Culture change is a big topic—and a big consulting business. When I Googled “culture change consulting business,” three of top five (non-sponsored) responses were Bain, BCG, and McKinsey (in that order). Because changing culture is a prominent issue for executives—and often a very frustrating one—I decided to tackle it in this Playing to Win/Practitioner Insights (PTW/PI) called Culture Change Strategy: Three Rules for Making Change Happen. And as always, you can find all the previous PTW/PI here.
The culture change consulting pitches
It was fun to take a quick look at the culture change pitches of Bain, BCG, and McKinsey.
Bain’s was aspirational: “Culture is behavior at scale. Companies that create a winning culture are five times more likely to be top performers . . . Get it right and you not only boost total shareholder return and EBIT growth by up to 500%, and revenue by a factor of 10, but create an advantage that’s hard for competitors to copy.”
BCG’s was interesting. It provided three success stories, the two examples for which the singular success metric was cost reduction/cost savings ($500M and $283M, respectively)—clearly BCG’s focus is culture change for cost cutting. (The third case was weird, celebrating a “147% rise in cost earnings per share.” You would think that a $10 billion professional service firm would at least spellcheck the large-font bolded highlights on the landing page. But maybe there is a new non-GAAP measure called “cost earnings per share.”)
In any event, its take on “desired culture” is: “We help create a high-performance culture . . . by articulating the unique set of cultural traits that support business strategy, activating them through leader and organization-wide practices, and embedding the culture and change in organization structures, processes, and policies.”
McKinsey’s culture and change blurb actually says very little about culture. Of the four elements of “Our Approach,” only of the four even mentions culture: “Capability-driven: We build the skills of your people and the capabilities and culture of your organization to improve organizational health and performance.”
Wholesale versus retail
There is lots of stuff there, and I am sure there are valuable nuggets in the approaches. But there is lots of focus on structures, policies, and processes. These are all in a category that I call wholesale—things that can be done from a distance, centrally. It isn’t an unusual impulse. Governments love wholesale. For example, a while ago the federal government became concerned about the economic struggles of single women with young children and came up with Aid to Families with Dependent Children (AFDC), a federal assistance program that provided cash benefits to single mothers with children. That is wholesale.
Giving money to local groups to provide customized help family-by-family is retail. Governments don’t like retail because they have got to find lots of local groups and vet them and monitor them, etc. Ugh. That is a lot of work.
Companies are similar. They want to change culture by reorganizing to push responsibility downward—to create a culture of initiative. Or change the stage-gate process for R&D projects—to create a culture of innovation. Or change compensation rules—to create a culture of accomplishment.
Steering mechanisms
Wholesale solutions inevitably sound cooler and connote commitment to culture change. But the secret to culture change is retail. To explain, l will dive into steering mechanisms, a term I coined (at least with respect to business organizations) in my very first Harvard Business Review article back in 1993, called Changing the Mind of the Corporation. Decades later, I wrote about it again in Chapter Six of my 2022 book A New Way to Think.
Both pieces discussed the underlying systems that cause companies to operate the way they do—and not some other way. It is not unlike the (literal) steering mechanism in newer model cars that won’t let you switch lanes without first signaling. You may want to change lanes, but the steering mechanism says: No!
My work on steering mechanisms adopted and adapted the work of Diana Smith—with whom I worked for several years in the mid-nineties. She is one of the group of most prominent students/followers of the late Chris Argyris, along with Amy Edmondson, Peter Senge, and David Cooperrider and me. I was attracted to her work because of my interest in the concept of steering mechanisms, shown below.
Three elements work as system of three interacting mechanisms. At one end are the formal mechanisms. These are the structures, systems, processes designed to meet goals—like the ones talked about above.
Cultural mechanisms are the mental guidebooks that drive collective interpretations/actions. That is, the cultural guidebooks tell you how to interpret the world around you and what actions are appropriate in that world. For example, if Kevin dresses down a subordinate in an abusive and demeaning way in a meeting and the interpretation, based on repeated incidences of this sort of behavior, is that because Kevin is an important star performer, he can abuse any subordinate and get away with it, the mental guidebook will become: “Abusive behavior is fine if you are a star. If you work for one; expect it. And if you can just get to be a star, you can do it too.”
In a strong culture (not a good culture, a strong culture), everybody watching such an interaction has the same interpretation. In a weak culture, the interpretations are all over the map—i.e. there is no guidebook.
The key is to recognize that culture is derivative of a mediating domain, interpersonal mechanisms, which are the patterns that form as members define and solve problems together. Formal mechanisms don’t directly influence cultural mechanisms.
It is during interpersonal interactions that collective interpretations—like the one with Kevin—take shape. The first time you see that sort of abusive behavior in your company, you might not know what to make of it, though you might well get some help from someone who will take you aside and say: Don’t get in that position with Kevin or that will happen to you!
In this way, the interpersonal domain is the linchpin. Formal can influence interpersonal. For example, if a company has completely separate marketing and sales organizations, it may promote tensions between the two functions and lots of testy meetings between marketing and sales people. Repetition of bad meetings will likely cause marketing people to warn new sales people to watch out for marketing—they always come up with unsaleable marketing ideas. When that becomes the common interpretation, the next meeting will go worse still, which just reinforces the interpretation, and so on. Eventually often a formal fix will be attempted to “transform culture,” for example to put marketing and sales under a single EVP of marketing and sales. But that won’t change culture because the source of the problem was in the interpersonal domain and the guidebooks are still in the heads of the marketing folks and the sales folks.
Implications for culture change
There are two common approaches to culture change. The first is to attempt to go at it directly by declaring that culture must change to a desired new state. It doesn’t work and never has—or ever will. The second is to change formal mechanisms—reorganize, streamline processes, change incentives, etc. That doesn’t work either. But the failures don’t stop people from trying.
Notice that these methods are entirely wholesale—broadcast a video; do a restructuring, etc. Wholesale isn’t the answer. Culture change happens at the retail level—which means working at the interpersonal level. Changing the way people in the company interact with each other in the interpersonal domain is what changes culture. When it comes to culture change you need to be the change you want to see (a quote that is misattributed to Gandhi).
Leaders of large companies often ask me, in response, how can I possibly make that happen in my large company? Won’t it take forever? I tell them that Kremlin watching doesn’t only happen in Moscow. In companies, managers throughout watch leadership behavior like hawks. As a leader, if you behave in interpersonal interactions the way you would like managers throughout the organization to act, mirroring will happen faster than you think.
I have seen it in giant companies like P&G. AG Lafley wanted to make the culture more consumer-focused, so in every meeting with any member of his executive team in which they were asking for his approval on a project or initiative, he would always ask: On what consumer insights is this recommendation based? And AG would spend lots of his time doing in-home visits with consumers to better understand their needs. Managers throughout the organization naturally followed suit because of his behavior. In the strategy process, he always both gave direction on what he was looking for his direct reports to produce but also offered to help them in whatever way they would find helpful. That created a culture of collaboration in strategy.
I have done it myself in a much, much smaller organization, the Rotman School of Management. The culture was far too professor centric. The tenure stream professors were the proverbial Brahmin caste. But the student experience depended on everyone to deliver, and I wanted our culture to reflect that. So, I always stopped to talk to the front desk receptionist on the way to my office and to the cleaning staff when they came to clean my office (because I was there working late when they made their evening rounds), and to the IT staff, and to the lecturers, etc. Professors watched and most of them (not all!) shifted their behavior in a positive direction.
And I have helped it happen in companies in between, as with a $10 billion luxury apparel company that sold mainly through clothing retailers. The incoming CEO was terribly disappointed in the in-store execution of the brand and the inattention the organization had to it. To him, it was a culture of fire & forget — and hope. I convinced him that rather than attempting to change that culture through fiat, to do a series of impromptu retailer visits during which he would problem-solve with the store personnel to come up with ways his company and the retailer could work together to create a great in-store shopper experience with his brands. And I convinced him to invite his senior team members to come—not order them; invite them.
Some joined him on the first trip, during which he modeled the kind of problem-solving, partnership culture that he wanted to nurture. He didn’t berate the retailer personnel. He talked to them constructively about partnership. Word got around and more executives joined him on future trips until the corporate jet was packed. Retail execution improved dramatically as the culture changed from fire & forget to partner-for-success.
Practitioner insights
Culture change is hard. The formal, interpersonal and cultural steering mechanisms that build up over time are there to keep you going in the exact same direction. There are three rules for successful culture change.
The first is to think retail not wholesale. There are no master strokes from the faraway top of the company that magically bring about culture change.
The second is to focus on the interpersonal domain. It is the mediating domain and the only domain that can directly impact and change culture.
The third is to change culture, you need to change your own leadership behavior. There is no alternative. Do as I say, not as I do works as well in companies as it works with children — i.e. not at all! Every interpersonal interaction for a leader is a two-edged sword. If you do it badly, your leadership behavior reinforces the culture you want to change. But if you do it well, it starts the formation of new interpretations consistent with the culture you want to see — and that is gold!
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When Accenture announced plans to lay off 11,000 workers who it deemed could not be reskilled for AI, the tech consulting giant framed the decision as a training issue: some people simply cannot learn what they need to learn to thrive in the world of AI. But this narrative fundamentally misunderstands—and significantly underplays—the deeper challenge.
Doug McMillon, the CEO of Walmart, pointed to this bigger challenge recently when he said, “AI is going to change literally every job.” Now, if this turns out to be true, every role will have to be reimagined. And when every role changes, this is more than a change in each job or even a specific field. It implies a profound and systemic change in the nature and meaning of the work itself.
For instance, when a customer service rep’s job changes from answering questions to managing AI escalations, they are no longer doing old-fashioned customer service—they are doing AI supervision in a customer service context. Their supervisor isn’t managing people anymore; they are orchestrating a hybrid intelligence system composed of humans and AI. And HR isn’t evaluating communication skills; they are assessing human–AI collaboration capacity. The job titles remain the same, but the actual work has become something entirely different.
You cannot prepare people for this disruption by sending them to a three-day workshop on how to prompt more effectively. When the change is as systemic as this, the real question is not whether individuals can be separately reskilled. It is whether organizations can transform themselves at the scale and speed AI demands.
Two types of transformation
To understand the reskilling demands created by AI transformation, it helps to distinguish between bounded and unbounded transformations.
Bounded transformations are organizational changes that follow a predictable path, starting from specific areas of operation with well-defined capabilities to develop. They unfold in distinct stages, allowing companies to master one phase before moving to the next.
Unbounded transformations, on the other hand, are sweeping changes that affect all parts of an organization at the same time, with no single point of origin. Because they simultaneously alter job functions, competencies, processes, and performance measures in interconnected ways, they can’t be tackled piecemeal or rolled out sequentially—they demand a holistic, coordinated strategy.
The AI revolution is a paradigmatic example of an unbounded transformation, as it fundamentally reshapes how we think, work, and create value across every industry, function, and level of the organization—redefining not just individual tasks but the very nature of human contribution to work itself.
And that means that it is not enough to simply reskill employees for AI. Instead, business leaders will need to transform the entire ecosystem of work—the infrastructure, the interconnected roles, and the culture that enables change. And they will often need to do all of this across the entire organization at once—not sequentially, not department by department, but everywhere simultaneously.
There are three key dimensions that organizations need to address if they are to successfully transform themselves and reskill their workers for the AI revolution.
1. Rebuilding the infrastructure of work
Most reskilling budgets cover workshops and certifications. Almost none cover what actually determines success: rebuilding the systems people work within.
For example, AI often now handles routine inquiries in contact centers while humans tackle complex cases. As McKinsey argues, successfully implementing this shift demands far more than teaching agents to use AI tools. Businesses must rethink operating models, workflows, and talent systems—creating escalation protocols that integrate with AI triage, metrics that measure human-AI collaboration rather than individual ticket counts, and training that builds the judgment needed to handle the ambiguous cases that AI can’t decide. Career paths and team structures must evolve to support hybrid human-AI capacity.
Very little of this work is “training” in any classical sense—rather, it is organizational architecture and system-building. And the organizations that do not undertake this work will find that their AI reskilling programs will inevitably fail.
2. The network effect: why roles must transform together
Organizational roles do not exist in isolation. They are interconnected nodes in an organizational network. When AI transforms one role, it also transforms every other role it touches.
For example, when AI chatbots handle routine customer inquiries, frontline agents typically shift to managing only complex situations, which may be more emotionally charged for the client. This immediately transforms the role of their trainers and coaches, who must now redesign their curriculum away from teaching efficient delivery of scripted informational responses toward teaching de-escalation techniques, empathy skills, and complex judgment calls. Further, team supervisors will now no longer be able to evaluate performance based on call handle times and throughput—they must instead develop new frameworks for assessing emotional intelligence and problem-solving under pressure.
The result is that holistic and comprehensive role redesign is essential if employees are to be successfully reskilled for AI. AI transformation requires synchronized change across interconnected roles—when one piece of the network shifts, every connected piece must shift with it.
3. Cultural transformation
As Peter Drucker almost said, culture eats reskilling for breakfast. It is crucial for organizations to understand that cultural transformation is not a nice-to-have follow-on that comes after technical change. Rather, it is the prerequisite that determines whether technical change takes root at all. Without the right culture, training budgets become write-offs and transformation initiatives become expensive failures.
Consider a financial services firm training analysts on AI tools. If the culture punishes AI-assisted mistakes more harshly than human mistakes, adoption dies. If success metrics still reward “heroic individual effort,” collaboration with AI will be undermined. If executives do not visibly use AI and acknowledge their own learning struggles, teams will treat it as optional theater rather than strategic imperative.
The culture that enables AI reskilling is one built on curiosity, not certainty. This culture prizes experimentation over perfection and treats failure as data, not disgrace. Indeed, because AI tools evolve so quickly, the defining capability of an AI-ready culture is not mastery but continuous learning. Relatedly, psychological safety becomes essential: people must feel free to test, question, and sometimes get it wrong in public.
And the signal for all of this comes from the top. When leaders openly use AI, admit what they don’t know, and share their own learning process, they make exploration permissible. When they do not, fear takes its place.
In short, successful AI cultures don’t celebrate competence—they celebrate learning.
Conclusion
AI reskilling is not a training challenge—it is an organizational transformation imperative. Companies that recognize this will rebuild their infrastructure, redesign interconnected roles, and cultivate learning cultures. Those that don’t will keep announcing layoffs and blaming workers for failures that were always about systems, not people.
