Why a healthy organisational culture matters

If you visited a store belonging to the first supermarket chain, they said, you would find the manager on the shop floor helping customers. At a store owned by the second supermarket chain, you would find the manager in the administration department because this chain was obsessed with operational procedures. When you called on a store from the third chain, you wouldn't find the manager at all. The reason was that this chain was so centralised that managers hardly seemed to be needed.

This anecdote held much truth about the culture of those different companies. The first supermarket chain grew into a highly successful company. The second chain got into financial difficulties and was taken over by a small, at the time, Western Cape based supermarket group. The third supermarket chain became bankrupt and was also acquired by the Western Cape supermarket group.

Authors Deal and Kennedy have described corporate culture as "the way we do things around here." (Although Deal and Kennedy are often quoted as the source of this informal definition, it was originally stated by Marvin Bower of McKinsey). "A corporation's culture is what determines how people behave when they are not been watched," says Tom Tierney, a former managing partner of the Bain consultancy.

Definitions of corporate culture

While there are many definitions of corporate culture, it is generally recognised to comprise the attitudes, values, beliefs, norms and customs of an organisation. It's relatively easy to draw and describe organisational structure.

But organisational culture is less tangible and more difficult to measure. Also, as Edgar Schein points out, culture is the most difficult-to-change organisational attribute that exists, outlasting products, services, founders and leadership and all other physical elements of the organisation.

Authors Peter van den Berg and Celeste Wilderom define organisational culture as shared perceptions of organisational work practices within organisational units that may differ from other organisational units. They believe that while values are typically not directly visible for employees, organisational values are expressed, in part, in organisational practices.

On the surface, and in casual conversation, cultures are described in terms such as "winning culture", "values culture", "action culture", "cost culture", "learning culture" and even "blame culture". Charles Handy provided a useful taxonomy of different cultures when he described four main cultures:

• Power (power vests in a few hands),
• Role (where people have clearly delegated authorities within a highly defined structure),
• Task (teamwork is the norm to solve problems, often in a matrix structure), and
• Person (where individuals believe themselves to be superior to the organisation -- some professional partnerships operate as a person culture, think of an advertising agency with different partners bringing in specialised expertise for clients).

Why is culture so important? Culture is vital to achieving a company's competitive strategy. When a company faces major change, often the dominant culture no longer supports the company's objectives.

As John Kotter, a management expert, points out, the starting point for change efforts begin with a frank discussion of potentially unpleasant facts: new competition, shrinking margins, decreasing market share, flat profits, a lack of revenue growth, or other relevant measures of declining competitive position. These worrying signals are often followed by change efforts that come under many banners: total quality management, reengineering, turnaround, cultural change, right sizing and restructuring. A desired culture is therefore one that supports the competitive position and business plan of the company.

Organisational culture is usually created by the dominant coalition (top management with the power to set direction and effect structure in organisations). Their leadership style, in turn, influences communication. Culture therefore influences the communication climate (degree of openness and candour) in an organisation. Positive communication climates (humanistic or participative) encourage problem-centred, open and candid communication where people tend to be respected and trusted.

The converse applies in mechanistic organisations where participation is replaced with power and control. A poor communications climate has a clear business cost including low morale, reduced production, poor customer service, loss of reputation (bad mouthing the company), weak relationships and reduced personal and organisational learning.

Playing a crucial role

Although structure and people systems influence an organisation, culture, which is more ethereal or "soft" (as is leadership), plays a crucial role in the success of a company. Lou Gerstner, who took the helm of IBM in early 1990s when the company was one of the world's greatest corporate disasters, had to focus on an outdated corporate culture. He quickly found that culture isn't simply one aspect of the game -- it is the game. Hansen and Wernerfelt, writing in the Strategic Management Journal, point out that, "organisational factors explain about twice as much variance in profit rates as economic factors."

A cultural makeover is not something that can be achieved overnight. Cultural change takes time. Traditional approaches to culture change often take so long that new economic and competitive conditions come about before the cultural change programme is completed.

Levels of culture

Culture change is often required when a company faces major change such as the need for expansion (growth), retrenchment (divestment, restructuring), mergers and acquisitions, loss of competitive position, and technological obsolescence.

But culture change programmes need to get deep under the skin of an organisation. The surface layer of culture often includes visible things such as offices, furnishings, visible rewards and recognition, the way employees dress and how they interact. The next level deals with professed culture of the organisation. Slogans, mission statements and other operational creeds, as well as local and personal values, are usually found at this level. At the third and deepest level, however, are the unseen elements identified in everyday interactions between employees. Debra Thorsen of Culture Builders (www.culturebuilders.com) says that at this deep structure level in-depth tools are required to identify the core layer and the underlying and driving elements of organisational culture. Often subcultures might overlap in the organisation or contradict each other.

Corporate culture change programmes therefore require a structured approach and a process that helps to change the paradigm for the new emerging culture to come into being. The old checklists and prescriptions for culture change need to be replaced with approaches that recognise the complexities of corporate culture.

A new corporate culture needs to be encouraged by top management and communicated company wide, not just through the CEO but also through every available communication channel (I will discuss corporate culture change programmes and communicating culture change, as well as behaviour change and values, in future columns on internal communications).

It is well worth noting that people change, not organisations, a point made by De lay Rey van der Waldt in an article "Towards corporate communication excellence in a changing environment" in the journal, Problems and Perspectives in Management. Companies that create strong corporate cultures support their people in achieving company objectives. Some corporate cultures can inspire employees to achieve their best. A strong corporate culture influences the communications climate, helping to create a nurturing environment for the development of human capital. SAS is a company with a legendary corporate culture that values employees and customers. As Tricia Bisoux, in an article in BizEd, says, "SAS strives to create a company where good customers never want to leave and great employees never want to quit".

As a service to readers, please find the following problem involving the need to change corporate culture. Fill in your answer to the problem in the comments option provided on this web page or send your answer to john.bradfield@tiscali.co.za. When sufficient answers have been received, I will provide my answer to the problem.

Answer this problem

A company, a well-established family business, merges with a BEE partner, known for its innovation. The merger team have looked at all aspects of the new company including assets, growth forecasts, future cash flows, profitability, future growth potential, employees, skills levels, customers and the market that the company serves. The due diligence process, however, has not involved a communications expert to discuss the cultural integration of the two companies. How would you go about making recommendations and a course of action (as the culture expert) on corporate culture to the merger team?