10 minute tutorial – to organisational culture

Keith
Rodgers outlines how organisational culture is imperative to a company’s
success

What
is it?

That
is probably the hardest question of all to answer, although every academic,
management guru and HR practitioner worth their salt has given it a shot. Culture
is a curious mix of values, behaviours, and intangible factors that make up the
‘feel’ of an organisation. In essence, it is the glue that binds people,
actions, values and goals together. As it is such a hotchpotch of elements, it
usually means different things to different people – which goes some way to
explaining the frequent discrepancy between senior management’s rosy view of
the culture they have infused, and the harsh reality endured by everyone else.

One
way of understanding culture is to recognise that it operates at different
levels, some visible and definable, others buried in the corporate
subconscious. Hagberg Consulting Group, a Californian HR consultancy, points
out that basic assumptions tend to be deep-rooted and often taken for granted –
avoidance of conflict, for example, may be an unspoken guiding driver within an
organisation. By contrast, other values are openly discussed and become the
principles that managers and employees try to live by.

As
Hasberg points out, the strongest indication of a company’s culture, is what
management pays attention to and rewards – which can be very different from the
ideals it ostensibly strives for. Bear in mind that it is defined as much by
management (and employees’) actions and behaviour, as by their public
pronouncements and goals.

To
an outsider, an organisation’s culture tends to be reflected in a wide range of
indicators – from levels of bureaucracy to staff clothing and the way they
interact with their managers. These signals can be subtle or in-your-face – one
HR consultant recalls an organisation where employees and directors were
obliged to use different staircases.

The
story so far

Cultures
begin evolving from the moment an organisation is created. The dynamics that
have shaped culture can be traced back through major social and economic
cycles, from slavery, through the emergence of workers movements, to the
‘union-busting’ culture of the 1980s, the ‘break-the-rules’ mentality of the
dotcom era, and the flexibility and uncertainty of the early 21st century work
environment.

Many
of the world’s greatest business leaders have recognised the correlation
between corporate culture and financial well-being, a belief that has been
reinforced by numerous academic studies. In 1984, for example, Daniel Denison
published a study of American companies entitled Bringing Corporate Culture to
the Bottom Line, which demonstrated that organisations with participative
cultures enjoy twice as good a return as those without.

In
1992, John Kotter and James Heskett published Corporate Culture and
Performance, a landmark study of more than 200 US companies. They concluded
that over time, organisations that managed their staff well saw their share
prices increase more than 10 times higher than others. Studies have also
demonstrated that poor cultural fit is a major factor behind failed mergers.

The
promise

The
promise of a strong culture is best demonstrated by the real-life case studies
that permeate management handbooks. Many of these studies – such as the US
carrier Southwest Airlines or Enterprise Rent-a-car – will be familiar to HR
practitioners because of the frequency with which they are quoted, particularly
in the context of high employee satisfaction or retention levels. Each of these
factors contributes to culture – employee satisfaction, for example, will
usually manifest itself both in higher-quality customer service and a more
positive working environment.

Of
the most common case studies, Southwest Airlines is the most topical. By
putting its employees and customers at the top of its priorities, the company
has developed a successful low-cost operation which is regarded as egalitarian
(there are no seat assignments), informal and relaxed. In a global airline
industry grappling with a devastating economic downturn, Southwest’s profitable
financial performance is widely admired.

Pros
and cons

Because
corporate culture touches every part of the organisation, the benefits of
getting it right are widespread. A culture borne out of effective leadership,
empowered employees, strong development programmes, good communications and a
real focus on customers, will result in enhanced productivity and improved
workforce retention. In this context, success breeds success.

Unfortunately,
there are one or two downsides. To begin with, it is not easy to demonstrate a
hard and fast link between cultural change and business improvement – much of
the evidence will have to be anecdotal or based on common sense. In addition,
changing culture is a slow, difficult process – not least because it challenges
management perceptions and requires extensive buy-in from across the
enterprise. For these reasons, changing culture is virtually impossible without
commitment from top and middle management and tangible benefits or rewards for
everyone else.

Who’s
on board

This
one is definitely a runner with the management consulting industry and
academia. The crucial issue for HR practitioners, however, is who’s on board
within their organisation.

Verdict

In
recessionary times, cultural issues tends to be pushed to the backburner – it’s
hard demonstrating a commitment to employee satisfaction when you’re slashing
jobs to stave off bankruptcy. Anyone taking a long-term perspective on the
development of their organisation, however, simply cannot afford to ignore the
cultural implications.

The
HR contribution

Leadership
is an essential factor in building culture, so the scale of HR’s contribution
will be directly linked to the amount of influence it can exert at senior
management level. If the CEO insists on an autocratic management style that
suppresses individuality and employee involvement, no amount of pleading from
the HR department is going to make a difference.

Assuming
HR’s voice is listened to, however, it has a major role to play in ensuring
that the implications of cultural development are understood by line managers –
and the best way to do so is to demonstrate the broad impact it will have on
the performance of their business units. HR will also have a central role to
play in the cultural change management process.

It
is also worth pointing out that HR has a responsibility to infuse the right
culture through its own actions. An HR department that is primarily seen to be
a paper-pusher and enforcer of rigid corporate rules, is a poor reflection of
the organisation’s commitment to employee satisfaction and development.

Essential
Reading

Corporate
Culture & Performance by John Kotter and James Heskett (Simon &
Schuster) ISBN 0029184673

Organizational
Culture and Leadership by Edgar H Schein (Jossey-Bass) ISBN 0787903620

Telling
the CEO his/her baby is ugly by Richard Hagberg and Julie Heifetz, Hagberg Consulting
Group www.hcgnet.com

Bringing
Corporate Culture to the Bottom Line by Daniel Denison  http://www.denisonculture.com/articles/bringing_culture.pdf

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