Corporate Culture

The Ultimate Strategic Asset

Eric Flamholtz,Yvonne Randle

• Verlag: Stanford Business Books
• Jahr: 2011
• ISBN:
  9780804777544
• Auflage: 1
• Thema: Betriebswirtschaft
• Thema: Unternehmenskultur

Organizational culture is a quiet, but driving, influence on our perception of a company, whether as a consumer or as an employee. For instance, we know Southwest Airlines as laid back and friendly. We think of Google as innovative. To almost every well-known company we can assign a character. It is now well recognized that corporate culture has a significant impact on organizational health and performance. Yet, the concept of corporate culture and culture management is too often tantalizingly elusive.

In this book, Flamholtz and Randle define culture, identifying and explaining the five key dimensions that determine it: a customer orientation; a people orientation; a process orientation; strong standards of performance and accountability; innovation and openness to change. They explain why culture is a critical factor in organizational success and failure—a key determinant of financial performance. Then, they provide a theoretically sound, highly practical, and field-tested method for managing corporate culture—presenting a set of international and domestic cases that show how actual companies have leveraged culture as the ultimate source of sustainable competitive advantage. In addition to well-known companies such as Starbucks, Ritz-Carlton, American Express, IBM, and Toyota, the text presents lesser known culture stars, such as Smartmatic and Infogix.

While other titles on culture have focused too heavily on the organization as a psychological being, or on academic studies of culture as a business lever, Corporate Culture draws on empirics to present a go-to, must-read guide for leveraging corporate culture as a source of competitive advantage and as a means of impacting the bottom line.

Part I

The Role of Corporate Culture and Culture Management in Organizational Success

1

Corporate Culture

The Invisible Asset

Scholars, students, and practitioners of organizational studies are faced with a variety of “corporate enigmas”—strange organizational phenomena that, at least on the surface, require some special explanation. Specifically:

•How does a little company headquartered in Bentonville, Arkansas, become one of the largest retailers in the world, with more than $400 billion in sales?

•How does a company selling a commodity product that has existed for centuries grow from $122 million in sales to more than $5 billion in slightly more than a decade, and more than $12 billion in two decades?

•How does a small company in Texas with all the cards stacked against it—whose business plan was created on a napkin—grow into one of the largest and most profitable players in its market?

•How does a company with an odd, unbusinesslike name come out of nowhere in the competitive environment of Silicon Valley to challenge the behemoth Microsoft and replace it as the leader in the Internet space?

•How does a company retain its vitality for more than one hundred years when virtually all of its peers of a century ago have disappeared?

•How does a company with a dominant market position (more than 42 percent market share) fall from grace over a period of twenty years and face the abyss of failure?

• How does a company that has developed a carefully nurtured reputation for quality over a period of more than fifty years suddenly have it tarnished by serious product defects that were known to management but concealed from customers?¹

Corporate Culture: An Invisible Strategic Asset

The answer in all these cases, we believe, is attributable to something that is very real but invisible to the naked eye. It is not magic but something that, under the best of circumstances, works much like organizational magic. The answer is the invisible asset (or liability!) of corporate culture.²

In the case of the little company from Bentonville, Walmart has grown to be a retailing colossus. In his book The Wal-Mart Way, Don Soderquist, former vice chairman and chief operating officer, of Walmart, now retired, attributes its success to the company’s culture.³ Similarly, both Howard Schultz, founder and chairman of Starbucks Coffee Company; and Howard Behar, former president of Starbucks International, have attributed their company’s astounding success to its culture rather than its coffee.⁴ Southwest Airlines recognizes that corporate culture has been a key ingredient to success and the ability to remain profitable, even in the face of significant challenges. As stated in their 2008 report “Southwest Cares: Doing the Right Thing,” “It is the Southwest Culture that sets us apart.”⁵ Other airlines went bankrupt in the aftermath of September 11, 2001, or as a result of the financial crisis that began in the fall of 2008, but Southwest remained profitable⁶ and consistently ranked in the top ten on Fortune magazine’s “Most Admired Companies” lists.

The company from Silicon Valley with the odd, unbusinesslike name of Google has become the leader in the Internet space through its search engine technology. However, a key to the continuous development of that technology is the talent and creativity of its people. As one article aptly stated, “The secret of Google’s success is its way of turning talented engineers into an extraordinarily creative team.”⁷ Google attracts its talent because of its culture. As a result of its special culture, Google is recognized as one of the best companies to work for.⁸

Almost unbelievably, GE is one of only two companies that were among the most successful at the beginning of the twentieth century that are still highly successful today. The company’s success has also been attributed to corporate culture.⁹ GE’s cultural values emphasize creating a clear, simple, reality-based, customer-focused vision; a passion for excellence; and not just acceptance of change but initiation of it.

General Motors, which was once the undisputed leader and apotheosis of business greatness, has fallen from grace and is now in a battle for its very survival. Many people attribute this to the insularity of the GM culture, and its unwillingness to look beyond the boundaries of Grosse Pointe, Michigan. While GM was in decline, one of the chief beneficiaries was Toyota. For more than fifty years, Toyota burnished its image and reputation as a manufacturer of high-quality automobiles and strived to surpass GM and become the biggest automaker in the world. However, beginning around 2008 some of Toyota’s automobiles experienced a “sudden acceleration problem” that led to a significant decline in the company’s exquisite reputation and its sales as well. In a public apology, the president of Toyota explained that the company’s managers were distracted from adhering to “the Toyota Way”—the cultural values and principles instilled by the company’s founders—by the drive to become the biggest automaker in the world and by the push to increase manufacturing in North America.¹⁰

Like bacteria or X-rays or other invisible phenomena, corporate culture is real but difficult to observe. In spite of this invisibility, it has a profound impact on organizational success and failure;¹¹ it can be a true strategic asset and sometimes a toxic liability.¹² Throughout the remainder of this book, we describe in more depth how the culture of the companies identified here (and others) had a significant positive or not-so-positive impact on organizational success.

Corporate Culture: An Introduction

During the past few decades, the term corporate culture has become widely used in business. It is now well recognized that corporate culture is a significant aspect of organizational health and performance.¹³ Explicitly or implicitly, it is presumed that corporate culture affects a company’s overall financial performance.

Although its significance is recognized, the concept of corporate culture as well as how to manage it in a practical way in organizations have remained tantalizingly elusive. As a result, several important questions arise:

•What is corporate culture?

•How is it manifested (how can we see it) in organizations?

•Why is it important?

•What are the key aspects of corporate culture?

•How can it be managed?

•What tools are available to help manage corporate culture?

All of these questions and others related to this topic are addressed in this book in the following chapters. In Chapter 1, we begin by addressing the first three of these issues: What is culture? How is it manifested? Why is it important?

What Is Corporate Culture?

The concept of corporate culture has become embedded in management vocabulary and thought.¹⁴ Although there are many definitions of the concept, the central notion is that culture relates to core organizational values.¹⁵ In a very real sense, corporate culture can be thought of as a company’s “personality.” Every organization—regardless of size—has a culture that influences how people behave, in a variety of areas, such as treatment of customers, standards of performance, innovation, etc.

How Is Culture Manifested in Organizations?

Culture is manifested almost everywhere in an organization, if we know where to look for it. It is reflected in the words and language people use in communicating with one another. For example, a company with a language rich in acronyms can communicate that the company values efficiency. At the same time, though, it can signal that there are barriers to cultural entry; one needs to know the language to understand what is being discussed.

Culture is also manifested in the artifacts that are in (and on display in) the company’s facilities. Everything in an organization—from coffee cups to artwork—contains a cultural message, whether explicitly intended or not. A simple coffee cup can be quite valuable to the person who owns it, if it was given for a reason that has meaning and purpose to the individual and to everyone in the company.

In brief, culture is manifested in everything from the cultural statements on posters to the furnishing of the office and to the art that adorns the walls. Sometimes, the culture of a company is obvious and clearly visible, as in the treatment we receive as customers and the artifacts we see that support this focus on customer service. Sometimes, a company’s culture is subtler and needs to be “read.”

Clear and Explicit Cultural Messages

Cultural messages may be clear and explicit, as in formal statements of culture. The Johnson & Johnson Credo is posted on the walls of subsidiaries such as Neutrogena and LifeScan; it is clearly meant to be absorbed by employees as well as observed by visitors.

Another clear but very different type of message about the importance of culture is found at Google, the quirky Silicon Valley company that has become a powerhouse in Internet search and caused mighty Microsoft to try to purchase its rival Yahoo! In 2006, Google’s co-founders, Larry Page and Sergey Brin, decided to establish the position of “chief culture officer,” currently held by Stacy Savides Sullivan, who is also director of human resources. The very existence of this position is a clear statement about the importance of corporate culture at Google. Sullivan’s mission is to retain the company’s culture as it grows, and keep the “Googlers” (the term used by the company to refer to its employees) happy.

At Southwest Airlines, a number of mechanisms are used to help reinforce and make the company’s values real to all employees. There is a Culture Committee with 120 members and a number of alumni. Each cultural ambassador (team member) serves a three-year term and works as a member of the team to communicate and find ways to reinforce the company’s culture. The company’s blog frequently presents a description of this committee’s activities. In addition, the company’s website, written publications, and facilities (including the airplanes) all include statements of the company’s values, whether presentation of the written values statement, recognition of the “Star of the Month” (in the company’s Spirit magazine), or the heart that is present on every employee’s shirt.

Implicit Cultural Messages

Sometimes you are literally surrounded by cultural symbols or icons of the organization, reflecting the company’s identity but not containing an explicit message. For example, walking the halls at the Disney offices in Burbank or Glendale, California, you see the Disney characters (Mickey and Minnie, Goofy, Donald Duck, and all their compatriots) everywhere—as stuffed animals, in glass and plastic replicas, in pictures, and on posters. Similarly, the hallways of Architectural Digest are lined with framed covers from issues of the magazine. The halls of Pardee Homes, headquartered in Los Angles, are adorned with pictures of the houses and communities developed by the company. The offices of many investment bankers or venture capital firms in Silicon Valley contain various symbols of companies that were taken public. The boardroom of Citation Corporation, headquartered in Birmingham, Alabama, has framed pictures of people working in the foundries located throughout the United States. All of these are reminders of a company’s business identity.

Cryptic Cultural Messages

Cultural messages may also be clearly visible, but subtler in meaning. Many U.S. company boardrooms boast art or statuary—expensive symbols of the stature of the company. However, in the boardroom of Melvin Simon & Associates (now Simon Properties), the largest shopping center (mall) developer in the country, there was displayed a picture of an old man and an old woman.¹⁶ It was not artwork, but more like a family portrait, something one would see in a home rather than a boardroom. In fact, it was a picture of the parents of the founders and leaders of the company (Mel, Herb, and Fred Simon). The message, if somewhat cryptic, was a strong, implicit culture (values) statement: We are the Simons. We know who we are; and we assume you know who we are. We value family and where we came from; and we do not need to try to impress you. Needless to say, we were impressed by this message.

A “Cultureless Culture”

Although culture is everywhere and in everything, in some companies there are few clues about what the culture is: no culture st...