Hint: It’s a system. 

Key Takeaways:

  • You don’t build a great culture through intention alone. You build it through a culture system.
  • You can’t dictate culture. But you can design for it. A strong culture system is designed around four key elements: Values, Rituals, Stories, and Consequences.
  • To build a better organizational culture, use the culture system framework to focus your energies on improving the weakest element, then improve the next and so on.

When Intention Isn’t Enough

It’s 9am on Monday morning at ACME Widget Corp. The management team is gathered in the 1st floor conference room waiting for CEO Jack Ryan to arrive. A rumor is buzzing around that Jack has spent the past weekend at Culture Summit 2.0, some sort of “interactive experience” where business leaders learn from culture gurus how to build a thriving organization.

A few minutes after 9, Jack, calm and present as always, enters the conference room and gives his hellos. As he is taking his seat, Sally in Marketing says, “Jack, there’s a rumor going around that you attended a corporate culture workshop this weekend? How was it? We’re all curious to know…”

Jack doesn’t answer right away and instead takes time to visually connect and smile at everyone around the table. Finally he speaks. “This was one of the most transformative weekends of my life. It really reinforced for me the importance of values-based leadership and I’ve got a lot of new ideas to try. But the main thing is this: going forward my #1 commitment is to ensure that we truly become a values-based organization. That’s what I’m most committed to and excited about as a result of this weekend.”

Now imagine you’re in that circle and you hear Jack say this. How do you respond? I imagine that outwardly you might nod your head and even give a verbal “right on!” But inwardly? Might you have some skepticism that any CEO might succeed at this — despite a personal commitment to personal growth and values-based leadership?

“C’mon,” you might think to yourself, “What about Marie in accounting? Wasn’t she just a nightmare who ate away at the company culture for 6 years? What’s going to be different this time? We’re swamped and who has time to really focus on and enforce values? There’s no question I’d like to be part of a great culture; the hard part is actually making it happen.”

At the same time, try to imagine being Jack. Can you empathize with his desire to truly lead by values? To build a transcendent organization that makes a positive impact on the world, kicks ass in the marketplace, and has the culture you’ve always wanted to build — one you’re truly proud of?

Intuitively we all understand that building a truly values-based organization can be a life-changing experience for everyone involved. It creates tremendous organizational resilience, inspires the best in its people and customers, and builds a sustained advantage that’s hard for competitors to duplicate. So there’s no question that Jack is sincere in his desire to build such a culture. But how is that done?

If you read most popular books on building a values-based culture, the focus is usually on what personal characteristics are required in a values-based leader and how to develop them. For instance, in his best-selling book From Values to Action, Kellogg School of Management professor Harry M. Jansen Kraemer Jr. codifies the 4 principles of values-based leadership: self reflection (know yourself to lead yourself and others), balance (ability to see situations from multiple perspectives and differing viewpoints), self-confidence (accepting yourself as you are and playing to your strengths), humility (valuing each person you encounter and treating everyone respectfully).

That’s all well and good. You can’t have a values-based organization without a values-driven leader. After all, if the head is rotten, it affects the whole body. But clearly that’s not enough. Let’s give Jack the credit he deserves and say that he is highly self-aware, compassionate, and has great integrity. If you were to compare his personality to all of the stated requirements, it would be positive check marks all across the board.

So if Jack is an aspiring conscious leader with awareness, compassion, and integrity, then what is the cause of subtle doubt on the team? Well, as you have certainly experienced firsthand in your own career, building a values-based culture is really fricking hard. It takes tremendous effort and energy to get it right and one small or unconscious misstep by an organizational leader can quickly undo years of positive work. It’s a lot like playing Tetris – mistakes pile up and accomplishments disappear.

If the leader’s intention and values alone aren’t enough to build a better culture, what is? When it comes to building a reinforcing a values-based culture, you need a simple system that defines, reinforces, and defends the desired organizational values. Put another way, while your own intention and personal values are important, what’s just as important is the cultural system you develop.

The Four Elements of an Effective Culture

Culture can be systematized. In fact, every successful and durable culture is built on four basic elements: Values, Rituals, Stories, and Consequences. Once you’re familiar with this basic cultural framework, you can train your focus on each element to build a thriving culture in your organization:


  • Values are the qualities of expression that the culture considers most important.
  • Rituals are the formal and informal procedures and celebrations that the culture adheres to.
  • Stories are the formal and informal lore that describe the culture’s values in action.
  • Consequences are what happen to members of the culture when they violate the values.

You can see these four elements at work in every strong culture, whether it’s a family, a tribe, a community, a Fortune 100 firm, or a national identity. Take the U.S. Armed Forces, for example. Now, whether you’re a pacifist or a war-hawk, you will probably agree that the U.S. Armed Forces have a very strong culture, right? That’s because they rely on the four elements of a successful culture:

  • They have a clearly defined set of values: duty, honor, respect for authority, sacrifice, courage under fire, etc.
  • Those values get expressed in rituals. The salutes, ranks, badges, and ribbons are all forms of ritual. So are the elaborate ceremonies for career advancement; the historical celebrations for Memorial Day, D-Day, and the 4th of July; and the solemn bereavement and 21-gun salute for those lost in battle.
  • Stories of values in action are spread and reinforced during those rituals (like when the General shares a story about a famous battle or a particular soldier’s heroics); through the armed forces media; in history books and historical re-enactments; and the informal mess-hall chatter of great exploits and total clusterfucks that happen out in the field.
  • The consequences of not adhering to values are clear and reinforced. If you’re in the armed forces and you don’t adhere to the values, then you’ll get a dishonorable discharge, a sentence to Leavenworth prison, or even get a Code Red (you’ll know what this is if you’ve ever seen the movie A Few Good Men.

The U.S. Armed Forces have an intense culture, don’t they? They have to! If the Armed Forces didn’t invest considerable time, energy, and resources in building and reinforcing their culture, they could not be effective. As they say in the most gung-ho units — “HOOAH!” And of course if the U.S. Armed Forces lost their culture, or if their culture was no longer in synch with the values of the broader environment in which it operates, it would cease to be effective.

Even if your organization isn’t dealing with life and death, or war and peace, the elements of building a strong and resilient culture are the same. As a leader, you need to be clear and committed to a set of core values that are reflective of the best your organization can be; you need a series of rituals, small and large, the reinforce the expression of those values; the values must “travel well” through effective formal and informal storytelling; and you must enforce the consequences on yourself and others for failing to live by those values. By breaking the elements of a strong culture down, you’ll better know where to focus your energy and attention so you can help to build a thriving culture.


Values are running the show in your organization; you just don’t know it. You can tap into the organization’s existing values by observing a meeting like a fly on the wall. What is considered of higher importance than anything else? Does this company value profits over people? Efficiency over service? Self-glorification over the needs of the group?

Because values guide decision making and behavior, it goes without saying that, in order to build a thriving culture, the culture needs to be clear on what its core values are and those values must be supportive of the organization’s purpose. If your organization isn’t clear on its values, or its current values no longer support the organization’s purpose, then you’ll need to guide the organization through a values definition process.

Just as with any good decision-making and implementation process, you’ll want to gather in a critical mass of leaders from all levels of the organization to help clarify and build commitment to the right set of core values. You’ll know you have the right set of core values when you and the team can answer an emphatic “Yes!” to each question below:

  1. Do these core values support our larger organizational purpose?1
  2. Do these core values reflect our culture when it’s operating at its very best?
  3. Will these core values attract the “right” people and repel the “wrong” people?
  4. Can we clearly identify when someone is not living up to these core values?
  5. Would we fire someone for not expressing these core values?

When you can answer “Yes!” to each question above, write down each core value using complete sentences, each one starting with a verb. For example: “Build open and honest relationships through communication.” “Empathize with customers by walking in their shoes.” “Pursue excellence by getting it right the first time.” “Work smart by being disciplined in your thoughts and actions.” “Play hard by having fun together.”

When the values are defined it’s time to bring them alive…

Key Question: Do we have the right set of organizational core values to support our purpose now?


It’s not enough for core values to be known and understood in your culture. They must be experienced. What do I mean? Well, try to recall all of the knowledge you gained back in college. You can’t do it, right? Now think back to all the memorable experiences you had in college. The parties, the crushes, the dates, the trips, the project teams… Those are easier to recall. That’s the difference between knowledge and experience.

Rituals create experiences and it’s memorable experiences that really impact your culture. Rituals run the gamut from small to big and you’ll want to choose those that best activate your desired organizational culture. Here are some examples of small, effective rituals I’ve seen over the years. I’m not sharing them to create an exhaustive list, only to highlight that there’s a lot of room for creativity in the rituals you do embrace…

Quarterly Celebrations. It’s easy to celebrate when times are good. But what about when times are bad? Great cultures schedule their celebrations in advance and follow through no matter what happened that quarter. What did we learn as a culture? What heroic efforts were made? Celebrate the journey, not just the destination.

Steam Whistle. I once ran a sales team where after every sale, the rep would stroll over to the wall and blow a super-loud steam whistle. It would rattle windows and shake doors. The bankers on the floor above us absolutely hated us but that made it all the more fun. That whistle became known as the sound of success.

Pistachio Nuts. Back when Hewlett-Packard was a great company, it was known for… pistachio nuts. Yep. If someone did something special, like solve a complex bug in software or win a big contract, they’d soon find a silver bag of pistachios on their desk with an anonymous note telling them what a great job they did. I’ve read that if you worked at HP, you soon coveted receiving a bag. When you did, it meant more than gold. That’s a ritual.

Coffee Walk. Last week I spoke at an all-company meeting for GumGum, a fast growing advertising network in Santa Monica. During my interactions with the team, I learned that GumGum has a daily ritual “coffee walk” where the entire company goes for coffee at 3:30pm. They stroll the block, take time out to gaze at the Pacific ocean, have some laughs, and even enjoy some trivia. A fun little ritual.

Build Your Own Desk. Amazon is famous (infamous?) for having its office workers build their own desk using a door and saw horses. It’s a ritual that reminds new hires of Amazon’s roots and creates a shared sense of experience. I can just imagine the savvy old veterans watching the newbie put his or her desk together and having a good-natured laugh about it.

Parking Lot Sessions. Where I live in Santa Barbara, there’s a cool shoe company called Seavees that celebrates its California roots by having a monthly get-together in its parking lot. Called “Parking Lot Sessions,” Seavees invites a cool band, provides a BBQ and drinks, and revels in the vibes. That’s a ritual.

Appreciation Fridays. Every Friday at my kid’s school, the children gather together and share appreciations for one another and the teachers. “I appreciate Reid for helping me solve a math problem.” “I’m thankful to Alexa for telling me that she liked my new shoes.” It’s precious sweet but you can see the same positive cultural impact in a gathering of adults at work: “I want to thank Linda for helping me to get my article published this week. It was awesome and she went above and beyond.” A powerful ritual.

The bottom line is this: A ritual can be just about anything that creates a shared memorable experience and that supports the essence of the core values. Rituals don’t have to take a lot of time or cost a lot of money. If your core values feel more like words and less like a shared experience, it’s a sure sign that you should put your focus on creating more or better rituals, small and large, in your organization.

Key Question: What are the rituals we have in place now in our organization and what new rituals should we develop?


The more the culture is shared, the stronger it becomes. The best way to share a culture is through stories of core values in action. Stories, positive or negative, are incredibly powerful. Human beings are storytelling creatures. We’re attracted to stories, we remember them, and they define the world in which we live.

Max De Pree, the founder of Hermann Miller Chairs wrote in his book Leadership is An Art that “The #1 job of a leader is to define reality.” That’s true. What was left unsaid is that reality is subjective. For instance, do you feel that the U.S. Armed Forces, to continue with the example, are a belligerent bully corrupted by corporate greed and nefarious politics, or an honorable institution driven by self-sacrifice, honor, and courage? The answer depends on the stories being told within and without the organization, and which ones you believe.

Here’s the thing to keep in mind. If negative stories run unchecked – gossip, rumors, tirades – they eat away at the culture from the inside out. Pretty soon all anyone can think and speak about is how bad things are, how the leaders are hypocrites, who’s sleeping with who, and how the business is soon going under.

As a leader, in order to define and craft a new reality, you need to create an environment where it’s safe and encouraged to share positive stories of core values in action. If you can create this positive storytelling environment, then pretty soon all anyone can think and speak about is how good things are, how the leaders strive to walk the talk, who’s helping who, and how the business is going to survive and thrive, no matter what.

Rituals and stories go hand in hand together. One of my favorite practices is to create a ritual where company meetings end with each person sharing a story of when they saw a core value being expressed in the past week. For example: “To close this meeting I’d like each of you to share a story of when you saw a colleague express a core value in the past week. I’ll start: Last week I saw Susan go above and beyond to help our client Frank. She truly expressed the value of ‘above-and-beyond customer service’ and it was awesome to witness. Molly, what did you see last week?”

The first time you ask this question, you might get some blank stares: “Ah, what are our values again?” Remind them. The second time you ask the question, people will be more prepared. By the third time you ask that question, people will be paying attention for when they see a core value being expressed throughout the week. The stories reinforce what it means to express a core value. Pretty soon, those stories of values in action begin to travel around the organization. We get more of whatever we focus our attention on.

You can contrast this with a company that has core values that remain dead on the wall, meaning, they are aspirational statements that have no life to them. They’re viewed by the culture as vague, abstract statements that stand for hypocrisy rather than reality. It is stories of values in action that bring those values alive in the organization. The more you share them, the more believable and powerful they get.

One aspect of storytelling to keep in mind is the use of photos and video to capture, share, and archive the culture in action. For instance, at the recent GumGum all-hands meeting, they paid to have a professional photographer shoot the 3-day event. Then the photos were placed on Dropbox and sent to all participants. Simple? Yes. Smart. Very. It’s cultural storytelling in action. Remember, the more you share it, the more powerful it becomes.

Key Question: How and when can we share more stories of core values in action in our culture?


Values without consequences aren’t values at all. They’re idle wishes. Consequences are both really simple and really hard. The bottom line is this: If someone in your culture isn’t living by the core values, they must go. Values are non-negotiable. The minute you accept behavior that isn’t in alignment with the core values is the minute that your culture starts to get flushed down the toilet.

A common theme I see in average cultures is that they tolerate behavior that’s not in alignment with their stated core values. “Sure, George can be a real asshole, but he’s the only one who knows our marketing engine/technology platform/key client/etc. We simply can’t afford to fire him right now. After we make it through this quarter/product release/fund raising period/etc., we’ll try to find a replacement.”

I call bullshit.

A core principle of Organizational Physics is to eliminate entropy from the system. Nothing is more entropic to a thriving culture than when someone in a leadership position isn’t living by the core values. And one of the highest-leverage decisions you can make as a leader is to fire someone who doesn’t match values.

For instance, I have a CEO friend who is an awesome guy. He’s kind, smart, and thoughtful. He truly wants the best for his people and strives to build a great corporate culture. However, precisely because he’s so caring and generous, he often bends over backward to try to help someone who is a poor cultural match fit in. Several months ago he was dealing with one senior team member who was causing a lot of turmoil for him personally and for the company. This employee was very me-focused, caused constant fights between departments, and generally cost everyone much more energy than the employee actually contributed back.

Finally, my friend reached a breaking point, owned up to the cultural mismatch, and fired this senior leader. At the time, it felt like a very hard thing to do. It wasn’t clear how the company would cover the gap created by the absence, how and when they would find a replacement, and what kind of impact it would place on the CEO’s personal workload, which was already severe. I spoke with my friend a month or so after the termination. What do you think he said? “I should have fired that person months ago. I can’t believe the positive impact it’s had on our culture. Everyone is in a good mood, there’s low BS, and we’re kicking ass on all the projects we were struggling with before. Hire slowly. Fire quickly. Lesson learned.”

A key attribute of great organizational leaders is that they tolerate no bullshit when it comes to defending values. There’s a reason that, when the President of the United States is sworn in, he must state that he will “protect and defend” the Constitution of the United States. The Constitution is a values document. It’s easy to aspire to values. It’s hard, but necessary, to protect and defend them. That’s the real work of leadership. Otherwise all is lost. When it comes to building your own organization, hire by values and fire by values. You already know this to be true. So what’s holding you back?

Key Question: Are you tolerating behavior that isn’t in alignment with the core values? If so, what are you going to do about it?


Building a winning culture requires more than just intention. It requires a systematic approach to transformation. The Culture System allows you to identify where you need to focus your energy and attention to build a thriving values-based culture. Right now do you need to focus on values definition? Rituals? Stories? Consequences? Break it down so you can build it up.

Got some good rituals or stories of values in action? I’d love to hear them. Please share in the comments.

1.Note that there will come a time in your organization’s life when it’s necessary to evolve the organization’s values to better reflect its evolving purpose. That is, while core values remain relatively constant over the years, they don’t remain absolutely constant over decades. Winning organizations and cultures evolve their values over time in interplay with the surrounding and changing environment.

The best evolutionary values model I’ve studied in depth is Spiral Dynamics, taught by Don Beck. Spiral Dynamics is not widely known in the mainstream but it is the underlying framework for very popular values-based theories including Integral Theory, Tribal Leadership, Conscious Business, and many other next-generation values frameworks. If you get the chance, take a workshop with Don Beck. It will forever change how you think about values in individuals and groups.