Monday, August 18, 2014

Coming to Grips with Corporate Culture

“Culture” has been in the business news again lately, from General Motors’ failure to recall its faulty ignition switches to the replacement of an outsider for Target’s new CEO.  Those of us who have worked for more than one company, and/or have friends and acquaintances who work for different companies, know how powerful corporate culture can be. 

We all know that companies, like all social groupings, tend to form cultures that influence the way its employees think, feel and perceive what is going on.  When I worked for Citibank many years ago, I would compare notes with a colleague who worked for what was then called the Chase Manhattan Bank on how different our respective company cultures were.  Citibank was then brash, and its employees were expected to be aggressive, and even rude.  Chase Manhattan was more polite, and employees were expected to behave more gently.  As we know, cultural fit is important to corporate survival.  Many companies assess cultural fit before hiring managers, and many executives de-rail not because they lack technical expertise but because they lack this cultural fit.

Executives in successful companies, recognizing the importance of culture, try to shape their company’s culture to be aligned with the company’s strategy.  For example, Wal-Mart instills an almost obsessive regard for expense management that is in keeping with its strategy to be the low-cost provider and remain profitable through its “everyday low pricing” business model. 

As Lane et al. point out, culture is important because it serves two functions.  One, it helps efficiency.  Everyone in the company is expected to know that there is a way of doing things (companies even label these, such as “The Wal-Mart Way” and “The Toyota Way”) and once employees learn this, the company can operate more efficiently.  What is interesting is that many of these so-called norms are not necessarily written down or documented.  But once we learn the cultural code, many things don’t have to be spelled out.  We know that is the way things are done and violating this cultural code can have consequences.  I remember a company I was involved with where decisions had to be made by consensus.  An executive hired from the outside felt that this was not good for a company that was trying to be more agile and so he started to make decisions without going through the usual channels.  There was so much resistance to his attempts that he only lasted a year with the company.

The second function of culture, according to Lane et al., is that is provides an important source of social identity for its members.  Culture serves as a kind of psychological “glue”; the stronger the culture, the stickier the glue.  Belonging to a group not only provides some security; it also increases our identification and commitment with the group (or company).  Creating a strong culture is especially important for global organizations with subsidiaries in dozens of different countries.  Expatriates from these organizations who go overseas not only provide technical expertise but also serve as cultural ambassadors.  I have seldom seen expatriates being sent overseas who have either just joined their company or are not able to “represent” the company in a positive way.  Strong identification with the company also reduces turnover, and enhances the feeling of pride an employee has in working for the company.

Changing a culture as powerful as GM’s will be an uphill battle but it can be done.  There have been successful attempts at cultural change in companies like GE, Ford, IBM, Nissan and many other companies.  I have been involved with a few companies where the culture changed successfully although in all cases, it took time – as much as five years. 

In brief, what does it take?  Corporate culture, in my opinion, is shaped by three sets of forces, and so understanding these forces and using them to help drive change is a good first step.  In my opinion, these three forces are self-reinforcing and interdependent; implementing changes in one without taking into account the others will not work.  The first force is leader behavior.  Nothing speaks louder to employees than how leaders behave (not what they say should be done).  When Carlos Ghosn of Renault went to Japan to head Nissan, he made it a point to walk around the plant floors and introduced himself to shocked groups of employees.  When CEO John Reed championed Six Sigma at Citibank, he himself went through the training and taught some of the training workshops to employees.

The second set of forces involves the company’s processes and systems.  This is where the rubber hits the road, in the day-to-day activities that shape employees’ behaviors.  In my experience, the most important of these include decision-making processes, how conflicts are resolved, and how employees are recognized and rewarded.  Changing these processes and systems will begin to create changes in the culture. 

The third involves the company’s structure.  Microsoft recently restructured its organization to break down silos.  Many companies such as Cisco, P&G and IBM have moved to a more matrix-type structure.  Unfortunately, many companies start and stop with structure.  For example, GM has recently announced that it would have a head of Global Compliance.  If people still perceive that they will be punished for speaking up, then having an executive accountable for compliance practice alone is not likely to change the culture.

Given all this, here are three takeaways on corporate culture for managers and leaers.  First, unless you are near the top of the company’s hierarchical food chain, it will be impossible for you to change corporate culture.  In fact, even executives at higher levels sometimes find it difficult to change culture by themselves.  Think about living in another country with different cultural values and norms than your own; you have to adjust your behavior to the country’s cultural code.  Similarly, you have to adapt your behavior so it somehow fits in with the culture of the company you are working for.  Of course, you can deviate a bit but too much deviance and you will be rejected.

Second, by understanding the company’s cultural code, you can use culture to your advantage especially when trying to lead and influence.  For example, one of the companies I used to work for had a strong bias for being data-driven.  That is to say, recommendations or decisions had to be based on arguments based on analyses and good data.  In this organization, arguing by appealing to emotion would not get you very far.  Knowing this, those who were effective in this company made sure that they persuaded their key managers by always having solid data to back up their arguments. 

Third, you can create your own “mini-culture” within the larger corporate culture, as long as this is not too deviant.  Countries have national cultures, but they also have regional and even local cultures.  The southern United States can feel quite different than the eastern United States.  Let’s say that you are a manager of a customer service team in your company.  You have strong beliefs about how customers should be treated that may not be as much of a priority to the larger organization.  Within your sphere of influence, you can build a strong sense of customer service.  How?  Start by getting your manager’s buy-in and support.  Have a compelling vision that you can communicate to him or her, as well as to your team.  Then get your team involved and excited to make sure that they share and internalize the vision – it becomes not just your vision but everyone’s.  Then walk the talk.  Recognize team members who exemplify great customer service.  Spend time with customers yourself, and act on their suggestions and complaints.   You need not be merely a victim or product of the corporate culture.

Lane, H. et al.  (2009).  International Management Behavior (Sixth Edition).  United Kingdom:  Wiley.