Corporate culture has become increasingly important to firms in the past 20 years. Despite its intangible nature, its role is meaningful, affecting employees and organizational operations. And while culture is not the only factor guaranteeing success, positive cultures offer significant competitive advantages over rivals.
Dominant set of norms
People come from diverse social, cultural and ethnic backgrounds, with different personalities and experiences. In a work environment, these factors manifest themselves in a wide variety of ways, and over time a dominant set of norms arise which guide the way work is accomplished. Deal and Kennedy popularized the notion of developing positive corporate cultures in their 1982 book Corporate Cultures, and since then the concept is seen playing as a central role in corporate strategy.
Corporate culture has many definitions as it is heavily influenced by the industry in which it operates, geographical location, history, employee personalities, etc. Some formal definitions have arisen, but essentially a corporate culture has several key elements: it offers a clear corporate vision; it is supported by corporate values consistent with the aims of the company and aligned with the personal values of organization members; a high value is placed on employees at all levels and there is extensive employee interaction across many levels; and the culture is adaptable, adjusting to external conditions, and consistent, treating all employees equally and fairly. These characteristics cannot exist without widespread employee support. And even though there may be strong sub-cultures within the company, the dominant culture must be strong enough for sub-culture members to embrace it.
But how to categorize culture? In 1988 Sonnenfeld defined four types: the academy (exposing members to different jobs so they can move within the organization), the club (which is concerned with people fitting in), the baseball team (with its well-rewarded stars who leave for better opportunities) and the fortress (concerned primarily with survival). Goffee and Jones’ (1996) model takes a different route, suggesting a corporate culture is determined by levels of sociability (friendliness among community members) and solidarity (a community’s ability to pursue shared objectives) and developed a survey that quickly slots companies in on this scale in four categories: networked, mercenary, fragmented and communal.
High-sociability, low-solidarity network culture individuals feel like family and socialize often, with promotions and work achieved by informal networks or internal sub-cultures (similar to Sonnenfeld’s club culture). Mercenary cultures have low sociability and high solidarity, with workers united in support of business aims (like the baseball team). The fragmented culture’s low sociability and solidarity tend to work with office doors shut, like a law firm or a downsizing company (the fortress). A communal organization has high sociability and high solidarity, often seen in small start-up firms, where colleagues are close socially and professionally, identifying closely with the corporate culture (the academy).
Categorizing cultures helps managers in several ways: it gives a better understanding of the pros and cons of that particular culture, helps managers to recruit the most suitable applicants and helps managers determine what cultural changes are necessary.
Organizations able to maintain positive cultures enjoy many benefits. Morale is improved, and the work environment more enjoyable, with increased teamwork, openness to new ideas and sharing of information. This activates learning and continuous improvement because of the free flow of information. It also helps attract and retain good employees.
Examples of companies benefiting from the positive effects of corporate culture include:
• Wal-Mart. Founder Sam Walton’s concern and respect for staff from the foundation of the company creates an environment of trust that persists to this day. Walton met staff, calling them by their first name and encouraged change to maintain the competitive edge. To this day, staff think about “how Sam would have done it”.
• Southwest Airlines. Its relaxed culture can be traced back to unconventional CEO Herb Kelleher, who encourages informality and wants staff to have fun at their jobs. Employees are valued, with Kelleher acknowledging births, marriages and deaths by notes and cards. Staff are encouraged to pitch in and help out, especially at check-in, giving Southwest turnaround times less than half the industry average.
• Hewlett Packard. Problems several years ago encouraged HP to change its culture; staff are required to formulate three personal and three professional goals each year, and are encouraged to cheer those that meet them, such as getting away early to be with family. Two years into the program, HP reports no loss in productivity despite staff working shorter hours and there is an increased staff retention rate. The program has been marked by the extent to which managers bought in, and modeled it in their personal lives.
It is obviously easier to model a corporate culture during a firm’s infancy, but in practice culture can be changed for the better. This can be done by surveying employees, meeting staff outside their departments and learning what they really think is going on. This helps managers identify the existing culture and identify areas of improvement.
Then, managers should institute cultural change by modeling the behavior they wish to encourage, then reinforce the desired culture with visionary statements/slogans, celebrating employees’ successes or promotions, distributing newsletters, hiring culture-compatible staff, etc.
Positive corporate culture is now a prerequisite for success rather than a competitive advantage; it allows the hiring and retention of top-quality staff. Ideally established at a company’s infancy, it can be changed over time as the authors’ example show. If a corporate culture is lowering morale, a top-down approach is needed, setting out the vision from the top and demonstrating acceptable behavior. Improving workplace culture makes employees’ experience happier and this in turn leads to improved profitability (or, in the HP example, no reduction in profitability!).
A well-structured study, combining a sound theoretical base with three case studies involving corporate culture change in top US companies, the article is of use both to academics and managers as it charts the concept of corporate culture and its positive and negative effects on organizations.
Sadri, G., Lees, B. (2001), "Developing corporate culture as a competitive advantage", Journal of Management Development, Vol. 20 No.10, pp.853.