Fish Can't See Water

How National Culture Can Make or Break Your Corporate Strategy

Kai Hammerich, Richard D. Lewis

• Publisher: Wiley
• Year: 2013
• Print ISBN: 9781118608562
• eBook ISBN: 9781118608548
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

How national culture impacts organizational culture—and business success

Using extensive case studies of successful global corporations, this book explores the impact of national culture on the corporate strategy and its execution, and through this ultimately business success—or failure. It does not argue that different cultures lead to different business results, but that all cultures impact organizations in ways both positive and negative, depending on the business cycle, the particular business, and the particular strategies being pursued. Depending on all of these factors, cultural dynamics can either enable or derail performance. But recognizing those cultural factors is difficult for business leaders; like everyone else, they too can be blind to the culture of which they are a part.

The book offers managers and leaders eight recommendations for recognizing those cultural factors that negatively impact performance, as well as those that can be harnessed to encourage superior performance. With real case studies from companies in Asia, Europe, and the United States, this book offers a truly global approach to organizational culture.

• Offers a fresh approach to the effects of national culture on organizational culture that is applicable to any country in any region
• Based on case studies of such companies as Toyota, Samsung, General Motors, Nokia, Walmart, Kone and British Leyland
• It describes the origins and nature of the most common corporate crisis and how culture impacts the response to such a crisis
• Ideal for managers, business leaders, and board members, as well as business school students

A welcome response to the flat-Earth fad that argues we're all alike, this book offers a nuanced and practical view of cultural differentiators and how they can enable or derail business performance.

Part I

Developing the Cultural Dynamic Model^®

1

Corporate Culture, Strategy and Business Results

In this chapter we discuss the mechanisms by which values, beliefs and assumptions are embedded in organizations through the behaviour of their leaders and their work practices. Drawing on the work of Ed Schein and Geert Hofstede, we go on to use the Cultural Dynamic Model^® developed by Kai Hammerich, to guide our discussion of how business influencers and national influencers impact the corporate culture in fundamentally different ways: the staid national traits that are slow to change compared with more fluid business traits that can be influenced by management over a shorter time scale. In this chapter our discussion focuses on the business influencers, and in Chapter 2 on the national influencers, using the Lewis model – a triangular representation of national types. In Chapter 4 we bring it all together in the complete Cultural Dynamic Model^®.

When Kai Hammerich was a newly minted and hopeful MBA from Kellogg Business School in 1984, he got his first job in marketing at Hewlett Packard in Denmark. To spur sales he came up with a promotional concept to expand the use of administrative computers , as servers with ERP (enterprise resource planning) applications on them were called at the time. The simple idea was to target secretaries rather than the heads of finance, and offer a 90% discount on word processing, email and graphics software, hoping that with use, the customers would need to upgrade to the then much more expensive computers. The campaign was a runaway success. HP Denmark more than tripled software revenues and profits.

Initially, the European software division was delighted, but they soon complained that the CFO was less than pleased with the deep discount. As the more pricey hardware upgrades started to roll in the software division had the sensible idea of asking the hardware division for a cross-subsidy. They argued that it was their discount solution that had enabled the hardware division to significantly increase sales and therefore profits. The response from the German head of the European computer division was disappointingly clear: “Over my dead body” – sophisticated business talk for a NO! Kai was disheartened. He felt this was not rational, and escalated the issue. Eventually, a senior CFO tersely told Kai that while he understood his frustration, the principle of the independent product division was sacrosanct at HP. Kai was right by MBA standards, but here was a fundamental belief at stake and that was more important than short-term MBA logic, and the campaign was called off. This belief in the independent product division was central to HP and had been inculcated in the organization by the two founders Bill Hewlett and Dave Packard. This was a principle that was not up for debate! It had become an embedded value – based on a business influencer.

The next sections explore the ways in which such beliefs become embedded in an organization.

First, let's look at the nature of organizational culture, or corporate culture as it is also called when describing a business organization.

What is corporate culture?

The three levels of culture

There are several definitions of corporate and group culture. The American guru of culture and leadership, Edgar A. Schein, defines culture in a particularly useful way for our purposes. Schein defines organizational culture as¹:

“A pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.”

From this definition it follows that:

1. Culture is learned and reinforced and handed on as learning to the next generation and new members of the group

2. Culture has a purpose in terms of achieving common objectives. Perceived success will reinforce the culture and make it stronger

3. A group will develop its own distinct patterns of behaviours and beliefs to support the culture, and the internal socialization process.

Schein notes that the early stages of a company's life are critical in defining the culture at three levels (Diagram 1.1).

Diagram 1.1: Schein's three levels of culture
Source: Organizational Culture and Leadership, E.H. Schein. Reproduced by permission of Jossey-Bass, San Francisco.

At the top level is what one can physically observe about the culture: the buildings, the physical workspaces, the visible behaviour, the rituals, the advertising, the organizational charts, and documented work processes, or artefacts, in Schein's words. These elements are easy to observe, but difficult to decipher. We can admire the pyramids, but have little idea of why they were built!

At the middle level you find the articulated shared goals, strategies, philosophies, and explicit values and beliefs, which Schein calls the espoused values. The P&G Way, outlining the guiding principles of Procter & Gamble, would be an example of an espoused value, used to justify decision making principles.

At the lowest level one finds the often invisible or difficult to detect values and beliefs or assumptions in his terminology, which guide the culture and the actions in the organization. These are the concepts or behaviours that are taken for granted; they are non-debatable and difficult to change. Assumptions based on the national heritage will be prevalent at this level. An American's right to individualism is such a fundamental national assumption, as is HP's belief in the independent business division. The American national value, though, is deeper-rooted and more staid than the more contextual HP value, which management would be able to influence and alter.

The popular mission, vision and value statements that most companies promote are often a mixed bag of how the culture actually is and how the company would like it to be or not to be. Most American companies have included a statement about collaboration and teamwork in their corporate values. This may be an appropriate corrective value in a company with an invisible assumption of everyone's right to individualism, but may not necessarily reflect how people actually behave. In Chapter 4, we will explore how a company's value statement often includes different types of messages with different purposes. They will tell you quite a bit about the culture and values of the company, once you have deciphered them, which may not always be what the company intended to communicate.

How leaders embed their values, beliefs and assumptions early on

Schein also observed that leaders embed their beliefs, values and assumptions in an organization.² The primary embedding mechanisms take place early in the lifecycle of a company creating its cultural foundation, while the secondary mechanisms take place as the company matures and moves from a personal to a managerially oriented culture.

The primary embedding mechanism includes:

• What leaders pay attention to, measure and control on a regular basis
• How leaders react to critical incidents and organizational crises
• How leaders allocate resources
• Deliberate role modelling, teaching and coaching
• How leaders allocate rewards and status
• How leaders recruit, select and promote
• Stories about important events and people
• Formal statements of organizational philosophy, creeds and charters.

Reinforced by the daily work practices in the mature organization

These embedded values, beliefs and assumptions are reinforced in the mature organization, through the daily work practices, in what Schein calls the secondary articulation and reinforcement mechanisms, which include:

• Organizational design and structure
• Organizational systems and procedures
• Rites and rituals of the organization
• Design of physical space, facades and buildings.

For simplicity and variety, we will use the words corporate or organizational values or just values to represent the values, beliefs and assumptions in the remainder of the book.

The six dimensions of corporate culture

P&G is a company that seeks the truth. This is a deeply-rooted belief that was inculcated by its purist and religious founders. When P&G launched Ivory Soap in 1881 its slogan said that the soap was 99.44% pure. Not 100%, not 99% – no, 99.44%, and scientifically proven to be purer than other Castile soaps. With that fact in hand, P&G, also keen on making a good profit, advertised it intensively and soon became the undisputed market leader. Anyone who has worked at P&G has toiled with frustration over the infamous one-page-memo. That single page that will summarize any major business decision. It is used to recommend an action, whether it is a billion dollar investment or a more mundane new advertising campaign. Every word is evaluated until it is perfect – and the “truth” is found. It can take weeks and tens of iterations between the writer and managers above to get it approved. Over the years, the P&G culture became centred on artefacts like that and at times developed cult-like traits. Either you enjoyed it and stayed for long, or you left early, as there was little room for cultural dissent. However, virtually all people who have worked in P&G are impressed by the principled and uncompromising nature of its culture.

In his classical IBM questionnaire-based study, Hofstede established six dimensions of what he terms Organizational (read corporate) Culture through statistical analysis.³

1. Process oriented versus results oriented (means v. goals)

2. Employee versus job orientated (people concern v. getting the job done)

3. Parochial versus professional (a person's identity derived from company or profession)

4. Open systems versus closed systems (inclusive culture v. exclusive-secretive-clubby)

5. Loose versus tight control (of people and what they do)

6. Normative versus pragmatic (following procedures v. market/customer driven).

These are very useful when describing a corporate culture in a consistent manner. However, as indicated repeatedly by Hofstede, Schein and others, this is a complex field and not easily captured in simple models. There are simply too many variables. You may be able to use a simple model to describe a business culture, but will probably not achieve much in terms of predictability of the performance of the organization. When it comes to culture, the devil is in the proverbial detail and the detail is multi-faceted.⁴

It is obvious that national values will have a significant influence on these six dimensions. For Danish companies, the culture is generally described as open and inclusive, whereas Japanese companies are generally considered more closed. Does this make either of them more or less effective in reaching their objectives? The answer is more complex, will depend on the particular circumstances and is not a simple yes or no, as we shall soon see!

Companies from every country can be grouped along these six dimensions; however, there can still be significant variances between companies from the same country. Google and Procter & Gamble are both American, but obviously very different, companies, that originated in different eras with somewhat different expressions of the basic American values – yet both are successful; and there are Danish companies that are closed and successful and Japanese companies that are open and successful.

Corporate culture and strategy: the cultural dynamic model^®

At its simplest level, the relationship between strategy and culture can be looked upon as two intrinsically linked objects. They can't be separated; they are as yin and yang (Diagram 1.2).

Diagram 1.2: The yin and yang relationship between strategy and culture

Results come from work that gets done: “the work practices”

In the Toyota case we describe how work practices deeply rooted in the Japanese culture enabled Toyota to gain a sustainable competitive advantage during a 30-year period. The international subsidiaries would adopt the Japanese work practices and philosophy with limited opportunity for local interpretation. We will use the term work practices throughout the book. By this we mean all the tangible processes, structures and systems that go into delivering the products and services the company offers. Work practices are a central concept for us. This is where culture meets strategy. In the case of Toyota, they include the Toyota Production System, the Just-in-Time Philosophy, the Lean manufacturing processes, as well as the skills and capabilities of the people employed, the physical plant, the decision-making processes and reward philosophy. Work practices are artefacts that can be observed by an outsider; the organizational values behind the work practices are more difficult to decipher.

Work practices influenced by …

The business strategy and execution perspective

When we focus on the culture side, we present you with a model that Kai developed, called the Cultural Dynamic Model^®. It combines the strategy and execution dimension with the culture perspective, and their yin and yang relationship. You have probably already read one or more of the many influential business books that have been written on strategy by leading American business theorists, from Porter's Competitive Strategy, to Clayton Christensen's The Innov...

Table of contents

• Cover
• Endorsements
• Title page
• Copyright page
• Preface
• Acknowledgements
• Introduction
• Part I: Developing the Cultural Dynamic Model®
• Part II: Cases: The Lifecycle of a Company from Innovation to Consolidation
• Part III: The Model in Action (Lessons for BOARDS, Managers and Investors)
• Appendix
• References and Websites
• Index