriented culture, no one's going to believe you. Employees can smell hypocrisy from miles away. The first criteria for this is that these stories have to be really authentic, both to your personal values and also to your understanding of the strategic challenges facing the organization. Now, you mentioned personal values there. How important is it to bring the first person into it for organizational leaders?

11:42Jay Barney:Oh, yeah. So our second criteria is the business leader has to star in the story. I know there's a lot of discussion in the organizational change literature about top-down versus bottom-up. I just want to say, again, we saw no examples, zero examples of successful culture change that did not start at the top. That doesn't mean that these leaders don't engage the rest of the organization. They clearly do. But it starts at the top, and it starts when that's authentic, when a business leader behaves in ways that break with the past and give guidance to a new culture, and that individual stars in their story.

12:20Jay Barney:Now, other people will be there. So Manuel started the story at TELSP, but the whole executive team was there. Those are the people who create the stories. They tell the stories. Now, if you are supposed to feature yourself in your stories, you know, if you like it or not, you know, as an organizational leader, you are a character in the story. Absolutely. Can that come off like bragging? Sure. That is going to hurt your efforts. No, that's a great question. And so there's a question of, you know, how can I start in my story and still be humble and open? Well, there's a couple of things to realize this.

12:59The first is you're a business leader.

13:01Jay Barney:people are watching what you do in depth, and they do that whether you want them to or not. So you are already starting in the story. The question is, what story are you going to build, right? The second thing is, you have to also understand, while the culture change process starts at the top, it's important that they diffuse throughout the organization. And the way that happens is, a business leader builds a couple more stories. With one story, people are still cautious. Is this real or not? But you do two or three of these kinds of really radical things, and people start getting the idea. And then other people in the organization start feeling empowered by the possibility that they could build their own stories.

13:41Jay Barney:Sometimes that happens with other senior managers, business leaders in the organization. And you can, by the way, as a business leader, you can see that. You can go to another business leader and say, listen, I'd like you to do something that builds a story that is consistent with the news culture. Now, I can't tell you what that story is because it has to be authentic to you, but I can sort of see that to happen. Let me give you another really great example of this. There's a company actually here in Utah called Traeger. You know Traeger Grills? I'm sure you do. The person who was running Traeger, Jeremy Andrus, was an investor in Traeger for a while, became convinced that Traeger had the potential for disrupting what was actually a very mature market, which is the outdoor cooking market, you know, barbecues and smokers and things.

14:31Jay Barney:But the organization that he sort of inherited had a really toxic culture. He basically closed up, put the organization where it was and moved it here to Utah, basically built a new culture from scratch. And one of the critical values of this new culture that he talked about, he tried to show in his own behavior, built stories around, had to do with customer service, sort of, there was no limit on customer service. He comes in working on Monday, and his sales VP comes in and says, did you hear what Rob did over the weekend? Who's Rob? Well, Rob's this first-line employee. He has some responsibilities, but he's not a senior manager.

15:06Jay Barney:He's just a guy in the office working hard, doing his thing. Apparently, Rob somehow got a phone call from a customer, a Traeger customer in Seattle. His Traeger reel is not working. Now, this customer was a manager, a sales manager at a Costco up in the Seattle area. And Costco, of course, is an important customer for Traeger. So this Rob listens to the phone call and diagnoses the problem, goes to the office, picks up the part that's needed, gets on an airplane, flies to Seattle, fixes the part, fixes the machine with the part, helps the guy season his brisket, gets back on the airplane, and flies home.

15:45Jay Barney:And then he comes in to work on Monday morning, and it's no big deal. It's like he's just sitting at his computer doing his work. Well, of course, the sales manager at Costco tells his boss, who is the Costco store manager, what Traeger did, what Rob did. And that guy then calls the head merchant at Costco Corporate, who then calls the VP of sales at Traeger, who then tells the CEO at Traeger, did you know what your guy did? This is awesome. This is unbelievable level of quality of service. And Jeremy Andrews' response was, yes, the culture is happening. This is a guy who is building his own stories on his own.

16:26For many companies, culture is, you know, where they are, how people work together. And if you're talking about stories circulating at the water cooler and people passing these stories on, I wonder in a post-COVID world and where there's much more working remotely, working from home, much more virtual work, how that affects the efficacy of these stories and just the distribution of these stories.

16:50Jay Barney:So I recently came from a meeting with a group of managers at a well-known consulting firm. And I was just listening, and I was listening to the CEOs and other senior managers talk about the challenges they're facing. And I came away saying what these people were saying was, our organizational cultures are in tatters. they are in tatters they're falling apart we have for good reasons i'm not saying i'm not arguing against going home during covid obviously that was a requirement but it's very difficult two things are very difficult where everyone's working from home the first thing is it's very hard to build new stories because new stories are created when groups of individuals confront situations that actually test their old values and so So it's very hard to build new stories, and it's very hard to communicate those stories.

17:43Jay Barney:And Zoom and related technologies is still a cool medium. We can't read the body language. The picture we see is two inches square in a large meeting. We don't know the context. People are interrupting each other because they can't read the body language. And then they're dropping off and coming on, and the dog's running through. I mean, all these things make it difficult. It makes it a cool medium, makes it difficult to get the really emotion and affect that has to be associated with telling these stories that are really profound in many ways. And so between those two things, I think a lot of firms now are calling people back in, saying it's time to get back together.

18:24Jay Barney:And there's resistance to do that. But one of the reasons to think about how to bring them in is to recreate these cultures, the cultures that are in tatters. Now, you talked about the affect, right, not coming across in video conference calls, for instance. One of the recommendations that came from your research is that organizational leaders need to be theatrical. What do you mean by that? Yeah, it's amazing, isn't it? I think you've said it a little stronger than I would say it. It turns out that many of the culture change stories that were created had a very theatrical element to them. That's how I would say it.

19:02Jay Barney:Not all of them. And what is theater varies a lot. But let me give you a really short example of one. This is one of my very favorite stories in the book. This is by a friend of mine named Jeff Rodak, who was the CEO of Hyperion a few years ago. This is during a time when the company had been doing fairly well, and there was a big downturn in the market. And he develops the new strategy in consult with a consulting firm. They put together a new strategy, and they're going to have a big meeting among the top management team to sort of talk about the strategy and its implications, one of which is going to be a pretty significant layoff.

19:40Jay Barney:So they're getting ready to do that meeting, and it turns out that they had already, their planning people had already booked a meeting room at a very, very fancy hotel in San Francisco. And Jeff says, we cannot have a meeting to decide to lay off a very large percentage of our employees at that hotel. It's just not right. And his assistant says, yeah, we've already paid for the hotel. So he says, we're going to change the meeting. So everyone shows up at the meeting, and they come into the dining room, and it's exactly what you'd expect. It's all fancy china and stemware. And then they sit down for dinner.

20:18Jay Barney:And the first course is rolls and water, bread and water. And then the second course comes out, and it's also just bread and water. And then the third course, it's just bread and water. And then he stands up and says, listen, we don't deserve to celebrate with a fancy dinner here. We only deserve bread and water. That is so theatrical. It's amazing. Right. And talks about the strategy then and the cost. and ends the meeting by saying, I'm going to schedule this meeting room for one year from now, and we're going to have a real celebratory dinner. We're going to deserve it, because tonight all we deserve is bread and water.

20:57Jay Barney:I guarantee there's not a person in that room who forgets that experience because of the theatricality. We know the old saying, hearts and minds. Right. How do you create stories that appeal to both? Because the stories will go on being told. Absolutely, and they evolve too. But we'll start with the head. We had heads and hearts is how we use it in the language. But you're a hearts and minds thing. That harkens back to Vietnam, so I'm a little worried about that. So show my age a little bit. Right, right, right. No, it does have that military connotation. It does. Get the hearts and minds of the people.

21:30Jay Barney:So we use heads and hearts. Heads and hearts, okay. And we start with heads. And the reason we say that is that if there's not a business case for culture change, then you should not engage in culture change. if if a business leader engages in culture change because without a strong business case without the notion that you need to change your culture to implement your strategy then it's an ego trip then you know think think what you're saying i want to change the culture so that everyone's values are kind of like my values seriously that's the most egotistical thing imaginable that's not going to work so you have to start with a business case and and it has to be very tight.