“If you do not manage culture," says Edgar Schein, a professor at the MIT Sloan School of Management, "it manages you. And you may not even be aware of the extent to which this is happening.” Culture has a significant impact on a company's long-term economic well-being: A 2000 study published in the Harvard Business Review found that company culture can account for nearly a third of financial performance. This is too high an impact to ignore.
An encrusted culture can sometimes impede a company's adaptability and prevent it from changing course in order to capitalize on new opportunities or changes in the market place. When asked why a small start-up could build Instagram while Kodak, which has now filed for bankruptcy protection, could not, Kodak board member Michael Hawley said: “Cultural patterns are pretty hard to escape once you get sucked into them."
What type of culture is right for the operational climate in your company? Let's look at how many cultures there are. The Competing Values Framework, considered one of the 50 most important models in business, identified four types of organizational culture: hierarchy (or controlling), adhocracy (or creative), market (or competitive) and clan (or collaborative).
Hierarchy: "Do Things Right"
The hierarchy culture is concerned with stability, predictability and efficiency. Clear lines of decision-making authority, standardized rules and procedures, and control are the way things are done here. This is an ideal culture if you are in a business where uniformity of products is expected and where the staff may be predominantly young with limited work experience. An example would be a fast-food restaurant.
Adhocracy: "Do things first"
Is innovation a major part of your company strategy? Are you running a company in which having unique products and services is paramount, like a software development company or a consulting practice? Then an adhocracy (or creative) culture is essential. This is a place where you need to allow people to safely stick their necks out and take risks, where experimentation is encouraged and mistakes are not punished.
Market: "Do things fast"
Is your predominant goal to earn profits through market competition? This is a sales-driven, competitive culture that needs to focus on producing maximum value for the customer—where the customer needs to come first. Does your vision and mission stress this? Do your employees fully understand the challenges and needs of your customers? Do you have programs in place to reward employee behaviors that are aligned with putting the customer first?
Clan: "Do things together"
The clan culture stresses shared values, loyalty and high commitment. Teamwork, participation and consensus are the highest priorities. Every company benefits from promoting a collaborative spirit. The days of the lone genius are gone. As Shawn Callaghan states in Building a Collaborative Workplace, "Innovation demands collaboration. So does production. . . .Today, we all need to be collaboration superstars." This includes collaboration among teams, the community and networks.
Tips for Dealing With Cultural Issues
Be clear about your current company culture. You can reliably assess which of the four cultures is the predominant one in your company by taking the Organizational Culture Assessment Instrument online.
Match the culture to organizational goals. All of the four culture styles are positive and there is no good or bad. Some companies may require a more balanced culture rather than aiming for a dominant culture. If your goal is to drive innovation, for example, you may need a hybrid of all four cultures, as shown in Jeff DeGraff's The Competing Values Framework.
The key to using culture to enhance your company's performance lies in matching desired attributes to organizational goals.
Clarify what cultural change needs to take place.If you determine that the culture needs to change, clarify for everyone involved what characteristics should dominate the new culture. What attributes need to be abandoned? Clarity is your ally.
Keep an open mind. Regardless of what culture is the desired one, guard against being rigid. Consider that company culture, no matter how hard you try to change it, is rarely homogenous. Different subcultures manifest themselves and evolve over time. Corporate culture studies pioneer Edgar Schein notes that this is not necessarily dysfunctional. "Rather, it allows the company to perform effectively in different environments based on function, product, market, location, etc.," he says.
Encourage intelligent disobedience. Even if your preferred culture is hierarchal, encourage your people to practice intelligent disobedience. Intelligent disobedience is about allowing people to use their judgment to decide when, for example, an established company rule actually hinders the organization. The people closest to the customer are most often the ones who know what is best for the customer. If Delta Airlines had a culture that encouraged intelligent disobedience, for example, it would have avoided the unfortunate incident in which returning troops were charged a $2,800 baggage fee.
Culture is everything. But changing cultures is not an easy undertaking. In the words of the well-known management consultant Peter Drucker: "Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you've got."
Perhaps the smartest thing to do when working with culture is to ask yourself: What needs to be preserved? As experts recommend, don't abandon core aspects of what makes your company unique, when only some aspects need to be transformed. Temper zeal with caution.
Learn more in OPEN Forum's Company Culture 2012 series.
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