By John VanDeusen, Executive Partner at Currie Management Consultants
Also, published at LinkedIn.com
In this post, I’ll answer three key questions: What is organizational culture? Why does it matter? Can it really be managed and, if so, how?
I’ve been noticing an increasing amount of discussion on the web and in print devoted to the matter of an organization’s culture. Some recent Google results:
“10 Examples of Companies with Fantastic Cultures – Entrepreneur”
“Examples of Organizational Culture and Its Importance – Grasshopper”
“5 Company Culture Examples Worth Emulating – Business Hub”
While most business owners are aware that something ‘cultural’ is going on in their organization, few may think it deserves any deeper consideration. This is unfortunate because culture can prove to be a strong lever for improving a company’s functioning and profitability.
What is organizational culture?
Edgar Schein, MIT professor emeritus and the foremost thinker in this area, describes organizational culture as a “pattern of shared basic assumptions learned by a group as it solves its problems of external adaptation and internal integration.” Schein (1992) sees culture as operating at three levels in any organization:
- Visible artifacts: Anything that would be visible to an outside observer, e.g., behavior patterns and work processes, the way the physical environment is organized, dress codes, company symbols/credos/logos, etc.
- Espoused beliefs and values: What people say about “what we do around here and why we do it,” e.g., core values and guiding principles, as well as cherished stories about the company’s history and significant accomplishments.
- Basic (unconscious) beliefs and values: Deeper feelings, mindset and motives about mission, relationships, human nature, etc., which drive words and actions.
In short, culture permeates everything said and done in any organization.
What Matters?
Organizational culture can be a driver of employee engagement and productivity, innovation, safety, reputation, value for money, etc. As an organizing force, culture can make any or all of these aspects of your company better or worse. Several attributes are key:
- Strength: the extent that people clearly understand, can articulate and act according to its dictates. A weak culture may lead to uncertainty, friction and disappointment among employees and customers.
- Outlook: A culture should strive for positive character, through proactive beliefs, words and actions that draw people in.
- Coherence: The various facets of the culture should be internally consistent, not conflicting.
- Focus: The best cultures concentrate on a few, vital aims with respect to creating and sustaining momentum in the desired direction.
Here are some examples of how all of this can translate into value not just for shareholders, but for everyone who participates in a strong, proactive and focused culture:
- Companies with a participative culture can have an ROI nearly twice as high as firms with less participative firms (Denison, 1990).
- Companies that managed their cultures well over an eleven-year period saw revenue growth four times higher than those that did not, and net income increases of 756% versus 1% (Kotter & Heskett, 1992).
- Customer satisfaction and loyalty: Gillespie, et al (2008) found that organizational culture has a strong correlation with customer satisfaction and loyalty
- Flamholtz (2001) found that business units adhering to a company’s preferred culture had greater profitability (as measured by EBIT), than units that did not.
Can Culture Be Managed? How?
Several authors have published good guides for culture management. Here are three I recommend: Roger Connors and Tom Smith (2012), Change the Culture, Change the Game, Jon Katzenbach, Ashley Harshak, et al (2012), Don’t Blame Your Culture; and Eric Flamholtz and Yvonne Randle (2011), Corporate Culture: The Ultimate Strategic Asset.
To get started, the steps I will suggest you take:
- Take Stock: What is the current state of your organization’s culture – the words, actions and beliefs that are most prevalent in day to day actions? How are these impacting customers, employees and business results? You could interview or survey to try to get a sense of these, but I find a much stronger approach is to bring together a cross-section of your stakeholders (including) customers to engage in some straight talk about their impressions.
- Define: Set the preferred direction for the culture. Identify the few key things most needed or desired from the culture to support the business, going forward. E.g., what is the desired orientation to customers, to employees, to performance and accountability, to innovation, etc. These should build directly from your company’s mission and core values. (If you are using a group meeting for the prior step, this can be a second topic for discussion.)
- Design: Seek to discover people and actions that can help catalyze or reinforce the desired changes. Katzenbach and Harshak suggest that you seek to engage four types of people in this work: pride builders, role models, networkers and early adopters. Work with them to design a simple, meaningful plan to start making the changes needed to tune up (or transform) your culture. It’s okay to begin with just one or a few items and see how well they work.
- Deploy: Put the plan into action. You may find that some desired changes are already happening somewhere in the company. Recognize and support these, wherever they are working. Where you don’t see anything relevant happening, drive new actions by incentivizing them in some manner.
- Keep Score: Regularly monitor your culture-building and -reinforcing activities in play to assess cumulative impact. Lend additional support and recognition to sustain momentum. Learn from both successes and failures. Repeat steps 1 and 2 every year or two.
Please contact me if you have any comments on the content of this post or would like to learn more about managing organizational culture. jvandeusen@curriemanagement.com.
References
Connors, Roger and Smith, Tom. 2012, Change the Culture, Change the Game. Portfolio
Denison, Daniel, 1990, Corporate Culture and Organizational Effectiveness. Wiley.
Flamholtz, Eric, 2001, Corporate Culture and the Bottom Line. European Management Journal, 19(3): 268-275.
Flamholtz, Eric and Randle, Yvonne, 2011, Corporate Culture: The Ultimate Strategic Asset. Stanford Business Books
Gillespie, Michael, Denison, Daniel, Haaland, Stephanie, Smerek, Ryan and Neale, William, 2008, Linking organizational culture and customer satisfaction: Results from two companies in different industries. European Journal of Work and Organizational Psychology.
Katzenbach, Jon, Harshak, Ashley, et al (2012), Stop Blaming Your Culture, in https://digitaledition.strategy-
business.com/allarticle/25249/134704/134704/allarticle.html. Also, available as a Kindle Edition from Amazon.
Kotter, John & Heskett, James, 1992, Corporate Culture and Performance. Free Press.
Schein, Edgar, 1992, Organizational Culture and Leadership. Jossey-Bass.