Stanford University’s Charles O’Reilly has spent over 50 years studying organizational behavior. In his research on why companies fail, he’s observed something troubling: The same strong cultures that drive success often become the very thing that kills companies when markets shift. Adaption is key.
In a conversation with MIT Sloan’s Donald Sull, O’Reilly breaks down culture change into five specific levers: harnessing senior leaders’ commitment and modeling behaviors, getting employees involved, using recognition and promotion (not money) as rewards, aligning stories and symbols, and fixing HR systems that undermine change by rewarding the wrong things. Miss any one piece, and it’s harder to get traction on culture efforts.
Culture is “the pattern of behavior that’s reinforced by people and systems,” O’Reilly says. If those patterns become toxic, the symptoms are predictable: no collaboration, fear of risk-taking, information hoarding, political maneuvering. These are, as O’Reilly notes, “exactly the norms that lock a company in.” He explains that Microsoft escaped this trap through CEO Satya Nadella’s decade-long commitment to instilling a growth mindset — which included training 47,000 managers on how to talk about and model new behaviors.
People want to contribute and feel good about their work, O’Reilly asserts. The opportunity is right there for leaders who are willing to do the unglamorous, daily work of reinforcing the right behaviors.
Video Credits
Charles O’Reilly is the Frank E. Buck Professor of Management at the Stanford Graduate School of Business.
Donald Sull is a professor of the practice at the MIT Sloan School of Management.
M. Shawn Read is the multimedia editor at MIT Sloan Management Review.