What Exactly Is A “Corporate Culture?”
All organizations have a corporate culture, just as all organizations have an employment brand. What differs is the degree to which someone’s notion of corporate culture is documented and protected. You tend to hear more often about corporate culture in organizations with a long history or stellar rise to fame such as IBM or Google. Perceptions of it get written up in the press, and executives use it to define in general terms "how the firm manages its employees." Theoretically, a corporate culture is kind of an invisible force which guides managers and employees to act consistently throughout the organization when "value" related issues arise. At best, it is a phrase that builds camaraderie or a sense of unity among employees. At its worst, I've heard it compared to cult like religious beliefs.
The corporate culture covers the basic "foundations" of what the organization values and presumably, how employees are supposed to act within those values. The best way to find out what a organization values is to track one or more of the following: what they pay attention to, what they talk about, what they passionately defend, and what they praise and reward. If your corporate culture is working well, it provides direction to employees about what to do and what not to do in value related situations. In an environment with a strong corporate culture individuals located in different departments or in far-flung geographic regions should act pretty much the same given the same set of circumstances. For example, if your corporate culture emphasizes "work life balance" then the same request for time off for an outside activity should get essentially the same positive response from managers, no matter where they're located.
The term corporate culture is derived from the concept of a "country culture." For example, the "country culture" in Japan, Singapore or Australia might "invisibly" remind its business people not to stand out as individuals (i.e. don't be a tall poppy) while a different culture in the United States might "direct" its people to be aggressive and to stand out. The problem with even the concept of "country culture" is that it is really just a broad stereotype or generalization that has only some basis in fact. For example, I've met business people in Singapore that were very aggressive and people in parts of the US that were happy to give all credit to their coworkers. While a company might actually believe that it has a certain corporate culture that provides companywide consistency, the reality might be that a culture does not drive consistent actions and in fact may have the negative impact of preventing change.
The Many Dangers of Relying On Your "Corporate Culture"
Whether you believe in the concept of corporate culture or not, it's important to realize that the overuse or even the use of the term corporate culture may be damaging to a organization. There are many problems associated with corporate culture. I'll highlight some here.
- It prevents change — because the corporate culture is unwritten there is no way for new hires to directly read and find out what it includes. In fact, those most likely to elicit the term or use it are those with the most tenure at the organization. They grew up acting a certain way of and they believe that that way of acting needs to continue. The main problem with this concept is that the world of business is growing "flat" and the speed of change is increasing rapidly. Products are copied or made obsolete in months where it used to take years. Information and "answers" that used to be true for decades now become outdated in weeks. Longtime corporate citizens will use the "stick" of the corporate culture to beat down new ideas or innovative thinkers. The former chairman of the board of the Chrysler Organization, Robert Eaton, put it best when he was quoted as saying, "any culture, by definition, exists primarily to prevent change, to set in stone the lessons of the past."
- No one measures it — there's nothing left in the corporate world that isn't measured (except perhaps HR) to the six Sigma level. Metrics and key performance indicators permeate the world of business. Unfortunately, no one makes a real attempt to measure corporate culture. That's important because "you can't improve what you don't measure" (an old HP saying). Well, unless corporate culture is to be exempt from this measurement requirement, it's essential that a organization be able to identify both what the current corporate culture is, what behaviors it reinforces and to know where a culture needs to be changed. If you can't measure the "strength" of the corporate culture you can't tell when its impact is waning. The fact the corporate culture is difficult to measure, doesn't mean it can't be measured. For example, when I was working at Agilent technologies (a recent HP spin-off) I kept hearing about the famous HP culture. So when I communicated with managers and employees around the world I would ask them how they would handle a particular "value" laden situation. Not surprisingly, I found such a range of responses that became instantly clear to me that the HP culture was not consistent and instead, it was more often than not whatever the local employer manager wanted it to be. For any set of values to work, they must be clearly defined so that they unambiguously direct employee action. Enron for example had once a 43 page "corporate values" document, but it seemed to do little to govern behavior.
- It has no owner — although HR frequently uses the term "corporate culture" I found that is seldom part of the strategic agenda for HR. In contrast, I've heard some CEOs say that the corporate culture is too valuable to be managed by anyone group, but that makes it even more complicated because essentially "no one" owns it. Because no one owns it, a corporate culture generally "develops on its own" and unfortunately, that might mean that it could actually develop in a direction that may directly harm the organization. This lack of ownership is even more critical during times when the organization is going through rapid hiring or mergers. Why? Because both mergers and headcount growth act to "dilute" the culture. If no one is effectively monitoring or managing the process, this dilution can make your once consistent culture blurry and inconsistent.
- It is a weapon against innovation — nothing is more critical in the world of business today than constant innovation throughout the organization. Because "first entry" into the market has become so essential for high margins, it is now essential that organizations hire, retain, develop and nurture innovative individuals and "out-of-the-box ideas". Unfortunately, at least in my experience, a strong corporate culture almost guarantees "straight line" movement. The "old guard" that utilize the term corporate culture unfortunately use it to screen out innovative individuals during the hiring process. They have even developed a term that I dislike more than corporate culture, that of "fit." If it is related to corporate culture and that when they assess that you are not like everyone else at the organization, they reject you because you don't "fit" the corporate culture. Unfortunately, in the fast changing world of business organizations need people that by definition "don't fit". Why? Because the world is changing so rapidly that all approaches, all technology or old thinking can doom a organization in a very short period of time. In a world where innovation is king, the people that should be let go are those that defend the past and use corporate culture as a "lever" to prevent change. I would argue that in a fast-changing world, having a strong culture would actually be a detriment to the rapid change required by the marketplace.
- There is no evidence that it helps — if having a strong corporate culture was correlated with business success then Xerox, Kodak, General Motors, Polaroid and Ford would all be industry leaders with huge profits. Yes, many of the storied companies that were written up for having an excellent and strong corporate culture are now floundering. I haven't seen any evidence that can flat-out prove that "strong culture" actually caused their downturns, but there certainly less evidence that their strong culture prevented them. Since at least in theory everyone has a corporate culture, you can't show that just by having one you do better. The corporate culture doesn't appear on the balance sheet or in any financial statement. It doesn't even appear in the annual report.
What's Better Than A Corporate Culture?
If you want to avoid the "trap" of relying on your corporate culture, there certainly are more flexible approaches that do a better job. Some of the thirteen action steps I recommend that organizations can use to get the same or better results than relying on "corporate culture" include:
- Set clear corporate goals so that everyone knows what you're aiming for
- Make sure that "what you care most about" dominates all forms of written and verbal corporate communications
- Develop performance appraisal systems that constantly change to fit the new corporate expectations
- Develop hiring and promotion procedures that ensure that those selected are those most capable of meeting the current and changing expectations. Also make sure that "fit" assessment isn't utilized in positions where innovation and rapid changes required
- Develop and widely report measures and results so that everyone knows both what's important, what they'll be accountable for and how well their performing in these important areas. This might entail dismantling some old reward systems developed by "dinosaurs" that prefer rewarding "fit in the culture" rather than shifting the emphasis to outputs and results.
- Develop reward and praise system so that those that "do the expected thing" get praised frequently
- Build a strong punishment and performance management system to ensure everyone knows what old behaviors need to be discouraged or even punished
- Change your budget and resource allocation system to ensure that the highest priority items get the lion share of the funding
- Build a great internal and external "employment brand" that spreads the word about your specific management practices and actions (rather than your culture)
- When you look at an acquisition or merger, look at what the target firm rewards, measures and punishes rather than its "culture"
- Replace the "feeble" attempt to explain the corporate culture to new hires during orientation with a specific list of what the organization expects now and how an employee would know when those expectations change
- Develop processes that celebrate and treat “contras” (those that think out of the box and that clearly deviate from the "old" culture) like heroes
- I would also suggest that you need to identify and "reeducate" those defenders of the corporate culture so that they don't (as they almost always do) contradict and counter your attempts to redirect the organization. Be forewarned, these individuals are like "supertankers", they resist a change in direction and it might take 10 miles to turn them around.
The advantage of all these approaches is that they are flexible. If corporate expectations or market expectations change rapidly, what you measure, talk about and reward can be changed rapidly so that everyone understands what is now needed. It is agility and flexibility that makes measures and rewards superior to “corporate culture.”
A corporate culture can inhibit change because it's not written down and it's held in the "minds" of long term employees. Instead, I have recommend several substitute approaches where you get the consistency and single direction you want by instead focusing on what you talk about, measure, reward and punish. These approaches are superior because they are visible and can be changed relatively quickly. Because they are part of the everyday fabric of the organization, when you change them, everyone will notice and then almost immediately know that expectations have changed. In contrast, corporate cultures (almost by definition) don’t easily change. Anything that doesn't change as fast as the current business environment changes needs to be immediately purged because of the evil it can cause.