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In 1987, when Paul O’Neill took over as CEO of Alcoa — a once great giant of American industry — he vowed to put all his energy behind improving one metric and one metric only: worker safety. When his tactics were questioned by a group of concerned investors, he explained, “If we bring our injury rates down, it won’t be because of cheerleading or the nonsense you sometimes hear from other CEOs. It will be because the individuals at this company have agreed to become part of something important: They’ve devoted themselves to creating a habit of excellence.”

O’Neill chose safety as his metric — instead of profits, efficiency, inventory or cost of goods sold — because he recognized that safety is core to culture and that culture in turn is core to success. Transform the culture, he believed, and you’d transform the bottom line.

And he was right. In his 12 years as CEO, there was not only a dramatic reduction in worker injuries and deaths, there was an incredible improvement in business performance. Alcoa’s net income multiplied by a factor of five, and market capitalization increased by a staggering $27 billion. If you’d invested a million dollars in Alcoa on the day O’Neill took over, you would have earned another million in dividends alone by the time he left.

This is an example of “agile” thinking, which, as I explained in a previous PandoDaily post, is a structured and formal way to create a culture of safety where collaboration, cooperation, and innovation can take root. The reason agile values “individuals and interactions over processes and tools” is that building cultures that empower individuals to shine and contribute are durable and productive. They also require far less management overhead to maintain than do heavyweight, draconian processes.

Agile processes and tools are actually install mechanisms for culture. By requesting people to work together in certain ways, track specific metrics, and check in with each other at specified intervals, companies can put in place the building blocks for people to interact in positive, productive ways.

Far from a silver bullet, these processes and tools are more like silver mirrors that help business leaders see the organization, customer, and product clearly. It’s only when operating from this point of clarity that they are able to make changes to an ever-evolving process. This is what leads to an organization becoming what Peter Senge calls a learning organization, one that is capable of improving continuously over time.

The first step to change is, of course, discomfort; change is difficult, messy, and challenging. In fact, most people will avoid any kind of change unless the current situation is uncomfortable on a personal level. But what do you do once you’ve made the decision to make a change and go through the discomfort and inevitable immediate loss in productivity that working with a new process will bring? How do you bring legitimate change to your organization?

Prevailing wisdom is often that the fish rots from the head and starts with the organization’s leadership team. While it’s tempting to start at the top, spending too much time and energy converting the CEO and leadership team is an expensive and slow process that runs a real risk of failure.

A popular alternative to top-down change is what veteran Lean theorist and consultant Don Reinertsen calls the Wildfire Model, where we depend on grassroots efforts within the organization to catch fire and combine into sweeping organizational change. While cheaper and less risky than doing things top down, this method doesn’t have a mechanism to address organizational impediments or coordinate effort. It harnesses people’s enthusiasm, but without some central support these fires frequently reach organizational limits and burn themselves out, leaving people even more demoralized and resistant to change than they were before — if they remain with the organization at all.

While it is helpful to proceed organically and collaboratively, one of the most powerful things an organization can do is encourage a shift in leadership behavior.

As business leaders ask other people to become more engaged in their work, more empathetic with customers, and more creative in their solutions, they need to listen more and do less. And to do this, they must slay our own demons of FUD (Fear, Uncertainty, and Doubt) and develop a greater trust.

Often the support of a coach or a colleague from outside the organization is key to this personal transformation. As renowned physicist Richard Feynman used to say, “The first principle is that you must not fool yourself, and you are the easiest person to fool.” Trusted advisors are essential to helping businesses understand when they are  fooling ourselves.

If we’re to create sustained change in our organizations, the focus can’t be only on our behavior or attitudes as leaders. We must also look at the structures of the organization that impede — or aid — the adoption of new, better behaviors. The two most effective areas to examine are the ways we measure projects and organize teams.

Rewards drive behavior. Many organizations use explicit and implicit metrics that measure and reward the amount of code written, the amount of time people spend in their chairs, or the amount of stress people encounter – which often looks like hard work to detached managers. These measures often unintentionally drive the wrong behaviors — people coming in early and leaving late to impress the boss but goofing off while at their desks.

A shift to an organizational structure made up of interlocking and interdependent teams allows businesses to harness the power of shared commitment. Teams that commit together to deliver to another team — or an external customer — are more likely to perform well. This is because you can’t get lost on a small team; your teammates see your work, or lack thereof, and hold each other accountable. These loose social ties and obligations that bind small groups together have been shown repeatedly in research to be much stronger motivators than any bureaucratic reward or punishment.

How can you apply these ideas tomorrow or next week instead of next quarter or next year? How can you begin to adopt the stance of a curious student and willing participant in transforming your organization? If you start there, you can develop the culture of continual growth and learning that separates organizations of excellence from those of mere mediocrity.

[Illustration by Hallie Bateman]