Leading Your Digital Transformation Requires a Different Organizational Culture

The advancement of the Internet over the past two decades has taught us that we must run our organizations differently for our businesses to thrive, and perhaps even survive. To successfully move into the future, leaders need to strike a balance between organizational hierarchy and cross-functional coordination. While there still needs to be accountability for results, organizations need to be able to move faster to achieve these results.

When we look at the retail industry specifically, and others more generally, it’s clear that traditional organizational structures are falling short. They are unable to keep pace with the demands of the digital economy.

“Things are moving so fast we can’t keep up!”

Three weeks ago, Macy’s announced that they were falling short of their 2019 financial goals. Sears and JC Penney are closing more stores. Even Walmart and Walgreen’s have announced they will close stores. Brick and mortar are giving way to the digital age. Amazon continues to grow at breakneck speed. Over ten years, Amazon’s revenue has increased about 12 times, whereas Target Stores’ revenue has increased about 1.2 times.

Structure made us remarkably efficient

Before the industrial revolution started to gain momentum, companies were small, and employed craftsman to build one product at a time. If your blacksmith shop made, say, wagon wheels, one person made the entire wheel. One craftsman forged the steel tire. He crafted and constructed the wooded spokes. He also built the hub, which consisted of a combination of metal and wooden parts. Then he assembled the entire product. The wagon wheel company had 4-5 employees each building wagon wheel one at a time.

The industrial revolution ushered in an era of specialization of tasks. Now the wagon wheel company had these 4-5 employees specializing in their tasks. One employee fabricated the steel tire. One employee crafted the spokes. And so forth. Instead of having 4-5 craftsman, they had one who oversaw the production, and each employee was able to specialize in their specific task. This brought about more efficiency and greater consistency of product.

The concept of specialization was introduced by Fredrick Taylor in the late 1800’s. He theorized, and correctly so, that with more structure came greater specialization and hence greater speed, efficiency, and consistency. Greater consistency meant that there was far less variation in product quality and products became more reliable.

By the early to mid-1900’s, this expanded to other parts of the organization. Payroll clerks computed payroll check amounts, and accounting wrote the paychecks. Order-takers received phone calls from customers who wanted to place orders, a warehouse clerk prepared the product for shipment, and a transportation clerk shipped the product to the buyer.

All this structure drove phenomenal efficiency. One Fortune 150 company drove $160 million of annual cost out of their supply chain through these efficiencies. Throughout most of the 20th century, organizations employed Taylor’s ideas to drive more and more cost out of their production.

Hierarchy yields to cross-functioning teams

However, this specialization drove hierarchical adherence which in turn promoted cross-functional dysfunction – especially during times of change. If leaders wanted to deploy a new product design or improve business processes across the organization, they ran into tremendous resistance. This led to the failure of organizations to achieve results in desired time frames, if at all.

This means that organizations must reduce their dependence on hierarchical adherence and drive more toward teams that work more effectively cross-functionally. People in these organizations must operate at higher levels of cross-functional collaboration, requiring greater trust, healthy dissent, and greater ability to engage in informal accountability.

Leaders must set the example

The first step in embracing a new, innovative and collaborative culture is the requirement for clear purpose. Once the purpose is clear and the leadership team is aligned to its outcomes, then leaders must:

  1. Be willing to give up traditional command and control in favor of a more facilitative approach. She must be passionate about her organization’s mission, must be humble, and must demonstrate greater trust and willingness to engage in healthy dissent.
  2. Hold their leadership team accountable to strip away the armor and work cross-functionally – more than ever. She must model and require more openness, more willingness and a greater propensity to challenge each other.
  3. This means that members of the leadership team must willingly commit to one another, not just the leader, and hold one another accountable for results.
  4. These points enable the leader and her team to promote and model the idea that employees across the organization work together more effectively to drive outcomes and be willing to challenge and support each other in doing so.

These are the elements required to build an effective organization. You still need hierarchy – after all, there still needs to be control mechanisms in place to keep the organization focused on its mission and not go too far afield. Striking the right balance between hierarchical adherence and cross-functional collaboration helps you drive the balance between efficiency and effectiveness.

Plan. Prepare. Act.

Leaders at all organizational levels—especially senior leaders—must give up the old command-and-control mentality that Fredrick Taylor inspired. They must become more of a coach, helping direct reports and the entire organization drive to these new behaviors which in turn advances to a greater culture of cross-functional effectiveness.

How you undertake these rapidly changing times does matter. As shared in the retail examples above, this time next year many businesses will likely experience a digital disruption at some level and be fundamentally different as an organization. Having this awareness sooner than later can be advantageous but only if you’re prepared to act. Assemble your leadership team, establish your key priorities, and get out front to guide your culture forward.


Editor’s note: Steve will be presenting at PMO Impact Summit, a virtual event for project management professionals, on Friday, Sept. 20 at 8 AM ET. He’ll share his transformational leadership framework and how it’s used to create a successful digital organizational culture. You’ll learn how to accelerate change to fuel the growth of your firm in this new world and propel your personal leadership success. Click here for more info.

Adapted and reprinted with permission from stevesalisburyconsulting.com.

About the Author

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Steve Salisbury

Steve Salisbury is an organization change, leadership, and culture consultant who has helped dozens of executives lead change and grow their businesses. Steve’s unique approach is to understand and adjust organizational culture and then execute strategy quickly, effectively, and with the highest return possible. Steve evaluates interpersonal, organizational, and process elements to eliminate cross-functional dysfunction and builds teams to create a leadership culture to drive exponential growth. Steve has worked with the world’s most recognizable and global organizations to drive growth by creating capacity, galvanizing leaders, and driving accountability. In 2020, Steve published his first book, Activate: 15 Steps to Profitable Strategy Execution. The book explains how to drive greater profitability faster. Steve also serves as a volunteer mentor for SCORE, an organization that provides small business advice to help companies start, grow, and operate efficiently.