Hack:
CORPORATE CULTURE: AN ASSET OR A LIABILITY ?

 

Opening remarks

 

For agile and innovative organizations, corporate culture is a great asset. It drives the commitment, the cooperation, and the collective creativity of the people. Conversely, for some traditional organizations, their culture is a heavy liability. Their authoritarian style, their complacency, their conceitedness, and their compartmentalization choke the alertness, the adaptability and the agility of the organization.

 

Facing the amplitude and the acceleration of all sorts of changes, some traditional organizations need to undergo a tectonic transformation in order to keep pace with customers, competitors and technologies racing ahead. An increasing number of business-leaders launch change-management programs. Yet, the majority of such programs result in partial or total failures, for which the corporate culture is consistently singled out as the main problem. Drucker suggested: “Culture eats strategy for breakfast”, and I would add: it also eats change-management programs for lunch, and performances for dinner!

 

Culture consists of waves or vibrations that people feel, sometimes very strongly, such as the excitement at some exceptional sports events or the grave mood after a mishap. These vibrations cannot be seen or touched because culture is an intangible resource.

 

“What you measure gets managed”, but, as all intangible resources, culture cannot be measured with mathematical precision. This could explain but it would not excuse the fact that culture, an important resource, is rarely included in the plans and in the reports, and that contributions to this asset are rarely recognized and rewarded. Executive surveys showed that talents, another intangible resource, are very poorly managed. If executive surveys also covered it, culture would not fare any better. Obviously, culture has an imperative impact on the talents, which are the ones that create new value in the business. If intangible resources cannot be measured with conventional tools and techniques, they can and they should be evaluated with the appropriate paradigms and practices, and then they would be proficiently lead and managed. (1)

 

Culture must be seen as a most powerful resource because it shapes the collective mindset. Buddha posited: “The mind is everything. What you think, you become”. The culture sets the way individuals and teams think, the way they behave, and the way they act. Thusly, culture affects the performances of the organization. Let us take a closer look at culture.

 

Corporate culture is a very complex issue because its interactions with other factors at the center of the management system, which drives the performance of the whole organization. So, as submitted by MIT Prof. Jay Forrester, we need to understand the factors whose interactions set in motion the system in order to find ways to improve its effectiveness. The complexity of the corporate culture is due to the following: (1) the different cultures (2) the different drivers of people’s attitudes and aptitudes (3) the different factors at the center of the management system. After taking a look at the complexity of culture, in section (4) we will look – albeit very briefly – at some of the principles that should guide the program of management innovation.

 

 

(1) The different cultures

 

Sometimes, executives and industrial psychologists merely fixate the official culture, which is what the CEO and his/her executive committee are promoting, and what they should be exemplifying. However, there is also another internal culture, the unofficial culture, which – as submitted by P. Scott Morgan – is the way people feel about their managers, about their management system, about the way people and actions are evaluated and rewarded. (2) Discrepancies between the official and the unofficial culture must be erased or the leadership-network will be dissonant and weak.

 

Furthermore, there are external cultures that affect the internal cultures, namely: the industry culture, the regional culture, and social-economic-political factors that can affect everything and everybody. Let us mention a few examples of the industry and regional culture.

 

° Ours are the times of technology. Adroitly exploited by companies such as Alphabet, Amazon, and Apple, the information-communication-social technologies can form a new and collectively creative a mindset that enables some large organizations to implement design thinking, and to operate like agile projects or like start-ups (3 & 4).

° Ingvar Kamprad grew up in Smaland, a Swedish region known for the thriftiness that inspired him to found IKEA with thriftiness as its distinctive corporate culture. Bill Hewitt and David Packard started in their garage the company that bears their names, and that start-up spirit animated their company for some time. It also helped to create the Silicon Valley culture that keeps galvanizing a whole industry. Each of the two Swiss Federal Polytechnic Schools has become a renowned hub of start-ups, some of which have become large enterprises. Open space garages rather than plush offices; informal rather than formal wear; wide-ranging interactions rather than compartments are among the striking signs of a start-up culture.

 

All organizations and in particular multinational corporations must synergize effectively all the internal and external cultures.  This is one of the main tasks of chief of the network of business-leaders, the CEO.

 

 

(2) The different drivers of people’s attitudes and aptitudes

 

Human nature is inherently complex; actually it is dynamically complex, and occasionally unpredictably complex. I will just point out three of the drivers of people’s attitudes and beliefs, aptitudes and behaviors.

 

The combination of different attitudes and aptitudes can lead to inspirational and innovative teambuilding. Agile and innovative enterprises rely on interactive teams and on their networks rather than on bosses, and bureaucracy.

 

Google for example invested heavily in “Aristotle”, a research program that uncovered the key drivers of team-effectiveness, namely: <> the psychological safety, i.e. the ability to count on the team for support in case of problems, and for a well-balanced distribution of roles and responsibilities  <> the social comfort of a pleasant and productive team-spirit <> the professional comfort of seeing how the team’s work contributes to the overall business value creation by the enterprise, and how it gets commensurate recognition.

 

Culture, an intangible resource, needs to be supported by tangible and deliberately striking features. For example, MIT’s Hal Gregersen describes how informal dresses, open space, and informal setting help create a collectively creative ambiance for student groups at MIT. At Amazon’s Seattle campus, three glass-covered domes that look like mini-rainforests create an urban oasis for employees to work and to socialize in.

 

As researched also by Prof. Pierre Casse, the personality of the CEO and/or of other prominent individuals can boost or bias the corporate culture, and thusly it can affect the attitudes and the aptitudes of the network of leaders. Thus, the spirit and the style of leadership are the ultimate drivers of the corporate culture.

 

Peter Senge observed: “People do not resist changes. They resist being changed”. Of course, instinctively people fear what they do not know. A bird in the hand is better than a flock in the bush or in Spanish major malo por conoscido que bueno por conocer. People get used to the way things are done; they accept them as the norm. But, there is more than meets the eye.

 

The challenge of successful start-ups is to be able to retain their agile and innovative culture as they grow up. But the challenge of traditional organizations is to get rid of a stale and stolid culture in order to implant an agile and innovative culture. As already emphasized, culture is not a stand-alone. It is an element that closely interacts with other elements in the frame of the management system. Thus, culture cannot be deeply and durably be changed without changing as appropriate the management system. However, people get used to the management system in place. They may instinctively cling to what they are used to, even if rationally they understand the leadership’s decision to radically reform the workings of the enterprise.

 

Changing the management system can be done, it has been done before, but it has to be done inside/out, starting at the center of the management system, which is where we find the corporate culture ultimate driver, namely: the spirit and the style of the leadership.

 

 

(3) The different factors at the center of the management system

 

The management is normally focused outwards on the market because this is where money is made. However, to change the corporate culture, the leadership must look inwards, starting at the center of the management system because this is where the CEO and his/her executive committee have set the factors that will drive the desired attitudes and aptitudes of the people.

 

McKinsey’s Peters Waterman published their model of the seven factors that form the center of the management system. (5) Based on their work, I developed the lattice of 5 factors that I place at the center of the management system.

 

Let me first outline my model of the management system. It features 5 corporate capitals, namely: the <organizational capital>, the <talent capital>, the <market capital>, the <life and time cycles>, and the <financial capital>. Moreover, each of the corporate capitals is a lattice where 5 capital-components interact. At the center of this model, the <organizational capital> drives the other corporate capitals. My model also features the processes that deploy the corporate capitals, but we do not need to discuss them here.

 

The <organizational capital> is a lattice where the following 5 capital-components interact, namely: the <Strategy fundamentals>, the <Spirit and the style of the leadership>, i.e. the ultimate driver of the corporate culture, the <Systems of management>, the <Structures of the organization>, and the <Shared core competencies>. The <Strategy fundamentals> and the <Spirit and the style of the leadership> are finalized by the CEO and by his/her executive committee. Together they steer the <Systems of management>, the <Structures of the organization>, and the <Shared core competencies>, which are empowered to the operations management. I refer to these elements as the <5S>. (1)

 

Allow me to recap that, management is a complex system where all its elements interact. Thus, no one element of the system can be changed without accordingly aligning the rest of the system or insidious strategic and organizational constraints will ensue that will corrupt the whole management system. Thus, the corporate culture or the <Spirit and the style of the leadership> cannot be changed without changing accordingly the other <S> of the <organizational capital>, and their effects on the framework of the corporate capitals.

 

 

 (4) The program of management innovation

 

As pointed out by Faeste and Hemmerling, most “change-management programs” merely look to solve with short-term fixes a particular problem that affects the bottom line. (6) Conversely, what I refer to as “programs of management innovation” are designed to scale substantially and durably the performances of the enterprise. Such management-programs introduce and implement the innovation of the management as appropriate with new principles, paradigms, and practices.

 

As already pointed out, changing the corporate culture successfully and sustainably requires a well-targeted program of management innovation that must be carried out smartly, simply, and swiftly. It must be steered, shared, and supported by the network of business-leaders, but it must be interiorized, implemented, and inspected by the lifeforces of the organization.  The program should not be seen as a one-time chore, but as the driveshaft of continuous reviews, improvements, and innovations.

 

Some CEOs see such a management-program to be too complicated, too times taking, and where the results – if any – only show up with delays. So, they may prefer to defer it, or to delegate it to their successor. However, customers, competition, and technologies are relentlessly on the move, and they increasingly widen the gap between the traditional and the agile and innovative enterprises. Moreover, given the right approach, a program of management innovation does not need to be complicated, it will not drag on, and it will not upset the normal business. 

 

Let us to highlight just some of the points of the advocated program of management innovation.

 

IDEO’s Tom Kelley submitted that: “Programs of streamlining the management system should start with the elimination of obstacles that hinder the practice of innovation”. Hereafter some examples of the changes that the CEO with his/her executive committee could make to the <5S>. 

 

The <Spirit and style of the leadership> must change from command-control-coercion to steering-sharing-supporting the empowerment and the involvement of the teams in the management of the assigned tasks. The entrepreneurial spirit and style must be continuously reinforced and monitored by the teams, by their networks, and by their global business-leaders.

 

The <Systems of management> must be in-line with participative and innovative management. The traditional management that sets financial objectives and measures financial results must be replaced by a broader-based performance planning and evaluation system (PPES) that includes the intangible resources. Agile Management breaks down things into small and simple tasks that teams can complete smartly and swiftly. Consistent, the PPES must get down to the level of detail that respectively the teams, the networks, and the business-units can easily understand and can work on. To that effect and based on my model of the <business-value>, I propose the method of the <return on total resources>. (1) As concerns the strategic process, I break it down to 4 tasks, namely: check & challenge; alert & innovation; planning & synergizing; the process of strategic and organizational deployment.  

 

 The <Structures of the organization> must be de-layered so that they galvanize the interactions of the teams and of their networks. I use the concept of the value-chains to show who-where-how <business-value> is created/destroyed. I look at the interactions among three internal value-chains, namely: the line-management, the support staff, and the corporate management. The internal value-chains cooperate to manage the two external value-chains, namely: the customer value-chain and the supplier value-chain. (1)

 

Last but not least, the <Shared core competencies> must be available to all teams and all networks, which should be encouraged to contribute to the enterprises competencies, and rapidly recognized for their contribution. The value-chain management must help to organize periodic social events.

 

After reviewing and reforming as appropriate the management system, the CEO and his/her executive committee will lay out the organizational design, the breakdown of the business-strategies in plans, and tasks, and the schedule of the program. Then, the CEO and his/her executive committee will run an introductory campaign, which explains the <why>, the <who>, and the <how>, and that will get the buy-in of the lifeforces of the organization by showing what the enterprise and what its people will get out of the program. The introductory campaign will be lead out by different people, it will involve small groups, and the feedback obtained will create value. The CEO and some of the executives may want to make appropriate introductions of the <program of agile management innovation> to some of the stakeholders.

 

The methods can be taught and practiced at seminars to the assigned tasks. Facilitated by consultants and supported by the management and by the network of business-leaders, individuals and teams will get to work right away on the assigned tasks, which should not fundamentally differ from what the people have been doing under the former system. The frequent reviews by the teams and by the networks will rapidly show up problems and performances. The former will get prompt support, and the latter will get rapid recognition.

 

 

Closing remarks

Bibliography

 

1. W. A. Sussland "The Platform of Agile Management, and the Program to Implement It" Routledge 2017
2. P. Scott Morgan “The unwritten rules of the game” 1994
3. N. Cross “Design thinking” Bloomsbury 2011
4. Sutherland and Sutherland “Scrum” Crown Business 2014
5. Peters and Waterman “In Search of Excellence” Harper Row 1982
6. Faeste and Hemmerling “Transformation” BCG 2016