Framing the Stakes: An Organisation’s Culture Has Ripple Effects at Scale, for Better, and for Worse

Photo by Biel Morro on Unsplash

Matt Collier is a Senior Industry Fellow at FORWARD — The RMIT Centre for Future Skills and Workforce Transformation — writing with director Peter Thomas and development partner Sally McNamara — on how organisational culture has larger effects on society, including its potential to build future skills at scale, its benefits for profitability and job security in a changing world, and its costs from a public health perspective.

What connects the leaders of a multinational corporation with those of small and medium enterprises (SMEs), nonprofits, universities, government agencies, and other institutions? At first glance, they may seem worlds apart — with different scopes, missions, and resources. Yet, they all oversee organisational cultures that collectively produce ripple effects at scale — and for better or worse.

The insidious effect of poor workplace cultures is borne by employees, and it tends to be casually dismissed as an unfortunate reality of work — a nuisance, something that generations have endured. As Stanford Prof. Jeff Pfeffer explored in his book Dying for a Paycheck, today’s work environments — whether in SMEs, multinationals, or elsewhere—are having significant and deleterious consequences for mental and physical health. In the intro to his book, Prof. Pfeffer summarizes his learnings:

The workplace profoundly affects human health and mortality, and too many workplaces are harmful to people’s health — people are literally dying for a paycheck. Most important, the situation is worse than I had imagined, affecting people in numerous occupations, industries, and geographies, and cutting across people of various ages and levels of education.

Simply stated, work environments matter. We know they matter for people’s engagement, satisfaction, turnover intentions, and performance … also for people’s physical and mental health, and well-being. It follows that concern for life and human sustainability, as well as a focus on costs and productivity, needs to include a focus on the workplace and its effects.

Meanwhile, in multinational corporations, the consequences of cultural issues carry systemic risks, whether it’s the tolerance of unsound risk management practices and a growth-at-all-costs approach at Silicon Valley Bank sparking a bank run, questionable conditions and employee practices at Emergent BioSolutions’ manufacturing plant causing 400 million vaccinations to be wasted at the height of a pandemic, or a poor speak-up culture at Wirecard disrupting transactions globally and tarnishing the reputation of Germany’s financial sector.

Questions of culture are not unique to the private sector. Consider examples at Penn State, Michigan State, and UCLA, where unchecked power amongst sports leaders led to the sexual abuse of student athletes, including at Ohio State, where one of the key figures allegedly involved in the cover-up is currently serving in the U.S. House of Representatives. In the Catholic church, the last two decades have brought a reckoning on the global extent of sexual abuse. And the unfolding scandal at the Confederation of British Industry (CBI) is bringing the issue of toxic workplaces to the fore.

Sure, we’ve seen the well-worn playbooks that draw reference to ‘culture’ in the crisis communications resulting from such failings. But given that poor culture seems to be accepted or at least tolerated as a fact of life and work, and given the wooly and seemingly intractable nature of culture itself, it can be difficult to believe that such pronouncements are anything more than lip service. That said, culture doesn’t have to be — and shouldn’t be — left to a loose and reactive collection of initiatives (at CBI, it was 35 recommendations). It can be shaped deliberately and systematically.

In our first essay on this topic, we made the case for doing just that, exploring how organisational culture has implications for supporting mental health and well-being, creating successful digital transformations, meeting increasing conduct and compliance expectations, and, crucially, helping employees develop the future skills needed as the nature of work continues to evolve.

In this essay, we will look at organisational culture through the lens of its larger effects on society. First, we will argue that the skills needed in the future are more human in nature and can be developed — at scale — through design thinking, lean start-up, and agile development. Then we will take on two perspectives: for better, where we will examine the economic upsides of getting culture right; and for worse, where we will consider the public health costs of status quo.

Future Skills and Workforce Transformation — at Scale

There is a paradox in the future of work and future skills space. On one hand, the language we tend to use suggests newness, novelty, some degree of sophistication, and fancy technology. On the other hand, a lot of what people need to do to prepare for the future of work, which is arguably already here, simply has to do with getting better at the basics of being human and working together.

In a recent opinion essay in the New York Times, columnist Tom Friedman argues that AI is one of two Pandora’s boxes that we are opening (the other one is our continued inaction on climate change). He makes the case that we need to act swiftly and decisively as a society to forestall harmful the effects of and not make the same mistakes as with the unregulated and overly optimistic adoption of social media. Friedman interviews Dov Seidman, the founder and chairman of the HOW Institute for Society. Seidman offers a compelling perspective:

We lost a lot of time — and our way — in utopian thinking that only good things could come from social networks, from just connecting people and giving people a voice. We cannot afford similar failures with artificial intelligence.

So there is an urgent imperative — both ethical and regulatory — that these artificial intelligence technologies should only be used to complement and elevate what makes us uniquely human: our creativity, our curiosity and, at our best, our capacity for hope, ethics, empathy, grit and collaborating with others.

Now, back to future skills. In a world with generative AI — hopefully a well regulated one — humans will have to find their way to work with these tools. So, one very clear future skill is the ability to use, leverage, and collaborate with AI in service of one’s job, whether that’s augmenting the day-to-day tasks of an individual contributor or embedding it into enterprise operations to automate routine transactions.

But as Seidman points out, there is an opportunity for AI to be used to “complement and elevate what makes us uniquely human”. He goes on to list traits like creativity, curiosity, empathy, hope, ethics, and collaboration. This wasn’t likely intended to be a comprehensive list, but it’s certainly a good starting point for what we might elevate about ourselves, and it leads us to the Inner Development Goals, or IDGs for short.

The IDGs, inspired by the U.N. Sustainable Development Goals, were developed by a team of international researchers after extensive outreach involving more than a thousand people. The IDGs framework consists of five dimensions organising 23 skills and qualities of human inner growth and development — i.e., the very things that Friedman and Seidman might say make us uniquely human. Here are the five dimensions:

1. Being — Relationship to Self. Cultivating our inner life and developing and deepening our relationship to our thoughts, feelings and body help us be present, intentional and non-reactive when we face complexity.
2. Thinking — Cognitive Skills. Developing our cognitive skills by taking different perspectives, evaluating information and making sense of the world as an interconnected whole, is essential for wise decision-making.
3. Relating — Caring for Others and the World. Appreciating, caring for and feeling connected to others, such as neighbors, future generations or the biosphere, helps us create more just and sustainable systems and societies for everyone.
4. Collaborating — Social Skills. To make progress on shared concerns, we need to develop our abilities to include, hold space and communicate with stakeholders with different values, skills and competencies.
5. Acting — Enabling change. Qualities such as courage and optimism help us acquire true agency, break old patterns, generate original ideas and act with persistence in uncertain times.

For the purposes of this essay series, where we are looking at how culture initiatives can double as a capability-building exercise, and vice versa, the IDGs provide a helpful taxonomy that is rigorously developed. In fact, in the full report on IDGs, the authors talk about this two-way relationship between skills/capabilities and culture/context.

In real life, skills and qualities develop in specific contexts. This goes both ways: what skills and qualities are relevant and important varies depending on role, tasks and situational conditions, while skills and qualities develop in response to the particular tasks and demands an individual or a collective are facing.

At this juncture, the difficulty of being precise with language ought to be apparent. In teeing up the above excerpt, we’ve mentioned the two-way relationship between skills/capabilities and culture/context. And then the excerpt introduces the additional concept of qualities as well as the distinction around the individual versus the collective. The language here can get quite fuzzy quite quickly.

One of the IDGs authors seeks to clarify skills versus qualities, writing, “some of the items we came up with can be thought of as skills: abilities that can be learned and trained. Other items do not fit into the conception of skills, but are better understood as personality traits or virtues (some of which can be nurtured and refined), values or qualities that are functions of a person’s level of ego development.”

We will address the language issues and necessary distinctions in an upcoming essay on defining culture and using frameworks and constructs to make cultural concepts more accessible and practicable. We will also delve deeper into the IDGs framework and the 23 skills and qualities that sit under the five dimensions. For now, for the sake of argument, let’s just settle on a few key points:

• Skills — a.k.a., capabilities, abilities — things that can be trained
• Qualities — a.k.a., traits, virtues, values — things that can be nurtured
• Individual vs. collective — and team, organisational, and societal levels
• Culture is context — and context is a great teacher

So, how might we train and nurture these IDGs — i.e., individual skills and qualities —at scale within our institutions while also shaping culture in the collective sense, first at the team and organisational level, and if we spark a cross-sector movement, eventually the societal level, where we can then credibly talk about workforce transformation in its truest sense?

The disciplines of design thinking, lean start-up, and agile development hold promise. Philosophically, they are aligned with the ethos of the IDGs and the business and organisational aspirations that leaders tend to talk about these days, including innovation, inclusion, agility, customer centricity, risk savviness, and more. (Note: Unpacking these aspirations is actually the next essay in this series, so stay tuned for that.)

Methodologically, these disciplines have specific tools, templates, norms, rituals, etc., all of which are teachable, scalable, and measurable by way of broad-based learning programmes. And because they can be taught in the flow of work and in service of real-world challenges, their application shapes ways of working, which in turn shapes culture. With the flywheel effect, as this kind of culture and the organisation matures over time, it becomes easier to learn and apply these methods in that particular context, thereby reinforcing the desired behaviours and driving the desired outcomes (e.g., growth, profitability, customer centricity, etc.).

• Design thinking is a human-centered approach to innovation that focuses on empathy, ideation, and iteration. It emphasises understanding the user’s needs and experiences, allowing for the development of more creative solutions to complex problems. This philosophy highlights the importance of insights, possibilities, and collaboration.
• Lean startup, on the other hand, is a methodology that emphasises rapid prototyping and market testing to validate product ideas before investing significant resources. It fosters a culture of learning, resilience, and adaptability, equipping individuals to respond effectively to the ever-changing business landscape.
• Agile development is a project management approach that promotes flexibility, collaboration, and iterative progress. It breaks down large projects into smaller, manageable tasks and encourages regular feedback and adjustments. This approach cultivates essential future skills such as teamwork, communication, and the ability to adapt to change.

By learning the methodologies of design thinking, lean startup, and agile development, individuals can develop skills in a tangible and actionable manner that is aligned with the IDGs. These disciplines offer a structured approach to innovation and and problem-solving and provide a pathway for training and nurturing that which makes us uniquely human.

Leaders across sectors can deconstruct these philosophies and methodologies to identify cultural ideals they would like to see flourish in their organisations. Investment in broad-based learning programmes can then help organisations develop a workforce that is equipped with the future skills needed to deliver their business and transformation objectives, all whilst shaping culture.

And policymakers can play a crucial role in preparing their countries’ workforces with future skills. In Singapore, Ngee Ann Polytechnic is a great example of how subsidies are being offered to Singaporeans who wish to upskill themselves in design thinking, all part of a broader SkillsFuture movement sponsored by the highest levels of government. Singapore has also begun incorporating design thinking into programmes at the primary and secondary school level.

Economic Upsides of Getting Culture Right — for Better

Let’s now turn to profitability, growth, and stewardship of resources, where a culture shaped by the aforementioned disciplines has been shown to have a ‘for better’ effect on businesses and institutions.

While design thinking, lean start-up, and agile development all have their distinct use cases, there is also a case to be made for their similarity. Philosophically, in broad strokes, they all emphasise empathy, iteration, and a highly collaborative test-and-learn approach. For those championing new ways of working, or even for those who are simply interested, it is an instructive exercise to consider the similarities and differences of these disciplines — where there is overlap, and where there is tension.

Here in this essay, for the sake of argument, we are going to rely on the similarities and use design thinking as a proxy for the others so we can consider pertinent studies on the business value of design. Design and design thinking, not unlike culture, can be viewed as wooly. To critics, they are innovation theater, a spectacle of sticky notes and performative activities. To proponents, they produce real value.

Several attempts to make the case for design and design thinking have occurred over the last decade or so. There are two that stand out: Design Management Institute (DMI); and McKinsey Quarterly. First, we will consider the Design Value Index from DMI, which found that design-centric companies outperformed the S&P 500 by 211% over a 10-year period. Here is the explanation from the DMI website:

DMI and Motiv Strategies, funded by Microsoft, began analyzing the performance of US companies committed to design as an integral part of their business strategy. Completed in 2013 the dmi:Design Value Index tracked the value of publicly held companies that met specific design management criteria, and monitored the impact of their investments in design on stock value over a ten-year period, relative to the overall S&P Index.

To add some rigor to the index, DMI looks for specific design management criteria, which taken together, arguably create the conditions for the kinds of design-savvy mindsets, behaviors, decisions, and practices to take root — i.e., some kind of ‘culture’ within and across the organisation and how it operates. Here are the criteria for the Design Value Index:

1. Design operates at scale across the enterprise.
2. Design holds a prominent place on the company org chart, and either sits on the leadership team or directly reports to a leadership team member.
3. Experienced executives manage the Design function.
4. Design sees a growing level of investment to support its growing influence.
5. Design enjoys senior leadership support from the top tier of the organisation.
6. The company has been publicly-traded on a U.S. exchange for the last ten years and thereby adheres to GAAP accounting rules.

Thee above criteria are clearly being used to judge the value of design in a private sector setting. But, what about the public sector? The U.S. Office of Personnel Management (OPM) together with the U.S. Department of Agriculture received the DMI’s 2015 “Design Value Award” for their joint work to improve the process for reduced or free lunches provided in schools. That project was estimated to save taxpayers more than $600 million by the 2019–2020 school year. The Lab at OPM, which was co-founded in 2012 by one of the authors, received an initial investment of approx. US$1.1 million. That’s quite the ROI, and it’s only one example from more than a decade of championing design thinking within the American federal workforce.

Now, let’s look at a more recent study, The Business Value of Design, published in McKinsey Quarterly in late 2018. McKinsey found that companies with a strong ‘design culture’ outperformed their industry counterparts in terms of revenue growth and total returns to shareholders (TRS) over a five-year period. According to the study, companies with high McKinsey Design Index (MDI) scores achieved 32 percentage points higher revenue growth and 56 percentage points higher TRS growth than their industry counterparts. This finding held true across multiple industries, including medical technology, consumer goods, and retail banking. Here are the four dimensions of the MDI:

1. More than a feeling, it’s analytical leadership. Measure and drive design performance with the same rigor as revenues and costs.
2. More than a department, it’s cross-functional talent. Make user-centric design everyone’s responsibility, not a siloed function.
3. More than a product, it’s user experience. Break down internal walls between physical, digital, and service design.
4. More than a phase, it’s continuous iteration. De-risk development by continually listening, testing, and iterating with end users.

Again, as with DMI’s Design Value Index, the four dimensions comprising McKinsey’s MDI suggest that top-performing organisations are applying a degree of rigor and intentionality in creating the conditions — and the culture — needed to realise the benefits of design. The MDI in particular shows a clear emphasis on users and user-centricity, both of which fundamentally require an empathetic approach.

Placing empathy at the center of work is crucial in a world that will be augmented by AI, which lacks this unique human capability. Empathy is something that individuals can offer that cannot be easily replicated, thus offering a degree of job security for those who become skilled at methodically applying it in service of their work.

Because design thinking is a discipline that puts people at the center of the process — it’s also known as human-centered design — it offers individuals the scaffolding to be more empathetic and provides leaders across sectors a blueprint for the kinds of systems, constructs, policies, and programmes needed to build this out at scale and reap the benefits shown by both McKinsey and the Design Management Institute.

Public Health Costs of Status Quo — for Worse

Finally, let’s turn to questions of public health, where poor work environments and the culture that comes with them have been shown to have a ‘for worse’ effect on overall wellbeing.

Culture has emerged as a critical focus area for policymakers, who recognize that the way organisations operate can have significant implications for mental health, physical health, and wellbeing, as well as for the overall costs to the economy. There have been countless surveys and studies exploring this topic, including one by Microsoft that we cited in our first essay where 54% of global respondents feel overworked and 39% feel exhausted. Policymakers are responding, as evidenced by work-related stress websites from the United Kingdom, Canada, Singapore, and even the Victorian State Government.

But the global extent of this problem is massive, and it will require more than self-help resources on government websites. According to the World Health Organisation (WHO), globally an estimated 12 billion working days are lost every year to depression and anxiety, with an associated cost of US$1 trillion per year in lost productivity. Their analysis is based on the risks posed by poor working environments such as discrimination and inequality, excessive workloads, low job control, and job insecurity.

On a smaller scale, a study conducted in Hong Kong published in November 2020 in the International Journal of Environmental Research and Public Health identified five work-related stressors: 1) job insecurity; 2) quantitative workload; 3) organisational constraints; 4) interpersonal conflicts; 5) and work/home interface. These stressors were validated through a series of focus groups and surveys. Using a disciplined approach, the study tallied the effects of these stressors on absenteeism, presenteeism, and medical costs, totaling an annual cost of US$900 million across an employee population of 3.87 million people.

Now that we have seen the impact of work-related stress on public health and the economy, both from a global perspective as well as a more digestible country perspective, let’s take a closer look at the specific job stressors identified in the Hong Kong study, and examine how cultural factors within an organisation can contribute to each stressor, and what steps can be taken to mitigate their effects.

1. Job insecurity is a significant source of stress for employees that can have detrimental effects on their mental and physical health. The uncertainty surrounding job security can lead to anxiety and decreased self-esteem. The factors that contribute to job insecurity can include financial performance, leadership changes, and restructuring. Building a culture of transparency and open communication, and investing in the kinds of change resilience that we are advocating at FORWARD, can help alleviate this stressor and increase productivity.
2. Quantitative workload is another significant source of stress. The pressure to complete tasks — often too many tasks — quickly and efficiently can lead to feelings of burnout, exhaustion, and frustration. This is exacerbated by poor job design and a massive and ongoing shift in when, where, and how we work. Collaborative approaches such as design thinking and agile can help to alleviate this stressor by breaking down work into smaller, more manageable tasks. These methodologies allow employees to work at a more sustainable pace and produce higher quality results. And now, with tools like MURAL, there is much more support for remote, hybrid, and in-person work that is both synchronous and asynchronous.
3. Interpersonal conflicts in the workplace can be a significant source of stress for employees, affecting their emotional wellbeing and job satisfaction. Developing skills in areas such as emotional intelligence, active listening, and conflict resolution can help to prevent and manage these conflicts. Two of the IDGs dimensions address this directly: Relating — Caring for Others; and Collaborating — Social Skills. By fostering a culture that values these things, employers can create a more positive and productive work environment.
4. Organisational constraints such as poor equipment, lack of resources, and bureaucratic procedures can create significant stress for employees. Organisations can mitigate these stressors by adopting a culture of continuous improvement that emphasises a focus on people, processes, and tools. Leaders and people managers who prioritize creating conditions for employee success can help reduce the impact of organisational constraints.
5. Work/home interface is a significant source of stress for employees as it can cause a blurring of boundaries between personal and professional lives. Leaders and managers can mitigate this stressor by developing thoughtful remote and hybrid work policies and promoting a culture where people respect each others boundaries. A focus on Being — Relationship to Self, which is another of the IDGs dimensions, can help employees cultivate a sense of self-awareness and intentionality that allows them to establish and maintain healthy boundaries.

Whether the global WHO statistics, or the more granular study on Hong Kong costs, the impact of work-related stress on public health and the economy is significant and cannot be ignored. Organisational culture plays a significant role, whether it’s contributing to or mitigating these stressors. It is crucial for policymakers, employers, and employees to work together to prioritise and implement measures that support mental health and wellbeing in the workplace.

Summary and What’s Next In This Series

This is the second essay in a 6-part series exploring culture in the post-pandemic era. In the first essay, we set the scene. In this essay, we framed the stakes for organisational culture’s collective impact:

1. First, we looked at the question of the effects ‘at scale’ — how to think about future skills (i.e., IDGs) from an individual level, and how the disciplines of design thinking, lean start-up, and agile development hold promise for building out culture and capability at the team, organisational, and societal levels.
2. Then, we looked at the question of ‘for better’ —considering two studies, one showing that design-savvy companies outperformed the S&P 500 by 211% over a 10-year period, and another showing 56% higher Total Returns to Shareholders. And we gave an example of the potential ROI in the public sector.
3. Finally, we looked at the question of ‘for worse’ — how to think about the costs of status quo from a public health perspective, considering the staggering WHO statistics on work-induced stress and a recent study in Hong Kong which explored the costs of presenteeism, absenteeism, and medical expenses via five job stressors.

In the next essay, we will explore what it takes to articulate a vision and choose the messaging around culture that meets an organisation’s people where they are and catalyses the desired change, whether it’s aspirations around innovation, inclusion, customer centricity, etc.

Subsequent essays will cover how to fashion this all into a culture framework; how to implement using a top-down, bottom-up, and middle-out approach; and how to integrate all of this in the organisation’s HR and people strategies.

Note: This article was written with the assistance of ChatGPT. The authors provided prompts, outlines from research and experience, and other prepared materials, while ChatGPT generated language, helped to refine the text, and supported research/citation requests. The collaboration between the authors and ChatGPT highlights how the future of work will involve human-machine collaboration. For a copy of the transcript, email matt@matt-collier.com.