The rise of the chief culture officer

July 30, 2012: 11:28 AM ET

More companies are looking to have someone around to keep an eye on their culture, but doing it well takes more than just adding an additional office in the C-Suite.

FORTUNE -- Read any management how-to, and it will talk about the sanctity of a company's culture. Culture, you could argue, drives everything a business does -- it's successes and its slip-ups. Cracks in an otherwise sound culture can lead to big, expensive mistakes, much of which we have recently seen in the financial industry.

But a company's culture changes constantly, which makes it a challenge for companies trying to define it and make sure it's progressing the way they want. More and more, companies are trying to figure out how to do this, says Ken Oehler, a senior vice president at consulting firm Aon Hewitt. "There's been a resurgence from our clients, certainly an elevation of importance of culture to the CEO level during the recession and post recession." Many companies, Oehler says, are seeing that "macroeconomic pressures have created a dysfunctional culture, one that is not supporting business performance moving forward," and now, they are trying to figure out how keep their culture from spinning out of control.

One way to do this is to bring someone into the C-Suite whose job it is to keep an eye on culture. The best-known example of this approach is Google (GOOG), which added "chief culture officer" to head of HR Stacy Sullivan's job title in 2006. Part of her job is to protect key parts of Google's scrappy, open-source cultural core as the company has evolved into a massive multinational.

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But Google is the poster child for innovation and foosball at work, it makes sense that they would have a culture-keeper. Yet other, more traditional companies, even in the financial industry, have hired culture chiefs as well. One example is North Jersey Community Bank (NJCB), which recently appointed Maria Gendelman as its chief culture officer. CEO Frank Sorrentino encountered resistance from his board when he argued for the position, he says, because the job description is a little tough to define. Though now, having a chief culture officer is a differentiator for the bank, and there's no reason it shouldn't be status quo, Gendelman says. "Could every bank utilize a protector of the culture as part of the team?" she asks. "Absolutely."

The title certainly isn't enough, though, notes Jon Katzenbach, a senior partner at consulting firm Booz & Company. In fact, he adds, one of the main ways that a culture can sour is if management focuses too much on messaging and not enough on action. In other words, don't preach about efficiency and customer service, but instead make operational changes that allow those behaviors to thrive: Reward great service, streamline technology, etc.

First, a chief culture officer needs to understand the way internal business environments change, which is slow, says Katzenbach. Most companies hire someone up top to monitor culture if they're expecting dramatic change, say, a series of mergers and acquisitions, Oehler says. But the most insidious changes rarely happen during times of crisis.

"Cultures that encourage inappropriate behavior and inhibit change to more appropriate strategies tend to emerge slowly and quietly over a period of years, usually when firms are performing well," according to the book Corporate Culture and Performance by John Kotter and James Heskett, published in 1992. "Once these cultures exist, they can be enormously difficult to change because they are often invisible to the people involved, because they help support the existing power structure in the firm."

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To that end, an effective chief culture officer would need the full support of top management. He or she would need to have the CEO's ear without growing too distant from the rank-and-file employees that live, breathe, and define a company's culture with everything they do. CEOs often subscribe to the misguided idea that culture can be controlled from the top down, says Mel Lowe, a consultant with Mercer's Delta division. Culture will morph, she says, and "You can either let it happen or you can influence how it happens." Hiring a chief culture officer is one way to step to the plate.

For Gendelman, that means she's in charge of a range of things -- soon she'll have people mystery-shopping at the bank, making sure employees at all branches aren't using a script and that they're inquiring into the lives of their customers. That's a key part of NJCB's culture. The idea, she says, is that "it's banking a hundred years ago where you knew everyone who walks through the door."

And while customer service is part of the equation, culture includes just about everything a company does. Gendelman's job, she insists, is completely different from head of HR. "I'm there to make sure that every single piece of paper that we give to the customer all looks the same, that our processes are efficient and streamlined -- all of those things touch culture."

But just as no culture is all good or all bad, appointing a chief culture officer is "neither a good idea nor a bad idea," says Katzenbach, "but certainly opens a whole interesting set of challenges." At the very least, it seems promising that companies are thinking about culture again at all.

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Shelley DuBois
Shelley DuBois
Writer - Reporter, Fortune

Shelley DuBois writes on management issues for Fortune.com. Before joining Fortune, she was a producer for National Public Radio's Science Friday and worked for Wired. Shelley has a graduate degree in science, health and environmental reporting from New York University. She lives in Brooklyn.

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