Co-author: Lynn Bennett, Managing Director, Advisory, BVC

Q3: HR is being asked to upskill staff on AI, but some of that is truly asking employees to train systems that may replace parts of their work. There is a risk if the business does not capture that knowledge, but there is also a risk of rampant fear and cultural entropy. How does BVC advise companies on AI upskilling in the context of culture building?

While AI is a catalyst for structural transformation, it needs to be led as a culture and leadership challenge. How it is led will determine whether it succeeds or creates additional risk.

Drawing on established change management and leadership practices, including Kotter, Edmondson, and COSO, a few practical principles stand out.

Be transparent about intent and trade-offs. Be clear on what is known, what is uncertain, and how decisions will be made.

Focus on reciprocal value, not just extraction. Clarify how roles will evolve, what employees retain, and what they gain.

Equip and align leaders. Enable direct, consistent conversations about impact and trade-offs across the organisation.

Create space for voice and monitor risk signals. Encourage questions and watch for reduced voice, slower escalation, or disengagement.

If not managed intentionally, organisations risk losing critical knowledge, weakening transparency, and increasing cultural entropy. AI upskilling is a trust and value exchange that directly shapes both culture and risk.

Co-author: Lynn Bennett, Managing Director, Advisory, BVC

Q2: Do you have any suggestions or processes as to how you recommend leaders discern between what they can control/what they cannot control to drive results?

Leaders influence the conditions that shape how people and the organisation respond. They rarely control outcomes directly. Two capabilities are particularly important for discerning what they own and what to let go of:

Listening to the System (informed by the work of Otto Scharmer and Adaptive Leadership): This involves looking beyond surface issues to understand patterns, tensions and what may be emerging. This helps leaders see where they can have impact and where outcomes are being shaped by dynamics outside their control. Otto Scharmers work on the Four Levels of Listening provides a useful lens for developing this capability: Listening Assessment | u-school for Transformation by Presencing Institute‍ ‍

Balcony and Dance (Adaptive Leadership – Heifetz, Linsky & Grashow): Adaptive leadership highlights the importance of moving between the “dance floor” (where action is happening) and the “balcony” (where you observe patterns and dynamics). Developing the capacity to pause and shift perspective enables leaders to make more deliberate choices about when to act and when to let go. This kind of discernment is developed over time, often with the support of a coach, working through real business challenges.

Co-author: Lynn Bennett, Managing Director, Advisory, BVC

This is the first in a series of written responses to questions raised at BVC’s April 2026 webinar, The Culture Advantage: Strengthening Strategy, Leadership, and Risk Resilience, hosted by Lynn Bennett, Managing Director, Advisory at Barrett Values Centre, and Jacqueline McGinn, Founder of Aurora Leadership and BVC Senior Associate.

The questions that came in during that session were substantive. This series works through the most important ones, drawing on the frameworks and practical experience that Jackie and Lynn bring to this work. New instalments publish monthly.

Q1: Could Jackie give some examples of culture risk, beyond Enron?

The most instructive examples of culture risk are rarely the catastrophic, headline-grabbing ones. The cases below are useful precisely because they show culture operating as a quiet but decisive force: in one instance as a strategic asset, and in another as a decision filter under pressure.

Costco: culture as a strategic asset

Retail is a low-margin, high-competition industry, and most players cut labour costs to protect profitability. Costco chose differently, maintaining higher wages and stronger employee benefits even under pressure, because leadership treated employees as a strategic asset rather than a cost line.

The result: significantly lower employee turnover, stronger engagement, and consistent operational performance over the long term. When culture aligns with leadership values and strategy, it becomes a source of resilience rather than merely a reflection of it.

Johnson & Johnson, 1982: culture as a decision filter

When contaminated Tylenol capsules appeared on US shelves, Johnson & Johnson faced a clear choice: limit the recall to affected regions, or pull the product nationwide at enormous financial cost. Their corporate credo, which put customer safety above all else, made the decision for them.

The recall was costly in the short term. It was also the decision that rebuilt public trust and restored the brand. Values did not override the strategy; they were the mechanism through which the right decision became clear.

If you didn’t catch our webinar live, you may view it by signing up for access to all of our webinars and videos here.

Next in the series: What leaders can control.

Summary

In today’s complex and volatile business environment, the alignment of organisational culture with strategic objectives is no longer a soft issue. Culture shapes how risks are perceived, decisions are made, and strategies are developed and executed. It is a critical driver of strategic success or failure.

When misaligned, it can quietly undermine even the most well-crafted plans. As strategic risks become more interconnected and dynamic, organisations must recognise that their internal culture plays a central role not only in execution but also in shaping their ability to identify, respond to, and withstand strategic challenges. In practice, most organisations operate along a spectrum, where elements of culture may simultaneously support or hinder different aspects of performance.

Framework for Considering Culture Risk

In their influential work Managing Risks: A New Framework, Mikes and Kaplan (2015) categorise organisational risks into three broad types:

• Preventable risks: Internal and controllable risks that should be eliminated or avoided (e.g., operational failures, ethical lapses).

• Strategy risks: Risks accepted by management as part of pursuing strategic returns (e.g., entering new markets, launching new products).

• External risks: Risks arising outside the organisation’s control (e.g., natural disasters, geopolitical shocks).

Culture risk, defined as the potential for organisational values, behaviours, and norms to misalign with strategic goals, can be classified as both a preventable and a strategic risk. As a preventable risk, culture may contribute to operational inefficiencies, weak collaboration and planning, as well as misconduct, regulatory breaches, and weak or compromised decision-making. As a strategic risk, a misaligned or dysfunctional culture can distort or delay strategic choices and execution, especially in times of uncertainty, transformation or innovation.

Mikes and Kaplan (2015) emphasise the need to embed culture into the fabric of enterprise risk management (ERM). Organisations that fail to do so risk allowing cultural blind spots to undermine both performance and resilience. High-performing organisations realise this. They treat culture as part of enterprise risk management (ERM), embedding it into governance, metrics, and strategic oversight.

In addition, the rapid emergence of advanced artificial intelligence (AI) introduces a new category of external risk that interacts directly with organisational culture. While AI itself sits outside the organisation’s control, how it is adopted, governed, and used is deeply shaped by internal norms, values, and leadership behaviours. In this way, AI amplifies existing cultural strengths and vulnerabilities: cultural gaps may enable misuse, over-reliance, or ethical lapses, while strong cultures establish appropriate boundaries, accountability, and disciplined use.

Culture and Insider Risks: A Critical Link

One of the most underestimated manifestations of culture risk is the insider risk. Insider risks arise when employees, contractors, or other internal actors intentionally or unintentionally compromise the organization’s security, operations, or strategy. These threats are especially dangerous because they are difficult to detect and often facilitated by a permissive or disengaged cultural environment. Research shows that insider risk is closely linked to cultural conditions (Greitzer & Frincke, 2010), such as low trust, disengagement, unclear ethics, or weak leadership. For example:

• Employees who feel undervalued or resentful may engage in sabotage or data theft.

• A culture that lacks accountability may allow poor practices to go unchallenged.

• If reporting mechanisms are absent or distrusted, early warning signs are missed.

Recent industry research continues to reinforce this perspective. The Ponemon Institute’s 2026 Cost of Insider Risks Global Report indicates that insider-related incidents remain both costly and complex, with human factors playing a significant role in the majority of cases. Insider risk security incidents now cost organisations an average of US$19.5M annually, up from $17.4M in 2024, underscoring how quickly exposure is escalating. The report maintains many of these incidents are not driven by malicious intent, but by everyday behaviour amplified by increasingly complex digital environments, including misjudgments, process gaps, and unmanaged workflows.

The proliferation of generative AI tools further heightens insider risk. Employees now have unprecedented ability to access, generate, and disseminate information, often outside traditional controls. In such an environment, culture becomes even more critical: norms around responsible use, confidentiality, and professional judgment determine whether these tools enhance performance or introduce new vulnerabilities.

Thus, insider risks are not just security issues. They are cultural concerns. High-performing organisations address insider risks using an integrated approach that includes values-based and accountable leadership, trust-building, and clear behavioural expectations, all of which fall under the umbrella of culture management.

The Barrett Model®

To better understand how cultural conditions shape behaviours such as those underlying insider risks, it is useful to examine how organisational cultures operate and can shift in response to leadership and strategic imperatives.

The Barrett Model provides a developmental framework for understanding how organisations progress from foundational needs, such as survival and control at the lower levels, to purpose and service at the higher levels (Barrett, 2016). Organisations operating at lower levels (Levels 1-3 Viability, Relationships, Performance) tend to prioritize control, hierarchy, and risk aversion, often leading to more compliance-driven or fear-based cultures. Such cultures may appear stable, but they are inherently more fragile, particularly under stress or disruption.

Conversely, at Level 4 (Evolution), organisations shift from more rigid, hierarchical structures to adaptive, inclusive systems that empower employees to operate with accountability. As organisations progress to Levels 5–7 (Alignment, Collaboration, Contribution), they reflect a focus on shared purpose, long-term sustainability and societal impact. Organisations at these levels encourage deeper levels of commitment, motivation and greater levels of resilience. As organisations progress from foundational needs (1-3) to higher-order values (4-7) their cultures are characterized by:

• Trust and transparency

• Shared vision and values

• Empowerment and accountability

• Values-based responsible behaviour embedded in daily practice

High-performing and resilient organisations intentionally cultivate higher levels of risk awareness, enabling them to take calculated risks, respond more effectively to uncertainty, and adapt strategies without internal resistance. In other words, cultural maturity is directly linked to performance capacity and strategic success.

Diagnosing Culture

The Barrett Values Centre offers a powerful set of tools to assess and manage culture risk. Central to their approach is the concept of Cultural Entropy®, which measures the degree of dysfunction within an organisation. Cultural Entropy measures how much energy is consumed by unproductive work, with high levels often arising from fear-based behaviours like blame, control, confusion and internal competition. High Cultural Entropy is correlated with low employee engagement, low morale, resistance to change, poor collaboration and innovation, and higher incidences of misconduct.

However, Barrett Values Centre’s diagnostic framework goes further. In addition to measuring dysfunction through Cultural Entropy, their assessment tools measure values alignment and balance across the seven levels of the Barrett Model. This enables organisations to identify cultural friction, strategic disconnects, and overemphasis on control or compliance. By tracking cultural evolution over time, leaders gain visibility into how culture supports or hinders strategic agility.

By actively managing culture using these measures and insights, organizations can reduce Cultural Entropy, increase alignment, and build environments conducive to sound judgment, responsible behaviour and strategic agility.

Culture as a Strategic Enabler or Obstacle

When aligned with strategic goals, culture acts as a strategic asset. When misaligned, it becomes a strategic liability. These patterns are not fixed but reflect tendencies within a culture that can strengthen or weaken execution over time.

Strategic Enabler

•  Culture supports innovation and agility

• Employees are empowered and accountable

• Clear standards guide decision-making

• Values align with long-term strategic vision

• Clear norms and governance for responsible use of emerging technologies (e.g., AI) strengthen decision-making and productivity

Strategic Obstacle

•  Culture resists change and new thinking

• Siloed thinking and low engagement

• Misconduct and rule-breaking go unchecked

• Short-termism and fear dominated behaviours

• Weak or unclear governance of AI use leads to ethical breaches, data risks, and flawed decision-making

Leadership as the Ceiling of Culture

Leaders set the “cultural ceiling”. Their values, behaviours, and standards powerfully define what is considered acceptable, aspirational, or off-limits.

In practice, when leaders prioritize long-term purpose, employees align their decisions with sustainable performance. When leaders embody transparency and accountability, psychological safety grows and misconduct declines. Conversely, when leaders fail to model, reinforce, and hold others accountable for living stated values in practice, it can cascade quickly into organisational dysfunction.

High-performing organizations recognize leadership development as culture development. They deliberately invest in equipping leaders to operate at higher levels of awareness, knowing that this directly expands the organization’s capacity for sound judgment, values-based decision-making and adaptive strategy.

Practical Implications for Culture Risk and Strategy

To integrate culture risk into strategic risk management, organizations should:

1. Diagnose and monitor culture regularly using validated tools such as those from the Barrett Values Centre.
   Why: Visibility into cultural strengths and risks enables proactive action.

2. Embed cultural indicators into performance and risk dashboards.
   Why: Linking culture metrics to performance reinforces accountability and prioritization.

3. Develop intentional, values-based and accountable leadership and role modeling through training, mentoring, and reflective practice.
   Why: Leadership sets the cultural ceiling and shapes long-term decision quality.

4. Create mechanisms for employee voice and safe reporting.
   Why: Surfacing ethical concerns early prevents escalation into costly insider risks.

5. Link values explicitly to strategy.
   Why: Ensuring day-to-day behaviours reinforce strategic goals enhances both execution and long-term resilience.

Conclusion

Culture is not a background variable. It is the operating system that shapes behaviours, influences decision-making, and determines how well strategy is developed and executed. The growing influence of technologies such as artificial intelligence further underscores this imperative. Resilient, high-performing organizations know this and treat culture risk management as performance management.

References

Barrett, R. (2016). The Values-Driven Organization: Unleashing Human Potential for Performance and Profit. Routledge.

Greitzer, F. L., & Frincke, D. A. (2010). Combining traditional cyber security audit data with psychosocial data: Towards predictive modelling for insider risk mitigation. Insider risks in Cyber Security, 85–113. Springer.

Mikes, A., & Kaplan, R. S. (2015). Managing risks: A new framework. Harvard Business Review, 93(6), 48–60.

Ponemon Institute. (2026). 2026 Cost of Insider Risks Global Report (sponsored by DTEX Systems). DTEX Systems. Retrieved from https://ponemon.dtex.ai/

NOTE: This article was prepared with the support of AI-assisted research and drafting tools. All conclusions and interpretations are those of the author.

In 2025, for the first time in history, we’re seeing five generations working side by side in many organizations: Traditionalists (born before 1946), Baby Boomers, Gen X, Millennials, and Gen Z. This historic overlap brings incredible diversity in perspectives, but also fresh challenges for workplace culture, communication, and leadership.

Culture Clash or Culture Catalyst?

Company culture is often where we feel generational differences most strongly. According to a 2024 report from Deloitte, 67% of HR leaders say aligning a multigenerational team around a shared culture is one of their top concerns. While Boomers might value loyalty and hierarchy, Gen Z places high value on authenticity, purpose, and social impact.

This diversity can lead to friction but also to innovation. When organizations intentionally define and model shared values, they create a cultural foundation that supports collaboration across generations and empowers people to bring their whole selves to work.

Talk to Me: Communication Style Mismatches

Generational diversity also shows up in how people prefer to communicate. A 2023 Grammarly and Harris Poll study revealed stark contrasts:

• Boomers and Gen X prefer emails and face-to-face conversations.

• Millennials lean into messaging apps like Slack and G-Chat but still value email.

• Gen Z expects rapid, informal communication, often preferring text-based formats and direct messaging platforms.

Miscommunication—or worse, assumptions about tone and intent—can easily lead to misunderstandings. “Typing in all caps” might signal an urgency to a Boomer but comes across as yelling to a Gen Zer. Likewise, a Millennial might interpret a short “K” message as passive-aggressive rather than efficient.

The solution? Leaders promote a culture of communication flexibility, where the intent is clarified, the tone is humanized, and employees are encouraged to interpret, not just transmit or jump to conclusions.

Feedback: One Size Doesn’t Fit All

Another area where generational expectations diverge is feedback.

• Boomers and Gen X are often accustomed to formal, scheduled performance reviews.

• Millennials thrive on frequent, constructive feedback and mentorship.

• Gen Z, raised on real-time likes and comments, often expects instant feedback.

In 2025, relying solely on annual reviews isn’t only outdated but also ineffective. Gallup’s recent workplace study found that employees who receive regular, personalized feedback are 3.6 times more likely to be engaged. Clear, open communication is often a unifying value in a company’s culture; to effectively live this value across all generations, visionary leaders are blending formats, including quick check-ins, peer recognition tools, and performance snapshots.  

 So What Can Organizations Do?

1. Define and model core values: Don’t assume everyone shares the same workplace norms. Make your values visible and actionable.

2. Create cross-generational mentorship: Let younger employees bring digital fluency while older employees share institutional wisdom.

3. Develop communication agility: Equip teams to navigate tone, timing, and platforms with empathy.

4. Customize feedback: Build a feedback culture that’s proactive, personal, and inclusive of generational needs.

In Summary

• The multigenerational workforce isn’t a challenge to fix; it’s an asset to harness.

• By embracing differences and designing cultures and systems that value all voices, companies in 2025 will have the opportunity to leverage generational diversity as one of their greatest strengths.

• Understanding your culture’s values and how different generations live those values is the foundation of a harmonious and productive multigenerational workforce.   

Sources: 

https://www.deloitte.com/ua/en/about/press-room/human-capital-trends.html

https://go.grammarly.com/state-of-business-communication-report-2023

Gallup 2024 Workplace Recognition & Feedback Report

Abstract

Values stand at the very core of human decision‐making. When we work in an organisation whose culture aligns with our personal values, we feel liberated. We are able to bring our full selves to work. We not only bring our energy, our creativity, and our enthusiasm, we also bring our commitment to the well‐being of our associates and the success of the organisation. Unleashing this energy is tantamount to liberating the corporate soul.

THE CENTRAL ROLE OF VALUES

There are four critical issues preoccupying the boardrooms of both large and small companies around the world:

• How do we increase profits and shareholder value?

• How do we attract and keep talented people?

• How do we build brand loyalty?

• How do we ensure that ethics permeate the corporate culture? How do we build a resilient, sustainable company?

 The critical issues facing the leaders of our public services are:

• How do we deliver high‐quality, cost‐effective services?

• How do we attract and keep talented people?

• How do we ensure that ethics permeate the institutional culture?

• How do we build a resilient, sustainable society?

The key to these core issues, in both private and public sector organisations, is found in building a high‐performance culture.

In the private sector, the culture of an organisation is the principal source of its competitive advantage and brand differentiation. In the public sector, the culture of an agency is the principal source of its cost‐effectiveness and the quality of services.

Our experience in mapping the values of more than 2,000 private and public sector institutions over the past ten years in more than 60 countries allows us to state categorically that values‐driven organisations are the most successful organisations on the planet. The reasons for this are simple to decipher.

In the private sector:

• Values and behaviours drive culture

• Culture drives employee fulfilment

• Employee fulfilment drives customer satisfaction

• Customer satisfaction drives shareholder value

In the public sector:

• Values and behaviours drive culture

• Culture drives employee fulfilment

• Employee fulfilment drives mission assurance

• Mission assurance drives customer satisfaction

In both the private and public sectors, the key to success—whether it is in terms of employee or customer satisfaction—begins with the values of the organisation. When we speak about “values,” we are talking about the deeply held principles, ideals, or beliefs that people hold or adhere to when making decisions. Individuals express their values through their personal behaviours; organisations express their values through their cultural behaviours.

Values can be positive, or they can be potentially limiting. For example, the positive value of “trust” is fundamental for creating a cohesive group culture. On the other hand, the potentially limiting value of “being liked” can cause people to compromise their integrity in order to satisfy their need for connection. Similarly, the potentially limiting value of “bureaucracy” can cause rigidity and limit the agility of an organisation.

Our research[1], and that of others shows that there is a strong link between financial performance and the alignment of an organisation’s cultural values with employees’ personal values. In other words, who you are and what you stand for is becoming just as important as the quality of products and services you provide.

In Corporate Culture and Performance, John P. Kotter and James L. Heskett show that companies with strong adaptive cultures based on shared values outperform other companies by a significant margin.[2] They found that, over an eleven‐year period, the companies that cared for all stakeholders grew four times faster than companies that did not. They also discovered that these companies had job creation rates seven times higher, stock prices that grew twelve times faster, and a profit performance ratio that was 750 times higher than companies that did not have shared values and adaptive cultures.

In Built to Last: Successful Habits of Visionary Companies, Jim Collins and Jerry Porras show that companies that consistently focused on building strong values‐driven cultures over a period of several decades outperformed companies that did not by a factor of six, and outperformed the general stock market by a factor of fifteen.[3]

In Firms of Endearment, Sisodia, Wolfe and Seth shows that companies that care for all stakeholders equally—employees, customers, investors, partners and society—are committed to exemplary citizenship, and embrace servant leadership outperformed the S&P 500 and the “great” companies identified by Jim Collins in Good to Great by significant margins over the long‐term (See Figure 1).[4] According to the authors, these companies had a humanistic soul.

[1] Richard Barrett, Building a Values-Driven Organization: A Whole-System Approach to Cultural Transformation, Boston: Butterworth-Heinemann, 2006.

[2] John P. Kotter and James L. Heskett, Corporate Culture and Performance, New York: The Free Press, 1992.

[3] James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies, New York: Harper Collins, 1994.

[4] Rajendra S. Sisodia, David B. Wolfe, Jagdish N. Seth. Firms of Endearment: The Pursuit of Purpose and Profit. Upper Saddle River, New Jersey: Wharton School of Publishing, 2007.

CULTURE AND LEADERSHIP

The values that make up the culture of an organisation are either a reflection of the underlying beliefs of the current leaders—particularly the chief executive—or they are the reflection of the heritage of past leaders.

Most organisations operate with “default” cultures. Because no one is measuring or paying attention to the culture, the underlying values and beliefs of the leaders become “the way things are done around here.”

When there is a lack of alignment between the values of the culture of the organisation and the personal values of employees, the result is low performance, which can further result in low levels of staff engagement and poor quality of products and services. All of these factors can have a significant impact on the financial performance of the organisation or its ability to deliver services of sustainable high quality.

On the other hand, when the values of the organisation are in alignment with the aspirational values of employees, the result is high performance. There is a high level of staff engagement and a pursuit of excellence regarding the quality of products and services.

There are two other major benefits to values alignment. First, when values are aligned, the culture of an organisation is able to attract and retain talented individuals. This gives organisations a significant commercial advantage, especially when talent is in short supply. Second, values alignment builds a strong brand. Brand values and company values are two sides of the same coin. The strongest external brands are always those with the strongest internal cultures.

Ultimately, therefore, whether we are talking about high-performance, brand differentiation, or retaining talented individuals, the success of an organisation is directly related to the degree of alignment that exists between the underlying values of the leaders and the aspirational values of employees. Long‐term, sustainable success is highly dependent on the culture that the leaders create.

Significantly, the culture that leaders create is highly dependent on the behaviours of the leaders and their relationships to other leaders in the organisation, and on their relationships with their employees. Leaders whose energies are wrapped up in status-seeking, empire‐building, and internal competition create toxic environments with little or no organisational cohesion. Leaders who share the same vision and values, who work for the common good, and focus on internal community building create internal cohesion and values alignment.

To put it another way, the organisational transformation begins with the personal transformation of the leaders. Organisations don’t transform; people do! The key factor in transforming a low‐performance culture into a high‐performance culture is leadership. This is why organisations with strong, high‐performing cultures tend to replace their leaders by promoting from within, whereas low‐performing cultures tend to replace their leaders with external candidates. By promoting from within, thriving cultures are able to retain their successful leadership styles with the least perturbation. Struggling cultures, on the other hand, absolutely need to change their leadership styles. That is why they typically hire from outside the company, with the hope that the new leader will bring a new way of being that translates into a more dynamic culture.

Bringing in an external leader is not the only way to transform organisational culture. More and more companies are engaging in cultural transformation programs that involve a whole‐system approach, which I describe in Building a Values‐Driven Organization: A Whole‐System Approach to Cultural Transformation.[1] In order to grasp the process and benefits of a whole‐system approach to cultural transformation, it is important to understand the differences between change, transformation and evolution,[2] and how to measure the current and desired cultures of an organisation, thereby identifying the current and desired leadership styles. From a cultural alignment perspective, it is necessary to have a clear understanding of where an organisation is and where it wants to go before embarking on a program of transformation.

[1] Richard Barrett, Building a Values-Driven Organization: A Whole-System Approach to Cultural Transformation, Boston: Butterworth-Heinemann, 2006.

[2] Richard Barrett, Liberating the Corporate Soul: Building a Visionary Organization, Boston: Butterworth-Heinemann, 1998; pp. 12-13.

CHANGE, TRANSFORMATION AND EVOLUTION

Toward the end of the last century, many organisations bought into a “change” concept known as “reengineering.” In a survey of almost one hundred reengineering projects, two‐thirds were judged as producing mediocre or marginal results. The principal reason for failure was the lack of attention given to the human dimension— particularly, people’s fear and anxiety of downsizing. Morale slumped in 72% of the companies downsized. It was later recognised that what was missing from the reengineering approach was the people or cultural dimension of change. Thomas H. Davenport, in an article for Fast Company magazine entitled “Why Engineering Failed,” notes that “Companies that embraced reengineering as a silver bullet are now looking at ways to rebuild the organisation’s torn social fabric.”[1]

This is a clue to the important distinction between change and transformation. Change is a new way of doing. Transformation is a new way of being. Evolution occurs only when individuals or organisations embrace a continual state of transformation and change.

• Change: A different way of doing. Doing what we do now, but doing it in a more efficient, productive, or quality‐enhancing way.

• Transformation: A different way of being. Transformation involves changes at the deepest levels of beliefs, values, and assumptions. Transformation results in fundamental shifts in personal and corporate behaviour and organisational systems and structures. Transformation occurs when we are able to learn from our mistakes, are open to a new future, and can let go of the past.

• Evolution: A state of continual transformation and change. Evolution involves constant adjustments in values, behaviours, and beliefs based on learning gained from internal and external feedback. Evolution most easily occurs in individuals and organisations that are adaptable, trusting, open, and transparent, and have a profound commitment to learning and self-development.

The fundamental change that occurs during cultural transformation is a shift in attitude from “What’s in it for us (me)?” to “What’s best for the common good? There is a shift in focus from “I” to “We”. This involves moving from an exclusive focus on the pursuit of profit to the broader pursuit of a group of objectives that are instrumental in meeting shareholder, employee, customer, supplier, community, and societal needs.

[1] T. H. Davenport, The Fad That People Forgot, Fast Company (October 1995); pp. 69–74.

AN EVOLUTIONARY MODEL FOR MEASURING CHANGE AND TRANSFORMATION

The model we use for measuring the values of organisations is known as the Seven Levels of Consciousness® model also known as the Barrett model. Unlike most other business models, this model is evolutionary in nature. Each level in the model corresponds to an evolutionary stage in the growth in development and consciousness of the organisation.

The seven stages in the development of organisational consciousness are summarised in the following diagram and table and described in detail in the following paragraphs. The model applies to all types of organisations—corporations, government departments, municipal agencies, institutions, non‐governmental organisations (NGO), and educational establishments. The focus of this table is on a for‐profit organisation. The differences between this type of organisation and other types of organisation are mainly in the way they are financed or funded, and the way they distribute their products and/or services. The table describing the Seven Levels of Organisational Consciousness should be read starting from the bottom and working up.

While the model as a whole, focuses on the needs of the organisation, different levels of consciousness focus on the needs of specific stakeholders. At the first level of consciousness there is a specific focus on the needs of investors and employees; at the second level on the needs of employees and customers; at the third fourth and fifth levels on the needs of employees; at the sixth level on needs of employees, partners, and the local community, and at the seventh level on employees, partners and society.

Ultimately, no matter what type of organisation is under consideration, it is the employees’ experience of the organisation, and the leaders’ ability to inspire them to unlock their discretionary energy that is a fundamental factor in determining the organisation’s level of success.

The “lower” needs, levels 1 to 3, focus on the basic needs of the business—the pursuit of profit or financial stability, building employee and customer loyalty, and high-performance systems and processes. The emphasis at these lower levels is on the self‐ interest of the organisation and its shareholders. Abraham Maslow referred to the needs of these three levels of consciousness as “deficiency” needs. An organisation gains no sense of lasting satisfaction from being able to meet these needs, but the leaders feel a sense of anxiety if these basic needs are not met.

The focus of the fourth level is transformation—a shift from fear‐based, rigid, authoritarian hierarchies to more open, inclusive, adaptive systems of governance that empower employees to operate with responsible freedom (accountability).

The “higher” needs, levels 5 to 7, focus on cultural cohesion and alignment, building mutually beneficial alliances and partnerships, long‐term sustainability and social responsibility. Abraham Maslow referred to these as “growth” needs. When these needs are met, they do not go away. They engender deeper levels of commitment and motivation.

Organisations that focus exclusively on the satisfaction of the lower needs are not usually market leaders. They can achieve some success financially, but in general, they are too internally focused and self‐absorbed, or too rigid and bureaucratic to be at the top of their game. They are unable to adapt to changing market conditions: they are not adaptable and do not empower employees. Consequently, there is little enthusiasm among the workforce, and there are little innovation and creativity. These organisations are often ruled by fear and are not healthy places to work. Employees often feel frustrated, and complain about stress.

Organisations that focus exclusively on the satisfaction of the higher needs lack the basic business skills and capabilities necessary to operate effectively. They are ineffectual and impractical when it comes to financial matters. They are not customer oriented, and they lack the systems and processes necessary for high-performance.

They are simply not grounded in the reality of business. These characteristics are often found in non‐governmental organisations and not‐for‐profit organisations.

The most successful organisations are those that have mastered both their “deficiency” needs and their “growth” needs. They operate from Full Spectrum Consciousness®. They create a climate of trust, have the ability to manage complexity, and can respond or rapidly adapt to all situations.

FULL SPECTRUM CONSCIOUSNESS

Full spectrum organisations display all the positive attributes of the Seven Levels of Organisational Consciousness.

• They master survival consciousness by focusing on profit, financial stability, and the health and safety of employees.

• They master relationship consciousness by focusing on open communication, employee recognition, and customer satisfaction.

• They master self‐esteem consciousness by focusing on performance, results, quality, excellence, and best practices.

• They master transformation consciousness by focusing on adaptability, innovation, employee empowerment, employee participation, and continuous learning. They master internal cohesion consciousness by developing a culture based on shared values, and a shared vision that engenders an organisation‐ wide climate of trust.

• They master making a difference consciousness by creating strategic alliances and partnerships with other organisations and the local community, as well as developing mentoring, coaching and leadership development programmes for employees.

• They master service consciousness by focusing on social responsibility, ethics, and sustainability, and keeping a long‐term perspective on their business and its impact on future generations, as well as embracing compassion, humility and forgiveness.

Each of the seven levels of organisational consciousness is described in more detail below.

Level 1: Survival Consciousness

The first need for an organisation is financial survival. Without profits or access to a continuing stream of funds, organisations quickly perish. Every organisation needs to make financial stability a primary concern. A precondition for success at this level is a healthy focus on the bottom‐line.

When companies become too entrenched in survival consciousness and have deep-seated insecurities about the future, they develop an unhealthy short‐term focus on shareholder value. In such situations, making the quarterly numbers—satisfying the needs of the stock market—can preoccupy the minds of the leaders to the exclusion of all other factors. This leads to excessive control, micro‐management, caution, and a tendency to be risk‐averse.

Businesses that operate in this way are not interested in strategic alliances; takeovers are more their game. They will purchase a company and plunder its assets. They see people and the Earth as resources to be exploited for gain. When asked to conform to regulations, they do the minimum. They have an attitude of begrudging compliance. Organisations experience their deepest fears at this level of consciousness.

Level 2: Relationship Consciousness

The second need for an organisation is harmonious interpersonal relationships and good internal communications. Without good relationships with employees, customers and suppliers, company survival is compromised.

The critical issue at this level of consciousness is to create a sense of loyalty and belonging among employees, and a sense of caring and connection between the organisation and its customers. Preconditions for creating a sense of belonging are open communication, mutual respect and employee recognition. Preconditions for caring are friendliness, responsiveness and listening. When these are in place, loyalty and satisfaction among employees and customers will be high. Tradition and rituals help cement these bonds.

Fears about belonging and lack of respect lead to fragmentation, dissension and disloyalty. When leaders meet behind closed doors or fail to communicate openly, employees suspect the worst. Cliques form and gossip become rife. When the leaders are more focused on their own success rather than the success of the organisation, they begin to compete with each other. When leaders display territorial behaviours, blame, internal competition and information hoarding become rife, increasing the level of the Cultural Entropy® score. Family businesses often operate from level 2 consciousness because they are unable to trust outsiders in management positions.

Level 3: Self-Esteem Consciousness

The focus of the third level of organisational consciousness is on performance and measurement. It is about keeping a balanced and watchful eye on all the key operational indicators.

At this level of consciousness, the organisation is focused on becoming the best it can be through the adoption of best practices and a focus on quality, productivity and efficiency. Systems and processes are strongly emphasised and strategies are developed to achieve desired results. Reengineering, Six Sigma and Total Quality Management are typical responses to issues of performance at this level of consciousness. The critical issue at this level of consciousness is to develop a culture of continuous improvement. A precondition for continuous improvement is the encouragement and reward of excellence.

Level 3 organisations tend to be structured hierarchically for the purposes of central control. Top‐down is the primary mode of decision‐making. The hierarchical structure also provides opportunities for rewarding individuals who are focused on their own personal success. Steep hierarchies often serve no other purpose than to cater to managers’ needs for recognition, status, and self‐esteem. To maintain central control, level 3 organisations develop rules to regulate and bring order to all aspects of their business. 

Companies that are predominantly focused at this level of consciousness can easily degenerate into power‐based silos, rigid authoritarian bureaucracies and/or a group of internally competitive overachievers. When this happens, failure or collapse will eventually occur unless the organisation can switch from being internally focused to externally focused, and become more adaptable.

Level 4: Transformation Consciousness

The focus of the fourth level of organisational consciousness is on adaptability, employee empowerment, and continuous learning. The critical issue at this level of consciousness is how to stimulate innovation so that new products and services can be developed to respond to market opportunities. This requires the organisation to be agile and flexible, and take risks.

To fully respond to the challenges of this level of consciousness the organisation must actively garner employees’ ideas and opinions. Everyone must feel that his or her voice is being heard. This requires managers and leaders to admit they do not have all the answers and invite employee participation. For many leaders and managers, this is a new role requiring new skills and capabilities. That is why it is important to develop the emotional intelligence of managers. They must be able to facilitate high performance in large groups of people who are looking for equality and responsible freedom. They want to be held accountable ‐ not micro‐managed and supervised every moment of every day.

One of the dangers at this level of consciousness is to become overly biased toward consensus. While some level of consensus is important, ultimately decisions must get made.

A precondition for success at this level of consciousness is encouraging all employees to think and act like entrepreneurs. More accountability is given to everyone and structures become less hierarchical. Teamwork is encouraged and more attention is given to personal development and relationship skills. Diversity is seen as a positive asset in exploring new ideas. This shift, which brings responsible freedom and equality to workers, cannot fully achieve the desired results unless all employees and teams share the same sense of direction or purpose. This requires a shift to the fifth level of consciousness.

Level 5: Internal cohesion Consciousness

The focus at the fifth level of organisational consciousness is on building cultural cohesion and developing a capacity for collective action. For this to happen, leaders and managers must set aside their personal agendas and work for the common good.

The critical issue at this level of consciousness is developing a shared vision of the future and a shared set of values. The shared vision clarifies the intentions of the organisation and gives employees a unifying purpose and direction. The shared values provide guidance on decision‐making. When the values are translated into behaviours, they provide a set of parameters that define the boundaries of responsible freedom. The values and behaviours must be reflected in all the processes and systems of the organisation with appropriate consequences for those who are not willing to walk-the-talk.

A precondition for success at this level is to build a climate of trust. Aligning employees’ personal sense of mission with the organisation’s sense of vision will create a climate of commitment and enthusiasm at all levels of the organisation. Personal productivity and creativity increase as individuals align with their passion.

In level 5 organisations, failures become lessons, and work becomes fun. The key to success at this level of consciousness is the establishment of a strong, positive, unique cultural identity that differentiates the organisation from its competitors. The culture of the organisation becomes part of the brand. This is particularly important in service organisations where employees have close contact with customers and the general public. At this and subsequent levels of consciousness, organisations preserve their unique culture by promoting from within.

Level 6: Making a Difference Consciousness

The focus at the sixth level of organisational consciousness is on deepening the level of internal connectedness in the organisation and expanding the sense of external connectedness.

Internally, the focus is on helping employees find personal fulfilment through their work. Externally, the focus is on building mutually beneficial partnerships and alliances with business partners, the local community, and in certain circumstances with non-governmental organisations—in other words with all stakeholders.

The critical issue at this level of consciousness is that employees and customers see the organisation is making a difference in the world, either through its products and services, its involvement in the local community or its willingness to fight for causes that improve the well-being of humanity. Employees and customers must feel that the company cares about them and their future.

Companies operating at this level of consciousness go the extra mile to make sure they are being responsible citizens. They support and encourage employees’ activities in the local community by providing time off for employees to do volunteer work and/or making a financial contribution to the charities in which employees are involved.

At this level of consciousness, organisations create an environment where employees can excel. The organisation supports employees in becoming all they can become both in terms of their professional and their personal growth. Everyone supports everyone else.

A precondition for success at this level is developing leaders with a strong sense of empathy. Leaders must recognise that they must not only provide direction for the organisation, but they must also become the servants of those who work for them. They must create an environment that supports every employee in aligning their sense of personal mission with the vision and mission of the company. At this level of consciousness, leaders must become mentors thereby creating pools of talent for succession planning. Leadership development is given significant emphasis at this level of consciousness.

Level 7: Service Consciousness

The focus at the seventh level of organisational consciousness is a continuation of the previous level—a further deepening of the internal connectedness, and a further expansion of external connectedness.

Internally the focus of the organisation is on building a climate of ethics, humility and compassion. Externally, the focus is on local, national or global activism in building a sustainable future for humanity and the planet.

The critical issue at this level of consciousness is developing a deep sense of social responsibility throughout the organisation. At this level of consciousness, organisations care about social justice and human rights. They care about ecology and the global environment.

A precondition for success at this level of consciousness is selfless service, displayed through a profound commitment to the common good and to the well-being of future generations. To be successful at level 7, organisations must embrace the highest ethical standards in all their interactions with employees, suppliers, customers, shareholders and the local community. They must always give consideration to the long‐term impacts of their decisions and actions.

CONCLUSIONS

Full spectrum consciousness and values alignment is becoming the most significant factors in predicting organisational success. Companies that consciously focus on their values are more resilient, more sustainable and more successful than all other companies. The leaders of these companies recognise the importance of creating an organisational culture that continually evolves and grows and serves the needs of all stakeholder groups.

The values of your leaders matter. They will shape and influence how AI or any disruptive technology is adopted and deployed. This is the time to take stock of leadership styles and the organizational culture they create to understand how they help or hinder the achievement of an organization's objectives. Knowing your strengths, blind spots, and possible limiting behaviors will significantly inform the capacity and potential for AI adoption.  This process of understanding is best supported with objective, data-driven insights that drive leadership alignment through shared understanding. If needed, the leaders can make changes to prepare themselves and the organizational culture better to support the ever-evolving business landscape. This is the cornerstone of a resilient organization.   

Aligning your culture to your systems and processes is the way to create sustainable success. AI will continue to provide an ever-expanding array of uses in business. Not every application will fit your business, and discerning that starts with your culture. Implementing AI in a manner that deviates from your culture will inevitably create dysfunction and failure. Aligning AI with your culture is the pathway to amplify your performance and create more impactful outcomes. Leaders who clearly understand their culture can tap into the organization’s cultural capital and realize the future gains of new technology. 

Are you considering the impact on your people and culture in your AI strategy?  

• How will AI disrupt or challenge your organization? How can you prepare your people & processes for the change?

• AI is generating a lot of fear and uncertainty. How is your organization addressing this?

• Leadership plays a critical role in AI adoption or avoidance. What must you do as a leader to step into the AI era?

Your deep questions may differ, as these considerations are particular to your organization, but aligning your culture to strategy is universal and time-tested.

Let’s look at one scenario under two very different leaderships and cultures:

Company A is focused on cost-cutting and goal orientation. The Marketing department proposes to cut 50% of its content developers and replace them with AI-assisted content. The remainder of the staff will manage the development of the AI content—mostly editing and fact checking. The team continues to meet deadlines, but their job satisfaction is low, the leads generated by the content are decreasing, and turnover has increased.

Company B is focused on quality, creativity, and job fulfillment. Their Marketing department proposes to explore how AI can assist their content development team.  They create a team to review the opportunities, conduct short-term tests of work process changes, and develop recommendations for the best approach.  They identified that some content did not work with AI and redesigned the job descriptions to create a hybrid job of manual content development plus AI-assisted content development.  The result is increased job satisfaction, improved productivity and lead generation, and a plan to move 25% of the content developers to different marketing positions.

For over 25 years, BVC has been working on leadership and culture.  The number one reason this work begins is either a crisis or navigating significant change.  AI can be the catalyst for both.  If you are ready to strengthen your leadership and culture, start with data, use the data to understand where you are and where you need to go, and ensure your plan is holistic.  The entire organization system - leadership, processes, strategy – must be aligned.

Despite return-to-office mandates, a sizable portion of the workforce still works remotely. As of August 2023, roughly one in five people (19.5%) teleworked or worked at home for pay, according to the U.S. Bureau of Labor Statistics. 

With this in mind, leaders need to consider how their culture needs to shift to keep virtual teams engaged.

Here are some strategies that your organisation can use to build a culture of trust and accountability among your hybrid and remote teams. 

1. Prioritise good communication to optimise relationships:

Clear and honest communication is essential for virtual teams. Offering several avenues for communication (email, instant messaging, video calls, etc) ensures that your team feels connected. Consider sending a regular internal newsletter to ensure everyone has the latest company updates. 

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Frequent one-on-one and team check-ins are vital for remote employees because, with regular face time, people generally feel more engaged and inspired. A casual, virtual coffee chat on a Friday morning can boost your team connection and sense of inclusion. 

2. Set clear performance expectations and recognize achievement: 

Leaders and their teams thrive when expectations are clear. Ensuring that all employees understand their role and how your leadership measures performance is essential. 

Be sure to recognize your team’s wins. Sometimes, without daily facetime, accomplishments can go unnoticed by the broader team. Set aside time in team meetings to acknowledge accomplishments or give recognition in a team email communication.

3. Be aligned in your collective purpose: 

Spend time developing your shared vision, your North Star. Having this compass point will help your team get excited and remain clear and engaged on your organisation’s purpose. The magic of humans working together is our ability to impact our world through our collective power.

Here are a few things to avoid that can erode trust:

• Don’t use apps to track activity on computers and other devices.

• Don’t assume that something is amiss if an employee doesn’t immediately respond to an email or instant message.

• Don’t focus on activity. Focus on results.

• Don’t grow apathetic with your team if a few employees have fallen off track. Be sure to deal with challenging situations on the individual level.

Hybrid and remote work formats are here to stay. As a leader, you can support your virtual team in a way that fosters trust and accountability. With your awareness and intentional decision-making, your employees will feel connected to the team and the broader organisation. Let’s chat about how.

Workplace culture and changing workplace norms dominated headlines and online discussions in 2023. Looking forward, our CEO, Chris Gomez, shares a few issues he expects Barrett Values Centre will continue seeing organizations wrestle with this year.

The Work-from-Home Conversation Continues

In 2024, Gomez expects that there will continue to be many conversations around remote work and return-to-office mandates. The new social contract in business is being renegotiated, and legacy management thinking continues to impede this evolution. 

"The battle lines have been drawn pretty clearly on both sides," he says. "So it'll be interesting to see how that plays out in terms of how quickly leaders understand it's not necessarily the policy, but aligning the policy to the organization's culture."

Gomez finds this issue fascinating because he sees a gap in awareness of how these issues connect to culture. Many leaders view decisions about remote work and unlimited PTO as policy decisions. However, these decisions are only sometimes made in alignment with an organisation's culture (or desired culture).

Environmental, Social, and Corporate Governance (ESG) Conversations

Another intriguing workplace culture trend that Gomez is following is the emergence of a conversation around reframing culture as simply an internal organisational issue. He's seeing leaders ask more questions like, "How does the culture of my organisation actually impact society outside the walls of the organisation?" 

An increase in these kinds of conversations around environmental, social, and corporate governance (ESG) is a sign that leaders are thinking more about the broader context of their organisation, Gomez says. He believes there's building awareness around the idea that, as humans, we're all connected, and we need to start behaving as such. 

Gomez views this as an exciting trend because it reveals that leaders are questioning whether their organisation has the awareness required to successfully implement new, sustainable practices. 

There isn't a unified understanding of ESG yet, Gomez says, but the general question is this: "How do we set up external governance policies to create a sustainable future in the realm of corporate business? What does this look like? It will be impossible to imagine the answer as long as companies see the world as a competition. Sustainability will require expanding our notion of capitalism to include of collaboration."

The Rise of Artificial Intelligence

The emergence of artificial intelligence as a disruptive technology is another topic Gomez expects will continue to generate headlines in 2024. 

For Gomez, it will be interesting to see what this technology might trigger in customers and employees and how leaders will respond and adapt. “This is a fast-moving and turbulent space. It will tell us a lot about ourselves and our values. The question is, will people pause long enough to reflect on that and make conscious choices to better serve humanity?”

Stepping into 2024

The year ahead promises to be one where strategic alignment between technology, policy, and a cohesive culture will define organizational success and resilience. In the ever-evolving landscape of workplace dynamics, we anticipate a compelling year ahead, marked by ongoing dialogues on pivotal issues shaping workplace culture.

THE VALUES OF THE LEADERSHIP GROUP

Through our work, we have found that the level of consciousness of the leadership group is a significant factor in diagnosing the cultural issues of an organization. Based on the thousands of surveys we have carried out, we have been able to develop some relatively hard and fast rules about organizational cultures and leadership groups.

• Rule 1: An organization cannot operate at a higher level of consciousness than the personal consciousness of the leadership group.

• Rule 2: The culture of an organization is either a reflection of the personal consciousness of the leadership group (conscious or subconscious) or is inherited from previous leadership groups.

• Rule 3: In general, most organizations operate with a “default” culture because it arises unconsciously. The culture is not managed or monitored. Instead, it is simply recognized as “the way things are done around here.”

In such situations, when the leadership group first sees the results of their Culture Assessment, they are shocked to find that the culture of the organization is lower than their personal consciousness. They have fallen into the trap of accepting “this is the way things are done around here.” They are not conscious of what they have created, and they are unskilled at creating the culture they want to experience. Furthermore, they do not realize that by changing their collective behaviors they can change the culture.

Our research has shown that the cultures created by leadership groups can be categorized into five basic types, characterized by the distribution of Cultural Entropy® across hierarchical levels of the organization.

SHADOW CULTURE

The shadow culture is typified by a high level of Cultural Entropy in the leadership group that gradually decreases as move down the hierarchical levels. The dysfunction of the personalities of the leadership group casts a shadow across the organization; the further away from the leadership group you get, the less impact the shadow has on the work culture.

DENIAL CULTURE

The denial culture is typified by a low level of the Cultural Entropy score in the leadership group that rises sharply at the next level and then decreases gradually toward the lower echelons of the hierarchy. The leadership group lives in their own world, unaware or impervious to the chaos they have created around them. They live in denial of the culture they have created. The direct reports of the leadership group have to deal with the dysfunction caused by their bosses.

SQUEEZE CULTURE

The squeeze culture is typified by a low or medium level of the Cultural Entropy score in the leadership group that gradually increases towards the middle management levels and then gradually decreases towards the lower echelons of the hierarchy. The dysfunction occurs at the middle-management levels, not because of dysfunction from above, as in the denial culture, but because of the delegated accountability for producing results being pushed down the managerial level. The middle managers come under intense pressure from above to produce results and from below to make decisions. This type of culture arises when managers are given accountability without authority.

CRISIS CULTURE

The crisis culture is typified by a pervasive high level of the Cultural Entropy score throughout all levels of the organization. This type of culture is often found in the public sector, where there are strong bureaucratic tendencies and rigid hierarchies. Part of the problem is that the leaders feel powerless to change the culture because of political interference and/ or strong unionization. Our experience suggests that both the political masters and the union bosses will willingly collaborate when they understand the purpose of cultural transformation and can appreciate the change in climate and performance that will flow from a culture-change project. Both groups need to be brought on board at an early stage in the process, by sharing with them the compelling reasons for change.

VALUES-DRIVEN CULTURE

The values-driven culture is typified by a low level of the Cultural Entropy score throughout all levels of the organization. Values-driven cultures are products of a values-management process and/or the result of inspired leadership and are the highest performing cultures. Values-driven cultures are typically consciously created: The leader and the leadership team choose the values of the organization and actively live them. They reinforce the values by constantly referring to them and make them part of every organizational system and process. They sustain a high-performing culture by regularly mapping the culture and the individual performance of every executive and manager. Promotions are not based on performance results alone, but on the executive’s or manager’s ability to live the values.

CONCLUSION

We can classify the first four of these cultures as “default” cultures because they arise unconsciously. They are an expression of the personalities of the past and present leaders of the organization. No one has consciously attempted to manage the culture of the organization and there has been no attempt at values management. Conversely, the fifth type of culture is values-driven. In such cultures, the leadership group consciously creates the culture they want to experience and actively manages their cultural capital. To this end, in addition to monitoring their own personal entropy, they remove the influence of previous leadership groups on the culture by carrying out structural realignment. This involves making sure that the values the leadership team wants to see in the culture are fully integrated into the organization’s systems, policies, and procedures. The desired values should be reflected in the incentives.

THE PROCESS OF DECISION-MAKING

There are four stages involved in decision-making: data gathering, information processing, meaning-making, and decision-making, and three possible outcomes: a reaction, a response or guidance that leads us into a process of reflection. The four stages and three responses are shown diagrammatically in Figure 1, together with six modes of decision-making.

Stage 1: Data gathering

We gather data from our external environment through our senses; our eyes, ears, nose, mouth, and skin (seeing, hearing, smelling, tasting, and feeling). The information we gather comes from our physical environment and arrives at the sense organs of our physical bodies as electromagnetic waves of information. Our eyes don’t see colours; they sense different frequencies of light vibration. Our ears don’t hear sounds; they sense different frequencies of sound vibration, etc. These multiple streams of data in the form of energy quanta are sent to the brain for processing.

Stage 2: Information processing

The brain assembles and synthesizes the data from the five senses into information patterns that can be recognized by the mind. What we see, hear, smell, taste, or feel is not the data that is pouring in through our senses, nor the information patterns produced by the brain, but the mind’s abstraction of this information. The mind gives form to the information patterns.

Stage 3: Meaning-making

The information pattern produced by the brain is used by the body-mind, ego-mind, and soul-mind, to search for a memory (body, ego or soul memory) that contains a similar pattern. When a similar pattern is found, meaning is ascribed to the situation, and a reaction, response, or guidance leading to reflection is initiated.

If there are no matching memories then the mind carries out a “fuzzy” search in the ego mind to find a pattern that has similar characteristics (but not precisely the same) as the one currently being experienced. When a pattern is found, we use logic (links to other patterns that we hold in our mind) to assign a meaning to the situation.

Since the sense organs are directly linked to the brain, which itself is part of the body, the information packages are first responded to by the body-mind—action precedes thought; then by the ego-mind— action precedes or follows thought; and, then by the soul-mind—action follows thought, as shown in Figure 2.

Stage 4: Decision-making

Once meaning-making has been done, the body-mind will react to a situation based on instincts; the egomind will react or respond to a situation based on subconscious beliefs or conscious beliefs, and the soul-mind will reflect on the intuitive or inspirational guidance it is receiving and then affirm or reorient its position.

Thus, as human beings we have three minds making decisions about getting our needs met; we have two sets of body needs (internal stability and external equilibrium), seven levels of ego/soul needs (internal stability of the ego and soul-mind); and six ways in which we make decisions. See Table 1.

SIX MODES OF DECISION-MAKING

The six modes of decision-making are described in detail in the following paragraphs.

Instinct-based decision-making

Instinct-based decision-making takes place at the atomic/cellular level because the actions that arise are based on learned DNA responses, principally associated with issues of survival. For example, babies instinctively know how to suckle; how to cry when their needs are not being met; and how to smile so they can get the attention they need. No one taught them how to do this. It is encoded in their DNA.

In adult life, instinct-based decision-making kicks in to help us survive and avoid dangerous situations. It is also at the root of the fight or flight response common to all animals. In certain situations, our instincts may cause us to put our lives at risk in order to save the life of another. Instincts are the principal mode of decision-making found in all creatures.

The main features of instinct-based decision-making are:

• Actions always precede thought—there is no pause for reflection between making meaning of a situation and decision-making.

• The decisions that are made are always based on past experiences—what our species history has taught us about how to survive and keep safe. These instructions are encoded in the cellular memory of our DNA.

• We are not consciously in control of our words, actions, and behaviours. They are in control of us.

Instinct based-decision is a faculty of the body-mind. The body-mind is where we keep the “institutionalised” DNA memories that keep our physical body safe and secure.

Subconscious belief-based decision-making

In subconscious belief-based decision-making we also react to what is happening in our world without reflection but on the basis of personal memories rather than the institutionalised memories of our cellular (DNA). In this mode of decision-making action also precedes thought. The action is often accompanied by the release of an emotional charge.

You know when subconscious fear-based beliefs are dominating your decision-making if you feel impatient, frustrated, upset or angry. Whenever you experience such feelings, you are dealing with some unmet ego deficiency needs that have never been resolved. Your reactions and emotions are being triggered by a present moment situation that is making you recall a memory about an unresolved situation from the past when you failed to get your needs met.

When you experience positively charged emotions such as joy, and happiness, you are remembering moments from your past which supported you in meeting your deficiency needs. For example, a picture of someone you have not seen in a long while or the sound of their voice may unleash tears of joy and happiness. Your reactions and emotions are being triggered by a present moment situation that is making you recall a positive memory from the past.

The main features of subconscious belief-based decision-making are:

• Actions always precede thought—there is no gap for reflection between making meaning out of the situation and the decision-making that precipitates an action.

• The decisions that are made are always based on past experiences—what your personal history has taught you about maintaining internal stability and external equilibrium in the framework of the existence of your childhood. This history is stored in our personal memory.

• We are not in control of our actions and behaviours. In this mode of decision-making, the only way we can get back into conscious control of your actions is either to release or bottle-up your emotions. Releasing helps us to return to rationality. Bottling-up builds up the pressure.

• It is very personal. Others are not consulted to help us enhance our meaning-making and give support to our decision-making.

Subconscious fear-based decision-making occurs at the first three levels of personal consciousness and is always about attempting to meet our ego’s perceived deficiency needs.

Conscious belief-based decision-making

If we want to make rational decisions, we have to leave behind subconscious belief-based decisionmaking and shift to conscious belief-based decision-making. We have to insert a pause between the event and our response to it. The pause allows us time for reflection so we can use logic to understand what is happening and make a choice about how to respond. By inserting a pause, we also have time to discuss the situation with others and get advice about the best way to meet our needs.

The main features of conscious belief-based decision-making are:

• Thought precedes action—we insert a pause between an event and our response to it so we can use logic and get advice in order to determine the best way of meeting our needs.

• The decisions that are made are based on past experiences and what your personal history has taught you about maintaining internal stability and external equilibrium in your childhood and adulthood. We make decisions based on what we believe we know.

• We are in control of our action and behaviours.

• We can consult with others to support and enhance our decision-making.

Conscious belief-based decision-making has one thing in common with subconscious belief-based decision-making: it uses information from the past (beliefs about what we think we know) to make decisions about the future. Because of this, the future we create is usually only an incremental improvement on the past.

Values-based decision-making

The shift from conscious-belief based decision-making to values-based decision-making is not easy. We have to individuate (establish ourselves at the transformation level of consciousness), and develop a selfauthoring mind before we can make this leap: we need to become viable and independent in our framework of existence before values-based decision-making is fully and naturally available to us.

The reason why the shift from belief-based decision-making to values-based decision-making requires individuation is that prior to individuation we make meaning of our world through our beliefs—and most of these beliefs have to do with our personal and cultural upbringing. The process of individuation involves examining these beliefs and letting go of the ones that don’t serve us. As we let go of these beliefs, we develop a new guidance system based on our deeply held values. Values are the universal guidance system of the soul. When you shift to values-based decision-making, you can effectively throw away your rule books. Every decision you make is sourced by what is deeply meaningful to you.

Values-based decision-making allows us to create a future that resonates deeply with who we really are. It creates conditions that allow authenticity and integrity to flourish. That is not to say there is no place for conscious belief-based decision-making based or logic and rational thinking. There is. However, all the critical decisions we need to make should pass the values test.

The main features of values-based decision-making are:

• Thought precedes action—we reflect on the values that we believe will allow us to get our needs met and make decisions accordingly.

• The decisions that are made are not based on past experiences. They are based on the future we want to create.

• We are in control of our action and behaviours.

• We can consult with others to support and enhance our decision-making.

We make values-based decisions so that we consciously create the future we want to experience. For example, if we value trust, then we should make decisions that allow us to display trust. If we value accountability, then we make decisions that allow us to display accountability.

Intuition-based decision-making

The shift from values-based decision-making to intuition-based decision-making develops overtime once the centre of gravity of your consciousness has shifted from your ego to your soul. Intuition arises from the deepening of your connection to your soul. This is one of the attributes of a self-transforming mind. We reach this level of consciousness after we have completed our own internal cohesion, and have become a self-actualized individual. Intuition allows us to access our own deeper intelligence and the collective intelligence of a wider group.

The principal characteristics of intuition-based decision-making are as follows:

• Awareness is expanded through a shift in our sense of identity/consciousness.

• Judgment is suspended: no meaning-making takes place, either subconsciously or consciously.

• The mind is empty: thoughts, beliefs, and agendas are suspended.

• The mind is free to make a deep dive into the mind-space of the collective unconscious and emerge with a deep sense of knowing.

• The thoughts that arise reflect wisdom and are in alignment with your most deeply held values.

In intuition-based decision-making there is no conscious or subconscious attempt at making meaning; and, there is no focus on the past or the future. You accept what is, without judgment. The intuitive decision arises out of your presence in the current moment. Beliefs lead to decisions based on past experiences. Values lead us to decisions based on the positive feelings we want to experience now and in the future. When we are totally present to a situation without judgment, we create the conditions that allow our minds to tap into the collective mind-space, and our intuition informs us of what wants or needs to emerge. This is the basis of the U-Theory used for collective decision-making, described by Senge, Scharmer, Jaworski and Flowers in Presence: Human Purpose and the Field of the Future. (2)

Inspiration-based decision-making

Inspiration is the way we receive soul-based promptings into our mind. Inspiration is always very personal and directive. It is about what you need to do. It is a persistent thought that will not go away or it is the next step you have to take in a soul-centered activity. It will keep prompting you to take action until you do something about it. The purpose of inspiration is to support you in fulfilling your soul purpose. Inspiration is different from intuition. Intuition is non-directive. Intuition is an idea or insight that apparently arises from nowhere at any specific moment that provides a solution to a problem. Intuition can best be described as a “eureka” moment, whereas inspiration is best described as guidance for staying in a state of “flow.”

When you keep receiving a soul-driven persistent thought about an action or direction you need to take, and you do not follow this directive, there will eventually be emotional consequences, usually in the form of melancholy or depression.

Depression arises from a lack of alignment of your ego motivations with your soul motivations. When the needs of the ego are given precedence of the needs of the soul over a long period of time, you will begin to feel the symptoms of melancholy and then depression.

The principal characteristics of inspiration-based decision-making are as follows:

• The thought appears to arise from nowhere,

• The thought is persistent,

• The thought is linked to actions that you need to take,

• There are consequences for not following your inspiration.

You will recall in the preface of this book I spoke about my “calling” to write a book on leadership. That was an inspiration in action. When I began to write the book, I often found myself in the flow. Ideas and insights just kept flooding my mind. Whenever I got stuck with my writing, I would ask my soul for guidance. I would say to my soul, “I need help.” If I felt really stuck, I would say in demanding voicethought, “Hey soul, get off your backside and help me.” Always within 24 hours, another perfect insight would pop into mind. I would be back in the flow. I feel that this book pretty much wrote itself. I just allowed my life to blend with my work and stay open to inspiration. I can recall periods of time when I could not stop the flow. Words just kept coming without thought or need for editing.

CONCLUSIONS

These six modes of human decision-making, or more precisely, ways of making meaning and getting to a decision, are all evolutionary support systems that have evolved to protect the integrity of the body, the ego, and the soul. Each mode of decision-making is naturally tailored to enable us to handle increasing levels of complexity in the world around us and enhance our ability to respond. As we move through these six stages of decision-making and Seven Levels of Consciousness® our mode of operation shifts from a socialized mind (young child to adult), to a self-authoring mind (adult to mature adult), to a selftransforming mind (soul-infused adult to elder).

As babies, we rely on the instincts of our body-mind to help us survive—a simple life with parents (Level 1 consciousness).

As young children, we rely on the subconscious beliefs of our socialized mind to help us stay safe by learning how to conform—a relatively simple life with parents, siblings and extended family (Level 2 consciousness).

As older children, we rely on the subconscious and conscious beliefs of our socialized mind to navigate the world we live in and differentiate ourselves from others—a more complex life with parents, siblings, extended family members, and non-family peers (Level 3 consciousness).

As adults, we rely on the conscious beliefs and values of our self-authoring mind to individuate and begin to step into our authentic self—a significantly more complex life with family members, non-family peers, and bosses (Level 4 consciousness).

As mature adults, we rely on the values and conscious beliefs of our self-authoring mind to self-actualize and become fully who we really are—a very complex life with our own family, parents, siblings, extended family, non-family peers, bosses, and subordinates (also Level 5 consciousness).

As soul-infused adults we rely on the values and intuition of our self-transforming mind to integrate with others who share similar values and a common vision—an even more complex life with our own family, parents, siblings, and extended family, non-family peers, bosses, subordinates, and partner groups (Level 6 consciousness).

As elders we rely on the intuition and inspiration of our self-transforming mind to serve humanity—this is as complex as it gets with our own family, parents, siblings, extended family, non-family peers, bosses, subordinates, partner groups, humanity and the planet, as well as future generations (level 7 consciousness).

Instincts support us from the moment we are born. We rely on them to navigate the first two years of lives until we learn to talk.

Subconscious beliefs support us in staying safe and surviving during childhood once we have developed the ability to talk and before we have developed the full cognitive abilities of our mind. Conscious beliefs then take over as our principal mode of decision-making.

When we begin to individuate, we need a new guidance system for making decisions that are not based on the parentally and culturally conditioned beliefs we learned during our formative years. This is when the values of the soul come into play. Values are the survival system of the soul. The soul uses values to protect its integrity.

As we grow and develop in soul consciousness, we first learn how to use values to support our decisionmaking; then we learn to tap into our intuition, and finally, we learn how to follow our inspiration. Inspiration is the mode of decision-making that enables us to fulfil our destiny. The soul-infused personality operates from values, utilizes intuition, and is guided by inspiration.

SOURCES

1 In this table I have specifically separated out the physiological needs of the body from the Seven Levels of Consciousness® model. In the original derivation of the model, I included these needs at the survival level of consciousness.

2 Peter Senge, C. Otto Scharmer, Joseph Jaworski and Betty Sue Flowers, Presence: Human Purpose and the Field of the Future, The Society for Organisational Learning, Cambridge, 2004.

ABSTRACT

This paper explores the concept of whole system change. It identifies the four principles necessary for whole system change and provides a nine-step process for implementing cultural transformation.

WHOLE SYSTEM CHANGE

As the title of this paper suggests, for cultural transformation to occur the whole system has to change. I can best explain what is meant by the term “whole system” by referring to Figure 1. The four quadrants in this figure represent the four different perspectives of a human system.

• The perspective as viewed from inside an individual—personal values and beliefs (top left quadrant)

• The perspective as viewed from outside of an individual—personal actions and behaviours (top right quadrant)

• The perspective as viewed from inside of a collective—cultural values and beliefs (the bottom left)

• The perspective as viewed from outside of a collective—social structures, systems, processes, actions, and behaviours (bottom right quadrant).

The four quadrants are linked in the following way. When individuals change their values and beliefs (top left quadrant), their behaviours change (top right). When sufficient numbers of people change their values, beliefs, and behaviors, then a shift in the collective values and beliefs occurs (bottom left). This results in a change in the behaviours of the whole group (bottom right).

In an organisational setting, the values, beliefs (top left quadrant), and behaviours (top right quadrant) of the leader and the leadership group significantly influence the values and beliefs of the collective (bottom left quadrant) and the behaviours of the collective (bottom right quadrant). In other words, the leaders’ values, beliefs, and behaviours significantly influence the culture of the organisation.

To be even more precise, the culture of an organisation is a reflection of the values and beliefs of the present leaders and the instutionalised legacy of the values and beliefs of past leaders as reflected in the structures, systems, processes, policies, and procedures of the organisation.

Four conditions must be met for whole system change to occur. These are described below and shown in Figure 2.

• Personal alignment: There must be an alignment between the values and beliefs of individuals and their words, actions, and behaviours. This is particularly important for the leadership group. It is important that leaders are authentic— that they walk their talk.

• Structural alignment: There must be an alignment between the stated values of the organisation, and the behaviours of the organisation, as institutionalised in the structures, systems, processes, policies, incentives and procedures. It is important that the values of the organisation are fully reflected in all the structures, systems, processes, policies, incentives and procedures of the organisation to institutionalise the culture.

• Values alignment: There must be an alignment between the personal values of employees and the stated values of the organisation. It is important that all employees feel at home in the organisation and can bring their whole selves to work.

• Mission alignment: There must be an alignment between a sense of motivation and purpose of all employees, and the mission and vision of the organisation. It is important that every employee, manager, and leader has a clear line of sight between the work they do each day and the mission or vision of the organisation, so they know how they make a difference.

THE PROCESS OF WHOLE SYSTEM CHANGE

With this background and understanding, we can now delineate the key steps in implementing a cultural transformation process.

Step 1: Commitment and ownership

The process of whole system change begins with the personal commitment of the leader and the leadership team to their own personal transformation. This is necessary because the culture of the organisation is a reflection of leadership consciousness. If you want to transform the culture of your organisation, the leaders must transform or the leaders must change. Organisational transformation begins with the personal transformation of the leaders.

If there is no commitment by the leader and their leadership team for personal behaviour change then it will be pointless embarking on any form of the cultural transformation process.

A culture change initiative must be owned and personally supervised by the leader of an organisation, and fully supported by the leadership team. Cultural transformation is not something that can be delegated: nor can it be handed off to a team of outside consultants. It is something that the organisation has to do for itself, and it is always ongoing: it is not a project, it is a process!

At this stage, it will be important if they have not already done so, for the leader to handpick their leadership team. Getting the right people on the bus and sitting in the right seats is extremely important.

It is quite usual for there to be one or two naysayers in the leadership team who are not willing to sign up for personal transformation. They are happy for others to do it, but they are not interested in themselves. This is the point where they have to decide to either get on or off the bus. There is no room on the bus for anyone who is not a willing participant and committed to the process. It is usually at this point that the naysayers start looking for alternative employment. It is important that the leader be aware that this might happen, and is willing to go ahead for the good of the company.

Step 2: Baseline measurement

After the leader and the leadership team have committed to the process, begin by carrying out a cultural values assessment of the whole organisation, and, at the same time build a scorecard of the organisation’s current levels of performance—revenues, employee engagement, customer satisfaction, the Cultural Entropy® score, values alignment, etc. The idea here is to develop a set of baseline measurements from which you can measure the progress of the cultural transformation initiative.

Step 3: Vision and mission

After you have completed your baseline measurements, the next step is to define where the company is going and how it is going to get there.

If the organisation already has a vision and mission, it will be important to revisit it, especially if there are new people in the leadership team. Setting the vision is the job of the leadership team. This task cannot be delegated. The direct reports of the leadership team (the teams of the members of the leadership team) should be asked for their inputs and comments once the leadership team is comfortable with the vision statements they have produced.

The vision statements should be:

• Short and easily memorable.

• Inspire people in the organisation to make a difference.

Step 4: Values and behaviours

As part of the process of developing a vision and mission for the organisation it will be important also to define the organisation’s values and behaviours. The results of the cultural values assessment will be useful in this regard. To the extent possible, all employees should be involved in this process.

The values should:

• Be single words or small phrases that are easily memorable.

• Support the vision and mission.

• Be four, and not more than five.

• Include relationship values as well as organisational values— i.e. trust and continuous improvement.

Once the organisation’s espoused values have been identified, two or three behaviour statements should be developed for each value. The purpose of developing behaviour statements is twofold:

• To give clarity to what each espoused value means in the context of the day-to-day operations of the organisation.

• To provide a way of evaluating executive and employee performance. Because behaviours are always contextual, it is not unusual for different behaviours to be used for the same espoused values in different parts of the organisation.

The behaviour statements should:

• Be short, memorable, one-sentence statements.

• Describe the actions that support the value they represent.

• Be appropriate for the context of the work unit.

Step 5: Compelling reasons for change

There must be a clear understanding among the executive population about why the organisation is embarking on a whole system change process. The change process must be grounded in reality, and driven by realistic optimism that provides the employee and executive populations with hope for success. People want to be associated with success. In companies that are suffering from low performance, the compelling reasons for change are usually obvious. The issues that underlie poor performance can easily be identified from the results of the cultural values assessment.

For high performing companies, the compelling reasons for change should focus on three factors—how the company can stay adaptable, positioning itself for the future, and building its long-term resilience.

Step 6: Personal alignment

Personal alignment should begin with the leadership team. To this end, it will be important for all members of the leadership team, and the extended leadership group, to focus on their own personal mastery by seeking feedback and, if necessary, receive coaching by using a 360 instrument such as the Leadership Values Assessment (LVA).

Once the leadership team has embarked on a process of personal mastery to enhance their emotional intelligence, the direct reports of the leadership team should follow suit. Eventually, everyone in the organisation that has a management or supervisory role should participate in some form of personal mastery process.

Step 7: Structural alignment

The purpose of the structural alignment programme is to reconfigure the structures, systems, processes, policies, incentives, and procedures so that they fully reflect the desired vision, mission, values and behaviours of the organisation, thereby institutionalising them into the culture of the organisation. The systems and processes that may need to be reconfigured include:

• New employee/executive selection

• New employee/executive orientation

• Employee/executive performance evaluation

• Employee/executive promotion criteria

• Selecting talented performers for fast track development

• Leadership development programmes

• Management training programmes

• Values awareness programmes.

In large organisations, structural alignment can take up to 2 to 3 years to implement. The responsibility for this usually falls to the Human Resource function. This step is the one that is most frequently forgotten in cultural transformation initiatives.

Step 8: Values alignment

The purpose of the values alignment programme is to inculcate the espoused values and behaviours of the organisation into the executive and employee population. Apart from the informational content, the programme should give participants the opportunity to explore their own values, and understand and practice the concept of values-based decision-making. We use values-based decision-making so that we can consciously create the future we want to experience. For example, if we value trust, then we make decisions that allow us to display trust. If we value accountability, then we make decisions that allow us to display accountability.

Step 9: Mission alignment

The purpose of the mission alignment programme is to inculcate the vision and mission of the organisation into the executive and employee population. Apart from the informational content, the programme should give participants the opportunity to explore their own sense of mission and vision, and see how their role supports the vision or mission of the organisation. It is very important that everyone in the organisation has a clear line of sight between the work they do each day and the vision and/or mission of the organisation. Without a clear line of sight, people are not able to value their contribution and understand how they make a difference.

FREQUENT MISTAKES

The three most frequent mistakes that are made in cultural transformation initiatives are as follows:

Mistake # 1: Focus on personal alignment only

Many organisations focus on personal alignment without doing anything about structural alignment. This serves only to aggravate discontent and disillusionment in the executive and employee population. When employees return from personal mastery programmes, they usually come back with a higher personal awareness about how to interact with their colleagues. They quickly become disillusioned when they realise that although they have changed, the organisation has not changed. The new behaviours they have learned are not practiced by their superiors and are not rewarded.

Mistake # 2: Focus on group cohesion only

Another frequent mistake is focusing on team building without first carrying out a personal alignment programme that involves personal mastery. This limits the potential for success because people enter these programmes without the self- knowledge and interpersonal skills necessary to make the team building exercise a success. For maximum impact, team building or group cohesion programmes should be preceded by a personal alignment programme.

Mistake # 3: Failure to customise the transformation programmes

Change agents and consultants frequently make the mistake of using “off-the-shelf” personal alignment or team building programmes which have not been tailored to the specific needs of the organisation, the division, or the business unit with which they are working. When you carry out a cultural values assessment of your organisation, you immediately know what issues need to be tackled and what topics your personal alignment and team building programme should focus on.

SOURCES

• Ken Wilbur. A Brief History of Everything. New York: Shambala, 1996; p. 71.

ABSTRACT

This paper explores the topic of cultural capital and its relationship to financial performance. It reviews research on this topic and comes to the conclusion that even though there is no direct measure of cultural capital, proxy measures such as cultural alignment and Cultural Entropy® clearly indicate a positive correlation between cultural capital and sustained high revenue growth.

Do you see your organization’s culture as a significant part of your business’ performance equation? Do you see it as a driver of your financial performance? If your answer is not a resounding “Yes,” then you may want to read on.

WHAT IS CULTURE?

The most universally accepted definition of culture is “the way things are done around here.” Effectively, what this means is that culture is a way of being. It is a reflection of the conscious and subconscious values, beliefs, and behaviors of a group or collective entity, such as an organization, that determine the “personality” of the group. Culture is who you are, and what you stand for.

Culture is determined by the values, beliefs, and behaviors of the current leaders of an organization and the institutional legacy of past leaders as reflected in the values and beliefs that underpin the policies, systems, processes, structures, and procedures of the organization.

WHAT IS CULTURAL CAPITAL?

Cultural capital is a measure of the value that can be placed on the way of being or “personality” of a group, collective entity, or an organization. The difference in the performance of a strong, adaptable culture compared to a weak, rigid culture is a reflection of the level of cultural capital in the two organizations. Although there is no precise measure of cultural capital, the Cultural Entropy score (the degree of dysfunction) can be used as a proxy for measuring cultural capital--high the Cultural Entropy score is synonymous with low cultural capital, and low Cultural Entropy score is synonymous with high cultural capital.

CULTURE AND PERFORMANCE

Whether you recognize it or not, your organizational culture is an important factor in your performance. Therefore, monitoring and measuring your culture is vitally important to your organization’s success. During the past 150 years, we have seen a significant shift in how organizations leverage their competitive advantage.

In the Agricultural Age, organizations focused on manpower. The more manpower you could muster, the more land you could till, and the more income you could make delivering your crops to the marketplace. In the Industrial Age, productivity and quality became the principal areas of competitive advantage. Companies worked on improving their margins and delivering the quality that customers were seeking. In the Information Age, the focus shifted to intellectual capital, and organizations competed for the best and brightest. We moved into a knowledge economy. Now, as we move into the Cultural Age, not only are organizations having to focus on quality, productivity, and talent management, they are recognizing that who they are and what they stand for—their vision and values—are significant differentiators in attracting and keeping talented people and fostering high levels of staff engagement. In other words, cultural capital has become the new frontier of competitive advantage.

As we passed through these different ages, organizations developed methods for measuring and managing their competitive advantage by focusing on the most important drivers of performance. They focused on measuring because whenever you attempt to measure something, what you measure tends to improve. Consequently, during the Industrial Age, organizations measured productivity and quality. During the Information Age, they attempted to measure intellectual capital. And, now during the Cultural Age, they are attempting to measure cultural capital.

Until the creation of Barrett analytics, cultural capital was difficult to measure. Barrett analytics and the Barrett Model® provide a breakthrough technology for measuring and managing organizational cultures, and more importantly, a way of managing performance by measuring the Cultural Entropy score.

RESEARCH FINDINGS

The link between culture and performance has been investigated and proven by a number of researchers. Eric Flamholtz from the University of California at Los Angeles conducted a study to explore the effect corporate culture has on the bottom line. As part of his research, Flamholtz discovered a strong positive correlation between cultural agreement (a proxy for values or cultural alignment) and the company’s EBIT (Earnings Before Interest and Taxes). Some of the results of this study are shown in the following diagram.

Flamholtz concludes, “Organizational culture does have an impact on financial performance. It provides additional evidence of the significant role of corporate culture not only in overall organizational effectiveness but also in the so‐called “bottom line.”

Performance of the best companies to work for in the USA

THE BEST EMPLOYERS SURVEYS

Hewitt Associates have been using their employee engagement survey as part of their Best Employers Survey for more than a decade. They have found that the Best Employer organizations, be they in the private or public sector, are always “best in class” in terms of performance. Here are some of the key characteristics of Best Employers:

1. Best Employers attract and retain employees, resulting in significantly lower levels of employee turnover—40% lower in Asia, 45% lower in Australia, 54% lower in Canada, 30% lower in Europe, and 50% lower in the USA. Best Employers have nearly double the number of applications per position than other organizations. Scott McNealy of Sun Microsystems estimates that being a Best Employer is worth $75 million annually to his company in recruiting, retention, and productivity gains.

2. Best Employers have faster revenue growth. Among the data collected in the Best Employer surveys is each company’s financial information for the last three years. Using these numbers, it has consistently been found that Best Employers exceed the rest in revenue growth, year after year. For example, the Best Employers attained 17.3% revenue growth compared to 10.73% for the rest.

3. Best Employers have higher levels of productivity. Revenue per employee is consistently higher in the Best Employers. Breaking down the revenue per full‐time employee shows that companies considered the Best are able to achieve higher levels of employee productivity.

PERFORMANCE OF THE BEST EMPLOYERS IN AUSTRALIA AND NEW ZEALAND (BEANZ)

A study of 163 organizations, carried out by Aon Hewitt and Barrett Values Centre as part of the Best Employer study in Australia/New Zealand, showed that:

Cultural alignment and Cultural Entropy significantly influence employee engagement, and employee engagement significantly influences organizational and financial performance.

The findings of this study confirmed that the degree to which employees are aligned with the values of the current culture has a significant impact on financial performance. The study found a strong correlation (0.8) between Cultural Entropy and employee engagement (See Figure 3).

The values that were present in the best employers in Australia and New Zealand, and not in the worst, were all values that reflected a positive employee experience— employee recognition, teamwork, coaching/mentoring, and balance (home/work).

Organizations with low Cultural Entropy (below 10%) and with high employee engagement (above 65%) had 35% revenue growth over three years compared to only 7% for organizations with high Cultural Entropy (above 20%) and low employee engagement (below 65 %).

CONCLUSION

Using employee engagement and Cultural Entropy as proxy measures for cultural alignment (cultural capital), we can categorically state that organizations with high levels of cultural alignment will have superior levels of financial performance.

ABSTRACT

We drew data from 100 Barrett Values Centre Leadership Values Assessments, a 360-degree leadership development tool, to examine the perceived differences among leaders based on their personal entropy (degree of dysfunction). We recently revisited that data to compare the overall results by gender. In this study, we looked at the top values, strengths, and areas for improvement that were chosen most frequently by leaders’ assessors. Note that strengths and areas for improvement are submitted as free responses. We found significant differences among male and female leaders that follow gender stereotypes.

THE DATA

To carry out this research, we examined the results of 100 Leadership Assessments conducted during a two-year time period in 19 countries. The assessment is a values-based, 360-degree leadership development tool that examines and compares a leader’s perception of his or her operating style with the perception of their superiors, peers, and subordinates (assessors). The 100 assessment results were divided by gender, with 81 males and 19 females among the group.

At the end of this article, there are three tables that show the top values, top strengths, and top areas of improvement as chosen by assessors for each gender.

The countries represented in this study include Australia, Belgium, Brazil, Canada, Czech Republic, France, Germany, India, The Netherlands, Norway, Peru, Poland, South Africa, Sweden, Trinidad & Tobago, Turkey, UK, USA, and Venezuela.

COMPARISON OF TOP VALUES

The most common value associated with both male and female leaders is commitment. Furthermore, male and female leaders share 12 out of 16 of their top values. However, among the values that are different, there are significant distinctions among the genders.

Male leaders are seen to focus on successfully reaching their objectives, with goals orientation, and achievement. They are recognized for using their experience to do so, and they make space for others by being accessible.

Female leaders are seen as promoting strong working relationships with others through open communication, teamwork, and cooperation.

These differences among male and female leaders align with common characterizations of masculine or feminine behavior conditioned by differences in treatment and expectations during upbringing. “According to social role theory, behavioral gender differences are caused by socialization where at a young age, males are encouraged and rewarded for being outgoing, and achievement oriented. Conversely, females are taught to be emotionally oriented, and reserved in their interactions with others.”

However, there is a greater tendency for female leaders to be seen as controlling and demanding, with these potentially limiting values being recognized in 32% of women and only 20% of men. These traits seem to contradict the collaborative approach noted above. Female leaders also have a propensity to overwork, with long hours.

The contradiction among the values of female leaders is further blurred when considering the dichotomy of expectations around gender roles for female leaders. In some circles, it is believed that women must act like men by exhibiting traditionally masculine traits to get ahead. However, “women have been socialized to believe that they will experience more positive outcomes regarding their accomplishments when they are seen by others as non-competitive, [so] they downplay their accomplishments in the presence of others to avoid being judged unfeminine. In contrast, men consistently self-promote their successes, in order to present a successful self-image to others.”

COMPARISON OF STRENGTHS

Male and female leaders share 8 of the top 15 displayed strengths among our research pool. Similar to the top values, female leaders continue to be perceived as demonstrating a more people-centered approach with the strengths teamwork, caring, and listener/receptivity.

Female leaders’ strengths also seem to convey a strong theme around follow-through in the areas of solutions-orientation, delivery, hard work, and reliability. Furthermore, women are more likely than men to be recognized as having drive and determination. “[Women] tend to have a greater need to get things done than male leaders and are less likely to hesitate or focus on the small details.” This desire to get things done may 3 account for the long hours recognized among female leaders’ top values, and perhaps also the increased perception of controlling and demanding.

Among the top strengths unique to male leaders, a theme around forward-thinking emerges with continuous improvement/innovation, strategic thinking/direction/vision, and developing people. INSEAD’s executive education program conducted a study using thousands of results from 360° assessments. They found: “As a group, women outshone men in most of the leadership dimensions measured. There was one exception, and it was a big one: Women scored lower on ‘envisioning’ – the ability to recognize new opportunities and trends in the environment and develop a new strategic direction for an enterprise.” Based on the differences in 4 these strengths, it may be that women leaders are too busy ‘doing’ rather than planning and preparing for the future.

COMPARISON OF AREAS FOR IMPROVEMENT

Seven areas for improvement are shared among male and female leaders.

Among the differences, there is a sense that women appear to hold themselves back, as seen by requests for increased visibility in the organization, confidence in their own abilities, and decisiveness. Again, this appears to be tied to gender roles. “Since they are expected to be feminine, women who display too much ‘male’ behavior (such as toughness, decisiveness, and assertiveness) are not well received by their peers at the top. Yet women who display too little of that behavior are perceived as not suited for the top job.” Some researchers believe that this unwillingness of female leaders to tout their own achievements or abilities may hurt them in climbing the corporate ladder even further.

If we interpret the above as a request for women to become more masculine in their behavior, a theme among the areas for improvement for male leaders could be construed as a request to embrace a more feminine approach by showing concern for others with cross-departmental working, feedback, patience, and building trust.

Female leaders also are seen to over-extend and be too hard on themselves and others, with emphasis on long hours, demanding, organization/time management, and stress management. And, despite their strengths and top values which point to promoting a collaborative working style, female leaders are not adequately handing things over to relieve some of this burden, as they are more likely than men to need to work on delegating and empowering. These areas for improvement may be tied to the drive among female leaders to get things done, as mentioned in the strengths. Female leaders, still in the minority, may feel a stronger need to prove themselves.

CONCLUSION

Women now make up just shy of half of the workforce. Record numbers of women are attending business school. However, despite the progress made over the years to chip away at the glass ceiling, women only account for 6% of CEOs.

Researchers surmise that women who do find themselves in leadership roles tend to be unjustly measured in their abilities due to the continued presence of gender differences. “Current models of leadership and leadership development cannot be applied to males and females in the same way. The research in organizational settings should focus on understanding the ways of ‘becoming’ and ‘being’ for males and females in order to identify strategies for each gender in terms of understanding what it means to be a successful manager from each perspective.” In fact, there is growing acknowledgment that the more relationship-centered approach commonly displayed by women may be a more effective way to manage others.

Additionally, researchers believe that embracing gender differences among leaders may be the path to success for many organizations. “Companies that are able to harness the strengths of both sexes may be said to be gender ‘bilingual’ rather than gender neutral. Organizations with gender diversity at the top are more successful than others and will find their way out of the current economic crisis into sustainable profitability.”

Our investigation of leadership behaviors based on gender concludes that, while there are similarities among male and female leaders, the differences demonstrated are significant and appear to be tied to biology and the socialization males and females receive during upbringing. As a result, it seems paramount to support leaders of both genders in ways that legitimately take into account both their similarities and their differences.

SOURCES

• Budworth, Marie-Helene and Sara L. Mann, “Becoming a Leader: The Challenge of Modesty for Women,” Journal of Management Development, 2010, pg. 181.

• Budworth, pg. 179.

• “The Qualities That Distinguish Women Leaders,” Caliper White Paper, http://www.calipercorp.com/articlespapers_text/pp_women.asp

• Ibarra, Herminia and Otilia Oboduru, “Women and The Vision Thing,” Harvard Business Review, January 2009

• Vanderbroeck, Paul, “The Trap that Keep Women From Reaching The Top and How to Avoid Them,” Journal of Management Development, 2010, pg. 766

• https://www.catalyst.org/research/women-in-the-workforce-global/

• https://www.kornferry.com/insights/articles/women-in-leadership-2019-statistics

• Budworth, pg. 183

• Vanderbroeck, pg. 768

ABSTRACT

The purpose of this paper is to deepen the discussion about what motivates employees. This paper briefly describes the seven stages of psychological development and the corresponding levels of motivation. These are linked to Harvard Professor Robert Kegan’s work on the three types of mind

(socialized mind, self-authoring mind, and self-transforming mind). Each of the three types of mind has different drives and motivations and is linked to different levels of job complexity. Understanding the motivations of the different types of mind is essential to creating a high-performance organisation with high levels of employee engagement.

The principal inhibitor of employee engagement is the Cultural Entropy® score—a measure of the amount of energy in an organisation that is consumed in doing unproductive work: work that does not add value. The Cultural Entropy score arises from the presence of potentially limiting values such as bureaucracy, hierarchy, blame, internal competition, etc. The levels of engagement associated with different levels of the Cultural Entropy score for each of the three types of mind are discussed.

Finally, the paper explores the impact of increasing levels of the Cultural Entropy score on culture risk. The culture of an organisation is rapidly being recognized as one of the key causes of lapses in ethical and integrity-based risk. The paper explores top-down and bottom-up approaches to building a strong values-driven culture that reduces culture risk by moving beyond compliance to commitment. This paper is based on the initial chapters of Richard Barrett’s book The Values-driven Organization: Unleashing Human Potential for Performance and Profit.

MOTIVATION, COMMITMENT AND ENGAGEMENT

The reason that leaders are interested in what motivates employees is that motivation leads to commitment, commitment leads to engagement, and engagement leads to high performance. If you want to build a high performing organisation you need to understand employee motivation and how to provide employees with what they are looking for. What they are looking for depends on two main factors—the level of psychological development they have reached and the demands placed on them by their current life circumstances.

STAGES OF PSYCHOLOGICAL DEVELOPMENT

We all grow and develop in seven distinct stages. Each stage of development entails mastering a different set of needs. The first three stages of development are focused on satisfying our basic needs—surviving, belonging and developing a sense of our own self-worth. The fourth and fifth stages of development are focused on satisfying our first order growth needs—individuating and self- actualizing, and the sixth and seventh stages of development are focused on satisfying our second order growth needs—integrating and serving. The seven stages of psychological development are shown in Figure 1.

THREE TYPES OF MIND

The seven stages of psychological development can be divided into three plateaus of growth. In Immunity to Change, Robert Kegan and Lisa Laskow Lahey refer to these plateaus as the socialised mind, the self-authoring mind and the self-transforming mind. As we grow and develop psychologically, we gradually evolve from one stage to the next: from operating with a socialized mind to a self-authoring mind, to a self-transforming mind. Each shift represents growth in consciousness and an increase in the complexity of thinking. The following descriptions of these three types of mind are based on my personal interpretation of Kegan and Lahey’s concepts.

The Socialised Mind

The socialized mind is a dependent mind. The way a socialized mind responds to a situation or a request is strongly influenced by what it believes others want to hear. It wants to fit in—stay in alignment with the group it belongs to—and has a limited ability for independent thinking. It is almost wholly focused on meeting its survival, relationship, and self-esteem needs. Those who operate with a socialized mind are unlikely to want to take on a leadership position. This could destabilize their carefully managed relationships to the group they belong to. Figure 2 shows what motivates people who operate with a socialized mind.

People with socialized minds tend to think of their work as a job. They are rarely highly engaged by their work. They are motivated by incentives that allow them to satisfy their basic needs—they value income and safety, friendship and respect, and recognition and rewards. They will quickly jump ship if they find an opening with another organisation that gives them more of what they want. They prefer simple tasks that can be easily mastered. They find it difficult to handle complex situations.

The Self-Authoring Mind

The self-authoring mind is an independent mind. The self-authoring mind responds to a situation, opportunity or request by seeking to further its agenda. The self-authoring mind wants to be accountable and take initiative but wants to do it its own way. People with self-authoring minds are ambitious and focused on achievement. They are keen to take on a leadership role. People with self-authoring minds can easily clash with other people who are also operating with self-authoring minds, especially if they hold different views on how things should be done. Figure 3 shows what motivates people who operate with a self-authoring mind.

People with this type of mind tend to think of their work as a career. In addition to satisfying their basic needs, they are motivated by having opportunities to satisfy their first order growth needs—challenging situations that lead to advancement, and work that is meaningful to them. When these needs are met employees feel a strong sense of engagement. However, if the excitement and challenges they seek to dry up or disappear, they will quickly be on the lookout for other opportunities to further their careers. They enjoy complex tasks that require them to tap into their innovation and creativity. The self-authoring mind values freedom and autonomy and is looking for meaning and purpose.

The Self-Transforming Mind

The self-transforming mind is an interdependent mind. The self-transforming mind responds to a situation or request by seeking to further its agenda, but unlike the self-authoring mind, it is not a prisoner to its beliefs or its position. It is open to the ideas of others and if they make sense can readily integrate them into a more inclusive worldview. Figure 4 shows what motivates people who operate with a self-transforming mind.

People with self-transforming minds tend to think of their work as a mission or purpose. They are motivated by having opportunities to satisfy their second order growth needs—to make a difference in their world, and leave a legacy by serving humanity or the planet. People with self-transforming minds experience the highest levels of engagement. They are prepared to put up with bureaucracy, and they will ignore internal politicking, just for the opportunity to experience the sense of fulfilment they get from being able to make a difference in the world. They bring clarity to complexity and are at ease with uncertainty.

Growth

The shift from one type of mind to the next is not something that can be taught: It has to be nurtured and developed. Some people take a lifetime to develop a self-transforming mind. Others get there more quickly. The majority of people never get there at all.

We evolve from a socialized mind to a self-authoring mind to the extent we are able to overcome our anxieties and fears about being independent—to survive and thrive on our own (individuate)—and embrace our sense of mission or purpose (self-actualize). We evolve from a self-authoring mind to a self-transforming mind to the extent we can be open to other perspectives—to integrate with others who operate with similar values and share a common purpose and live a life of selfless service.

We all start off in life trying to satisfy our basic needs—the needs that correspond to the first three levels of psychological development. If by the time we reach 25 to 35 years of age, we are able to satisfy these needs, we may feel the call to continue our developmental journey: We will begin to focus on our first order growth needs. Once we reach 45 to 55 years of age, and we have been successful at satisfying our first order growth needs, we begin to focus on trying to satisfy our second order growth needs.

Responding to Change

People who operate with socialized minds tend to be vigilant and concerned about everything that is happening around them that involves change—they prefer stability and the status quo. They get anxious and fearful if they feel that the satisfaction of their basic needs might be threatened in any way. They want to protect what they have. Reorganisation plans or cutbacks can significantly affect their work output and stress levels. Whereas people with socialized minds tend to view change as a threat, people with self-authoring minds tend to view change as an opportunity. They see change as a potential opening to further their careers. They have learned how to master their basic needs and consequently, for them, as long as they are, they are living in a healthy job market, change is not a threat to their stability.

People who operate with self-transforming minds tend to see change as part of the normal ebb and flow of life. They interpret what is happening around them through the filter of the “big picture”—how the changes they are experiencing allow them to further their life’s mission or purpose. As long as their basic needs and first-order growth needs have been met, people with self-transforming minds are completely focused on making a difference and service to humanity or the planet.

Tailoring Incentives to Types of Minds

Based on this understanding, it is clear that the answer to the question, what do organisations need to do to create a highly motivated workforce, depends to a large extent on the level of complexity of the organisation’s core business; in other words, on what types of minds are needed to perform the work.

Organisations that employ mechanics, labourers, retail or service personnel in relatively low-complexity work—usually people who are operating with socialized minds—should give emphasis to satisfying their employees’ basic needs—pay and safety, friendship and respect, and recognition and rewards.

Organisations that employ knowledge workers, skilled technicians and researchers in medium-level complexity work—usually people who are operating with self-authoring minds—should give emphasis to satisfying their employees’ first-order growth needs—challenging situations that lead to advancement, and work that is meaningful to them.

Organisations that employ highly qualified professionals and advisors in work that impacts the way in which organisations and societies operate, especially in international relations—usually people who are operating with self- transforming minds—should give emphasis to satisfying their employees’ second order growth needs—making a difference in the world, and leaving a legacy by serving humanity or the planet.

In large organisations, one will normally find work that requires all three types of mind. In this case, it will be important to specifically tailor work incentives for each of the three types of mind.

LIFE CIRCUMSTANCES

Although our primary motivations will always be determined by the level of psychological development we have reached, a change in our life circumstances can alter our needs, and hence what motivates us. For example, if we suddenly find ourselves in a situation where we have significant financial needs, no matter what stage of psychological development we have reached we will find ourselves looking for work that provides us with more income. If on the other hand, we feel we need to spend more time caring for an elderly relative, a sick child, or disturbed teenager, we may find ourselves taking a less demanding position that allows us to spend more time with those we care about. When our life circumstances return to normal—when our need for income or personal time declines, we will always revert to the motivations that represent the level of psychological development we were at before the changes affected our needs.

EMPLOYEE ENGAGEMENT

The level of engagement an employee feels depends on two main factors: the type of mind the employee is operating from, and the level of Cultural Entropy score he or she experiences in their day to day activities. Table 1 describes five levels of engagement.

Employees operating with a self-authoring mind will feel engaged if their basic needs are met, but will only become highly engaged if they feel the organisation also provides them with a solid career path (see Figure 3).

Employees operating with a self-transforming mind, like those with a self- authoring mind, will feel engaged if their basic needs are met, and will feel highly engaged if the organisation gives them the opportunities to do the work that they are passionate about (see Figure 4).

People operating with self-authoring minds will leave the organisation if they do not have a clear career path, and people with self-transforming minds will leave the organisation if they are not given work that fulfils their sense of purpose.

When employees feel the organisation cares about them, by meeting their needs, they develop a sense of loyalty and connection to the organisation. The sense of connection increases commitment when the organisation supports them in their personal and professional growth; and the commitment increases to emotional and intellectual engagement when the organisation gives them opportunities to do the type of work that affords them challenging situations where they have to use their creativity or work that allows them to make a difference in the world and fulfils their sense of purpose.

When employees feel engaged or highly engaged, revenues increase and the portfolio value of the organisation increases. The following graph shows how the portfolio value of the 40 of the best companies to work for in the USA outperformed the S&P 500 during the period 2002 to 2012.

THE CULTURAL ENTROPY® SCORE

There is a very strong link between employee engagement and the Cultural Entropy score. When the Cultural Entropy score is high, engagement is low; and when the Cultural Entropy score is low, engagement is high. Figure 6, based on research carried out by the Barrett Values Centre and Hewitt Associates in Australia and New Zealand shows the relationship between Cultural Entropy score and employee engagement.

Table 2 shows how the levels of engagement, described in Table 1, are affected by different levels of the Cultural Entropy score, and also shows the potentially limiting values that show up in the culture of the organisation as entropy increases. This table is based on research carried out by the Barrett Values Centre in over 1,000 organisations where cultural values assessments were undertaken during the period Year 1 to Year 5.

Employees start to become disengaged when bureaucracy, hierarchy and confusion get in the way of them doing their work. They become more disengaged when in addition to these potentially limiting values they also have to deal with excessive control, short-term focus and silo-mentality. At this point, they usually find themselves working long hours. They become highly disengaged when in addition to these potentially limiting values they also have to deal with blame and information hoarding.

CULTURE RISK

Culture is being increasingly recognised as a significant risk factor in business. Without a strong set of values, ethical and integrity-based risk can spiral out of control especially if the level of the Cultural Entropy score in an organisation grows beyond 20-30%. At this level of entropy, performance begins to stagnate, and the pressures to hold integrity ransom to profits are high. This factor alone has caused many companies to go bankrupt in recent years. Table 3 shows the potentially limiting values that correspond to different levels of entropy and the corresponding levels of cultural risk.

In high entropy cultures, the pressures to meet short-term financial targets encourages unethical behaviour and corruption. As performance gets worse, controls are increased, cost-cutting measures are put in place, and people feel they are obliged to work long hours. When it is clear the organisation is significantly underperforming, leaders and managers try to protect themselves by retreating into their silos, blaming others and information hoarding.

Increasing levels of the Cultural Entropy score affect people differently. People operating with socialized minds quickly become disengaged when their basic needs are put under threat, especially when cost-cutting measures are introduced. People with self-authoring and self-transforming minds become progressively frustrated and disengaged when bureaucracy, hierarchy and silo-mentality, along with budget cuts prevent them from achieving their ambitions or when the administrative work they have to do to satisfy the bureaucratic controls prevents them from doing the work they are passionate about.

Whilst highly disengaged employees operating with socialized minds can pose a significant threat to the productivity in an organisation, especially if the workforce is unionized, the largest risk usually arises when knowledge workers or managers, with self-authoring minds, decide to leave and take their intellectual capital with them or turn a blind eye to the ethical norms of behaviour in order to win or retain contracts. The pressures to perform, combined with their ambitions, and need for achievement, can easily draw people operating with a self-authoring mind into the danger zone of corruption. When they are frustrated, they present a real and present danger to the organisation because they have not yet reached the level of psychological development where who they are how they behave is as important to them as their need to be successful. They value success over integrity.

MINIMIZING CULTURE RISK

There are two possible approaches to minimizing culture risk: top-down and bottom-up. Both are necessary. The most frequently used and least effective top-down approach is ethics compliance: stressing the need for honesty, transparency and openness and making sure transgressors are punished. The least used and more effective top-down approach is building a values-driven culture. The reason this is the least used approach is that it is difficult to find leaders who are operating from full-spectrum consciousness—leaders who mastered each of the seven stages of psychological development, know who they are, and how to behave with integrity in all situations.

When you are able to build a values-driven organisation, compliance shifts to commitment, and as the values-driven culture takes hold, commitment shifts to consciousness. People not only know what they have to do to achieve excellence in their work, but they also know how to achieve excellence in their behaviour. They are living and breathing a values-driven culture. They operate with honesty and integrity because they are encouraged to do so. The leaders act as role models and they set up systems and processes that encourage ethical behaviour. As Cultural Entropy score drops to the low teens, we begin to see a commitment to shared values showing up as one of the top ten values in the culture. When entropy drops further, to below ten percent, ethical integrity becomes conscious. We not only see a commitment to shared values, but we also see a commitment to a shared vision.

The bottom-up approach I am proposing supports the top-down values-driven culture approach by making a commitment to self-leadership the sine qua non for promotion to all levels of management: in other words, a commitment to your own psychological growth. In The New Leadership Paradigm (book and learning modules) I set out a bottom-up approach to leadership development that begins with leading self; follows with leading a team; then leading an organisation, and finally leading in society.

This approach recognises that every employee, every supervisor and every manager is on a personal journey of psychological development. Supporting them on this journey helps them: a) to measure where they are on their journey; b) to understand and modulate their drives and motivations, and c) to understand what developmental tasks they need to accomplish to accelerate their evolution. By working on their own evolution, they are able to support their staff in their evolution. This is how leaders create high levels of engagement, low levels of entropy, and enviable levels of performance.

Further information on how to build a values-driven culture can be found in The Values-driven Organisation: Unleashing human potential for performance and profit, by Richard Barrett.

SOURCES

1. Robert Kegan and Lisa Laskow Lahey, Immunity to Change (Boston: Harvard Business School Publishing), 2009, pp.16-21.

2. Socialized mind, Self-authoring mind or Self-transforming mind

3. The Cultural Entropy score is a measure of the amount of energy in an organisation that is consumed in doing unproductive work: work that does not add value. It is a measure of the conflict, friction and frustration that exists in an organisation due to potentially limiting values such as: bureaucracy, hierarchy, blame, confusion, short-term focus, etc.

4. Richard Barrett, The New Leadership Paradigm (Asheville, NC: Fulfilling Books), 2011.

5. Richard Barrett, The Values-driven Organisation: Unleashing Human Potential for Performance and Profit, (London, Routledge), 2013

INTRODUCTION

Unethical or illegal behavior doesn’t exist in a vacuum. There are multi-layered cultural influences at play, whether conscious or not, that encourage such behavior. The job of promoting ethics cannot be left to the compliance or legal function alone. Instead, leadership across the organization must cooperate in order to address the systemic factors in the culture that influence employees.  

Sometimes when the norms governing behavior within an organization are strong enough, even good people do bad things. There is growing consensus among business leaders, regulators, and lawmakers that culture is essential when it comes to promoting ethical behavior in organizations. In fact, 85% of CEOs and CFOs believe that “a poorly implemented, ineffective culture increases the chance that an employee might act unethically or even illegally.”

Creating and sustaining an organization where everyone who does business on its behalf behaves ethically (does the right thing), requires attention to all aspects of the culture.

The Barrett Model® is a powerful way to visualize the factors that together will help leaders to consciously create an effective, ethical culture, resulting in compliance with applicable laws and regulations.

ETHICAL BUSINESS PRACTICE

Organizations all over the world are using the Barrett Model® to create increased awareness at every level of leadership and generate higher performance in all parts of the organization. The principles set out in Ethical Business Practice and Regulation are contributing to changing the way regulators and companies think about regulation and ethical behavior.

DEFINITIONS

Ethical Business Practice (EBP) is about creating a culture where people make decisions and act in ways that build sustainable businesses, care for the needs of all stakeholders and comply with their ethical and legal obligations

Ethical Business Regulation (EBR) is a relationship between a business and its regulator(s) where the business produces evidence of its commitment to EBP and the regulator recognizes and encourages that commitment. 

Ethics is doing the right thing even if it is more than the law requires.

EBP is a holistic and values-based approach to creating an effective, ethical culture. It is based upon evidence that a pure compliance approach is ineffective and potentially counterproductive. The context in which people operate can result in misconduct, even by people with strong values, so EBP is a framework for creating an environment in which people can do the right thing.  

EBP is built on the conviction that “ethics is everyone’s responsibility”. It takes a collaborative approach, involving people throughout the organization so that “doing the right thing” becomes part of the culture. It draws on experience in the aviation safety industry, where eliminating blame, fostering openness, and learning from mistakes produces improvement. The Barrett Model helps to understand and implement EBP.   

The following provides a view of Ethical Business Practice as viewed through the lens of the Barrett Model. Note: Higher is not better.

LEVEL 1: SURVIVAL

From a personal perspective, it relates to satisfying one’s physical and basic survival needs such as health, security, and financial stability. 

From an organisational perspective, it is about financial viability/sustainability and the safety and security of people in the organisation. A focus on financial results, profit and growth, without an emphasis on values and integrity, can result in unethical behaviour and corruption.

From a societal perspective, it is about preventing corruption, which if widespread, results in distrust of institutions, inequality, poverty, poor quality or lack of infrastructure, failure of the rule of law, and ultimately can lead to violence and a lack of security. 

QUESTIONS:

• Do we focus only on financial results without asking how they are obtained?

• Do we have a purpose that is broader than profit?

• Do we consider all our stakeholders or only our shareholders/owners?

• Do employees have safe working conditions?

LEVEL 2: RELATIONSHIPS

From an individual perspective, it is about a feeling of belonging.  

From an organisational perspective, it is about an open culture that allows relationships of mutual respect to develop and thrive. It is also about having effective internal communication of our values and purpose as well as information that people need to do their jobs. Leaders listen and are skilled at managing people and who encourage constructive conflict and challenge, do not blame or bully, and are able to learn from mistakes and support others do so.  

From a societal perspective, it is about being a good caring corporate citizen and recognising that employees have families, friendships, and other interests outside of work. 

QUESTIONS:

• Do we have a blame culture?

• Do our leaders create an emotionally safe environment for their teams?

• Do we respect each other and listen to what others have to say?

• How do we treat people who speak up when they disagree or have an alternative perspective?

LEVEL 3: SELF-ESTEEM

From an individual perspective, it is about whether we feel we have the skills, confidence, and competence to do the job.  

From an organisational perspective, it is about quality, incentives and performance management, compliance, and other systems and processes that enable people to do the right thing. Effective training and awareness-raising give everyone the knowledge, skills, and professional pride necessary for an effective, ethical culture.

From a societal perspective, it is about the organisation abiding by applicable law and regulation and creating well-performing systems and processes that provide a foundation for the organisation to fulfil its purpose and make a difference to society. The behaviour of leaders impact the culture of the organisation – and this is particularly important when it comes to compliance with rules and regulations.

QUESTIONS:

• Are our compliance systems effective and not onerous? 

• Are our risk management systems adequate to identify the risks we are facing across the business?

• Are your employees proud to tell others who they work for?

• Do your employees know what is expected of them?

• Do we have the right individual and collective skills training and information/knowledge to enable people to make ethical decisions?

• Do we apply our policies fairly and consistently across the organisation?

LEVEL 4: TRANSFORMATION

From an individual perspective, it is about having the courage and feeling empowered to make decisions and do the right thing, taking accountability for one’s actions, and being able to learn from one’s mistakes in the service of continuous improvement.  

From an organisational perspective, it is about creating a learning and “just” culture able to examine the root causes of mistakes and learn the lessons without blame. It holds the energy for evolution, change, and growth. An ethical organisation empowers its people and holds them accountable for their actions, within the context of a just culture.

From a societal perspective, it is about the organisation adapting to changing market and life conditions and the leaders’ ability to make courageous decisions in the face of environmental or social challenges. 

QUESTIONS:

• Do we have a regular procedure for conducting root cause analysis and implementing the results?

• How diverse is the organisation in terms of gender, ethnicity, sexual orientation, and diversity of thought?  

• Do we brand people who have the courage to challenge the status quo as trouble-makers?

• Do we have a balanced and appropriate attitude to risk? What is our risk appetite? 

LEVEL 5: INTERNAL COHESION

From an individual perspective, it is about personal integrity and finding meaning and purpose in life. We stay true to our values when confronted with forces or situations that might influence us (consciously or unconsciously) to betray them.

From an organisational perspective, it is about having a well-defined purpose, shared vision, and set of shared values. The underpinning value is trust, and therefore, leading by example.  

From a societal perspective, it is about having a purpose that serves all stakeholders. 

QUESTIONS:

• What is our purpose and have we articulated it clearly?

• Do our employees truly share the vision and purpose?

• Have we clearly defined our values and supported people to use them in daily decision-making?

• Do our values support our aspiration to operate fairly in everything we do?

• Are our values authentically lived and demonstrated by our leaders?

• Do we enjoy what we are doing? Are we able to relax and laugh together and have fun?

• Do we have a shared vision that ethics is everyone’s responsibility?

LEVEL 6: MAKING A DIFFERENCE

From an individual perspective, it is about making a positive difference to the world by living one’s purpose and the close relationships formed to work together in this endeavour.  

From an organisational perspective, it is about collaboration both internally and beyond the borders of the organisation to make a difference to the lives of all stakeholders, including the communities you reside in and serve.   

From a societal perspective, it is about the collective action amongst all sectors to achieve an ethical society that supports sustainable quality of life for all. 

QUESTIONS:

Do we treat the third parties with whom we work fairly? Do we take the time to explain our values, listen to theirs, and agree on how we want to work together?

Do we participate in collective action initiatives to improve ethical performance of our industry sector?

Do we aspire to be the best in the world or the best for the world in our sector?

Do we look for opportunities to have a positive impact on the lives of our stakeholders and the communities where we do business?

LEVEL 7: SERVICE

From an individual perspective, it is about your personal ethics, compassion, and how you seek to be of service to humanity. 

From an organisational perspective, it is about having a long-term perspective and prioritising ethical conduct, social responsibility, human rights, and caring about your organisation’s contribution to global sustainability.  

From a societal perspective, it is about what is important to your country, its world view, and its attitude towards human rights and future generations.  

QUESTIONS:

• Have we considered the impact of our operations on the human rights of all stakeholders in our supply chain?

• Do we respect the human rights of the people in the communities where we operate?

• Is our organisation ethical in all aspects of its operations and the products it produces? 

• Do we make investment decisions based upon the long-term and the impact on future generations?  

BASED ON BARRETT VALUES CENTRE’S® BARRETT MODEL AND ETHICAL BUSINESS PRACTICE AND REGULATION: A BEHAVIOURAL AND VALUES-BASED APPROACH TO COMPLIANCE AND ENFORCEMENT (HODGES & STEINHOLTZ, 2017, HART PUBLISHERS)

Using data from Barrett Values Centre’s® Leadership Development Reports, a 360‐degree leadership development tool, we set out to investigate the differences among leaders based on their level of personal entropy. Personal entropy is the amount of fear-driven energy that a leader expresses in his or her day-to-day interactions. The lower the personal entropy, the fewer fears the leader brings into the workplace. High entropy leaders, on the other hand, let fear drive their decision-making. 

In this paper, we will explore what all leaders have in common, what makes the leaders with the lowest entropy (fearless leaders) unique, and what employees want from their leaders.

Similar to a study conducted using the BVC’s Leadership Values Assessment, we found significant differences in style among leaders with low levels of personal entropy. Most notably, fearless leaders have a greater focus on their relationships with others, demonstrate values commonly attributed to successful leaders, and are more authentic in their interactions. 

THE DATA

The data we used in this study includes the results from 128 Leadership Development Reports (LDR), covering 18 countries and 28 industries. The LDR compares a leader’s perception of his or her operating style with the perception of their superiors, peers, and subordinates (assessors). The results were divided into five personal entropy bands (0‐6%, 7‐10%, 11‐15%, 16‐20%, and 21% and over).

The data set included 68 male and 60 female leaders from Australia, Brazil, Canada, Colombia, Germany, Hungary, India, Italy, Netherlands, Russia, Saudi Arabia, South Africa, Sweden, Turkey, United Arab Emirates, UK, and USA. The industries included are Accountancy, Advertising & Marketing, Banking, Chemical & Pharmaceutical Manufacturing, Construction, Consultancy & Management, Education, Engineering, Financial Services, Food & Drink, Healthcare, Hotel & Restaurant, Insurance, IT & Computer, Local Government, Media-Film-News-TV-Publishing, Motor Vehicle Manufacturing, Non-Profit, Postal & Logistics, Real Estate, Retail, Service, Telecoms, Transportation, and Utilities.

UNDERSTANDING PERSONAL ENTROPY

Personal entropy is the amount of fear‐driven energy that a person expresses in his or her day‐to‐day interactions. Personal entropy is expressed through potentially limiting values found at Levels 1, 2, and 3 of the Barrett Leadership Model. Examples of such values include blame, bureaucracy, hierarchy, and power.

All fears stem from believing that we don’t have enough money, safety and/or territory to satisfy our need for survival; we don’t have enough love, friendship and/or connections to satisfy our need for meaningful relationships; or we do not have enough confidence, success and/or authority to satisfy our need for self‐esteem.  

The personal entropy of leaders creates cultural entropy in organizations. Cultural Entropy® is the amount of energy in an organization that is consumed in unproductive work. It is a measure of the conflict, friction, and frustration that exists within an organization.

VALUES LEADERS SHARE

How Leaders Are Perceived

Based on the results of the study, we found that among the top values chosen by the leaders’ assessors, two values were consistent with all personal entropy bands: accessible and ambitious.

At its essence, the word accessible is defined as “the ability to be reached”. It is also often associated with being open, easy to talk to, and friendly. However, when accessible is coupled with potentially limiting values such as controlling, demanding, and authoritarian, it becomes a tool for high entropy leaders to gain power or recognition. They may be reachable simply because they spend much of their time micromanaging others. 

“If you’re the kind of boss who lasers in on details, prefers to be cc’d on emails, and is rarely satisfied with your team’s work, then—there’s no kind way to say this—you’re a micromanager.”

It’s not surprising that ambitious shows up as a consistent leadership value given the hard work and dedication it takes to climb the ranks. However, ambition also has a shadow side, which may explain why it is recognized as an attribute of both low and high entropy leaders. 

“Ambition by itself is neither positive nor negative. What you do with the drive, like all human drives, is what matters. As 18th century political theorist, Edmund Burke posited, ‘Ambition can creep as well as soar.’ If ambition causes you to cut corners ethics-wise so much so that you sacrifice integrity and values, then ambition can be destructive. Conversely, if you channel your ambition into fulfilling organizational goals that build a stronger and better company and do it in ways that help employees and customers then ambition is a positive.”

Four of the five entropy bands also shared the values of commitment, goals orientation, attention to detail, analytical, and business/industry knowledge.

HOW LEADERS SEE THEMSELVES

Based on the results of the study we found that most leaders, apart from those exhibiting the highest levels of entropy, characterized themselves as accessible, while only two groups (7-10% and 11-15%) recognized that they are ambitious.

Leadership Perspective: How Leaders See Themselves

All leaders across all entropy bands feel that they demonstrate accountability. However, this value is only observed by one group of assessors (16-20%), as shown in Figure 1.

WHAT MAKES LOW ENTROPY (FEARLESS) LEADERS DIFFERENT

From the perspective of employees, fearless leaders place more emphasis on building connections–they have a greater number of “relationship” type values. However, leaders in the higher entropy bands (11% or higher), focus less on relationship values and more on their personal qualities and contributions. At 16% entropy and higher, while some positive relationship values are observed, potentially limiting values such as conflict avoidance, controlling, and demanding are clearly undermining interpersonal connections.

Fearless leaders have most of their values concentrated at Level 5 – Authentic Leader, showing a focus on creating shared mission and meaning within their organizations. Additionally, these leaders are the only group who are recognized as paying attention to values at Level 6 – Mentor/Partner Leader, which shows attention to creating mutually beneficial partnerships. They also have the widest spread of positive values across the Barrett Leadership Model. 

All the higher Entropy bands are primarily concentrated at Level 3 – Performance Manager, indicating an emphasis on systems, process, and achievement. As Cultural Entropy increases, leaders show there is a stronger concentration of values at the lower three levels of consciousness.

VALUES UNIQUE TO FEARLESS LEADERS

There are a number of values that fearless leaders exhibit that are not present in any of the other groups. In the top values chosen by their assessors, fearless leaders are seen to be personable and open to new ideas, while exhibiting collaborative working and enthusiasm.  

These values seem to indicate that low entropy leaders foster an inclusive approach, something that is often attributed to great leadership.

Leadership isn’t about having all of the answers. “Successful leaders deflect attention away from themselves and encourage others to voice their opinions. They are experts at making others feel safe to speak-up and confidently share their perspectives and points of view.” The lowest entropy leaders understand this, as they are open to new ideas.

At the same time, leaders need to have a personality that makes it easy for others to approach them. It’s not just being likable. The value of personable recognized in the lowest entropy leaders also has business implications. “Being personable is a leadership strength, while being unapproachable, prickly or guarded shuts people up and shuts them down, cutting off information flow and collaboration vital for a team to do its best work.”

Just as leaders can’t be expected to know everything, they certainly can’t be expected to do everything. Collaborative working suggests that the lowest entropy leaders understand the importance of working with those around them to achieve goals. “Increasingly, work is being executed through networks of relationships that cross boundaries within and outside the organization. Leaders who excel at this capability demonstrate a talent for collaboration—a highly sought-after skill.”

If leaders aren’t excited about the mission and vision of the organization, how can others be? With their value of enthusiasm, leaders with the lowest entropy demonstrate the kind of passion that is necessary for attracting and motivating others to their cause. “Your employees want passion; in fact, they’ll go to the ends of earth because of it, live and die for it. Passion is such a key part of being a great leader that if you don’t have it, you simply can’t be a great leader.”

As we move away from the lowest entropy band, leaders tend to demonstrate qualities such as attention to detail, business/ industry knowledge, as well as being analytical. With the potentially limiting values of controlling, demanding, and authoritarian, those leaders with entropy over 20% appear to be largely stuck in serving their own self-interest, being hampered by fears and feeling unable to truly lead others. 

AUTHENTIC LEADERSHIP

Fearless leaders, on average, have a much higher number of matching values between how they see themselves and how others see them compared to their high entropy counterparts.

A high number of matches shows that the leader is coming across effectively, authentically, and able to walk his/her talk. 

“Our growing dissatisfaction with sleek, ersatz, airbrushed leadership is what makes authenticity such a desirable quality in today’s corporations—a quality that, unfortunately, is in short supply. Leaders and followers both associate authenticity with sincerity, honesty, and integrity. It’s the real thing—the attribute that uniquely defines great leaders.”

LEADERSHIP STRENGTHS

The Leadership Development Report asks leaders and assessors to rate the leader against a prescribed set of 26 ‘behaviors’ that our research has shown to be important for success. This data highlights the leader’s strengths and areas for improvement in relation to each of the levels in the Barrett Leadership Model.

When we look at the degree to which these behaviors are recognized among the leaders in the different entropy bands, fearless (low entropy) leaders’ strengths come across much stronger than those in the higher entropy bands.

The top-ranking behavior of fearless leaders has a strength rating of 89% while those in the 21%+ entropy group highest-ranking strength is 61%. A similar pattern emerges with the lowest ranking behaviors.

When we averaged the strength rating for all of the 26 behaviors, low entropy leaders’ average score is 44% compared to 20% for high entropy leaders.

We also noticed an interesting trend among leaders when we compared the entropy groups in regards to how they perceive their strengths, compared to how their assessors perceive their strengths.

Fearless leaders more often underestimate their strengths in the behaviors examined, while leaders with the highest entropy tend to overestimate their strengths. In 14 of the 26 behaviors, fearless leaders rated themselves lower than their assessors. High entropy leaders rated themselves higher than their assessors in 12 of the areas. This data seems to indicate that fearless leaders are more self-aware, humble, and honest about their strengths and limitations. 

WHAT WE WANT FROM LEADERS

There are five values/behaviors important for leaders to reach their full potential. These are communication skills, coaching/mentoring, team builder, developing others, and strategic thinker. The first four of these values are “relationship” type values. Across all groups, the significant shift in emphasis requested is for leaders to become more people-focused, building connections, and support for others. They are asked to focus less on their own personal qualities and contributions and start instead to truly lead others.

Most leaders, except those in the 7-10% entropy band, are asked to focus on collaborative working and building trust; more focus again on “relationship” type values.

Fearless leaders already demonstrate the highly desirable values of collaborative working and communication skills according to their assessors. 

The top area of focus across all groups is at Level 4 – Facilitator/Innovator, indicating that leaders need to pay attention to the development of new ideas and learning, enabling others to express themselves and take more accountability. Additionally, assessors across all groups want leaders to increase their role as a Mentor/Partner, with more focus requested at Level 6. This is a call for leaders to make a difference in the world, to help employees realize their potential and collaborate more, both internally and externally.

CONCLUSION

“Almost everyone, except perhaps for some of the most highly evolved people, operate with some level of personal entropy. The problem with personal entropy is that, if you don’t learn to master it, it becomes counterproductive to meeting your individual short, medium and long-term goals.” Additionally, personal entropy influences Cultural Entropy which negatively affects employee engagement and organizational performance. 

While leaders with the lowest entropy aren’t completely fearless, they demonstrate a stronger degree of personal mastery. “You achieve personal mastery when you are able to successfully manage your emotions so that you become responsible for your own emotions and are no longer dependent on others to meet your survival, relationship, and self-esteem needs.”

Fearless leaders demonstrate values commonly associated with successful leadership traits. They also come across more authentically, operate from a wider spectrum of consciousness, and their strengths are more strongly recognized by others.

Regardless of the level of personal entropy, there is a strong call for all leaders to focus more on building relationships. Many people in a leadership role are actually ‘managing’ people and processes, rather than truly leading. In essence, the call for leaders is to act more as a guide, by leading through serving others.

Those leaders who have let go of their fears and who demonstrate low degrees of dysfunction are closest to achieving this aim. However, all groups have work to do on helping to develop and coach others, with leaders across all groups also being asked to focus on building strong teams and paying attention to strategy.