What is Corporate Culture?

Hundreds of books and thousands of pages have been written on the subject of corporate culture, and the danger is always that no-one is quite sure what it means. Perhaps the best definition is the way we do things around here. Businesses are not separate entities, but collections of people. ll collections of people produce certain common and important patterns of behaviour. !o the topic of corporate culture is really about people and the way they behave when in groups together. Businesses have a history which consists of e"periences shared by the people who belong to the business. #his shared history sets constraints to the values of the group, the way the group thinks about things, and the way rewards operate. shared history is a common feature of any group of people, whether it be a business, or a football team, or a friendship group or a family group. !o you should be able to understand e"actly what is going on here. #here are strengths and weaknesses to the constraints that affect a particular group. $or e"ample, all groups have problems and problem members. #he question is how these problems are dealt with. #he danger is that they are not dealt with because they have become taboo. $or e"ample, !arah !mith%s bitchiness may be a well-known problem of a social group, but no-one is prepared to tackle it because all have agreed that the untimely death of her father is to blame, and no-one wants to upset her by reminding her of that sad event. !imilarly, untie &orah%s drinking may remain undiscussable in a family group. 'n a business the marketing department%s total lack of original thought may become, like the weather, just (one of those things% that have to be lived with. #his may go beyond what is talked about, and actually effect what is thought about, so a group becomes unaware of other possibilities. #his could put a business at a serious disadvantage. )n the other hand, there will be strengths to a particular group and their habits of speech and thought. People have a powerful need to belong. newcomer is quickly (encultured% into the way of the group, and learns to conform to the prevailing patterns of behaviour. #he reason for this is that (breaking the rules% will result in ostracism to some degree. *ou have to be very brave or very right to risk this. +ost people will accept a standard they know perfectly well to be daft if it avoids confrontation and e"clusion from the group. ll groups reward certain patterns of behaviour, and punish other patterns, and we all follow these patterns because the social rewards of acceptance and peer-approval are so powerful. business is no different. 'n fact, it can be more so, because managers have power and status, and pleasing them ,even by agreeing to arrant nonsense- is even more rewarding. 't follows from this analysis that (Business .ulture% is all about how groups of people that happen to be in a business together set up and follow certain rules of behaviour and thought. ny one set of rules has advantages and disadvantages. #he business then needs to play down the disadvantages and play up the advantages. But the prevailing culture, the (way we do things around here%, sets up constraints so that some options are closed down before they have even been properly considered. !o, the business either needs to work around the constraints or remove them. t certain times in a business% development and growth it becomes apparent that the business culture is completely inappropriate for the future. )ften this realisation comes when a new management team is appointed to take a business forward into a new stage, especially if had become clear that the previous management team wasn%t up to the job. !o the business culture has to be changed. #his is e"tremely difficult. People don%t like change. However daft the old system, many people will cling to the old system because it is known territory and they

have spent years learning how to manipulate it to their own advantage/ they feel comfortable with it. !o convincing people that change is both necessary and desirable is very difficult, and requires management skills of a high order. People are very good at passively sabotaging something ,as you all know very well- they don%t approve of. !ometimes the only solution is to replace the entire work-force, but that, too, is difficult and e"pensive. ll change produces winners and losers ie people who are better off under the new arrangements and people who were better off under the old arrangements. #he first group of people can be relied upon to be broadly supportive of the change ,whatever they say to their colleagues over coffee-. #he question then is (how many of them are there, and are they a majority0 1ho are they, and do they include sufficient key staff0% #he second group need understanding, and their losses compensated, possibly but not necessarily financially. +ore importantly they need winning over. !o communication is vital. 1hen a business is going through change gossip becomes a very damaging source of information if management don%t communicate properly. 2eadership is also vital, and too many managers are in fact administrators rather than leaders. 'n a sense, it is a marketing job, as the new arrangements have to be (sold% to a sceptical audience. Part of this is re-assurance, because people will naturally fear the unknown future and assume it will be worse for them personally. #his whole area is well-researched and discussed. #here are copious case-studies showing how real businesses have tackled this difficult area and made a good job, or a complete mess, of it. 't is, fundamentally, a people issue and solving the people problems is at the heart of solving the whole business problem. #oo many businesses spend a lot of time and energy brilliantly solving the technical and logistical problems of re-organisation but with too little thought about the people side. #he temptation is to think that if the managers think it a good idea, everyone else will too. 'n other revision notes on this topic, we look at the importance of business culture, how businesses can build a positive culture and some criticisms of the concept. The Importance of Business Culture 't took a long time for the importance of business culture to be recognised as an important factor in business success ,or lack of success-. !tudy of 3apanese business methods from the 4567s onwards was part of the answer, and 3apanese businesses take from 3apanese society a strong emphasis on a strong and co-operative group culture in the face of adversity. !olving business problem, and advancing beyond them, is a group responsibility, not just (them lot upstairs%. 8esearch into many businesses of all nationalities then showed a common pattern that successful businesses had developed a strong and positive group culture which is about management as leadership and not just administration. How to Build a ositi!e Corporate Culture ". Culture Carriers. #hese are key people, usually managers, who represent and spread the core values of the corporate culture. #. $tability of the group. 't is more difficult for a culture to emerge if people are changing all the time.

%. $tories. group packages up its culture into stories which are frequently told and re-told, and which typify the values of the group eg (the time we all stayed late on 9mas :ve to get the last orders finished and then has an impromptu party at the local.% &. Heroes. 'ndividuals who typify to an e"treme the values of the group. '. $ymbols. #hese may be staff mottoes, the corporate mission statement or anything that symbolises the core values. (. )ites. #hese are specific occasions, such as the annual office party, when the core values are publicly displayed. $ormal award ceremonies are another e"ample. #hese are especially important for enculturing new staff. *. )ituals. #his means a standard pattern of behaviour at a specific occasion, such as the office party if things are always done in a particular pattern. +. Courses. ttending in-house courses is an important way of team-building and communicating the core values. ,. Cultural -etwor.s. #his means the informal contacts between employees where they reinforce core values, especially by passing them from older to younger group members. Types of Corporate Culture ". /dapti!e Cultures. #hese have as a core value the ability to adapt to change, especially in response to changing e"ternal circumstances. #. Inert Culture. #his is a (dead% culture totally unable to change. %. -etwor.ed 0rganisations. #hese are very sociable networks of small teams. #hey are highly creative. But loyalty is low. &. 1ercenary 0rganisations. #hese are ruthless business machines dedicated to work and to success. But sociability is very low. '. 2ragmented 0rganisations. #hese are really loose alliances of very independent workers, such as lawyers. !ociability and loyalty are both very low. (. Communal 0rganisations. #hese have high loyalty and high sociability. #hey act like one bog happy family. 8ecruiting new staff with similar values is important. /d!antages of $trong Corporate Culture 4. 'nstructions are interpreted in a common way, so work is done to a similar standard and in a similar manner. ;. 2oyalty is increased, and replacing workers is an e"pense to be avoided. <. +otivation, and therefore productivity, is increased. =. +anagement control is increased.

Criticisms of Corporate Culture 4. 'n a +&. ,+ulti-&ational .orporation- there will almost certainly be conflicts between the local national culture and the imported corporate culture. #hese conflicts are very difficult to manage and there is usually a shortage of managers with the necessary skills in %multi-cultural management%. $or e"ample, in the +iddle :ast family values are very important and an employee wouldn%t dream of staying late to finish work if this conflicted with a family duty. #his doesn%t mean, however, that their work-ethic is poor, it is just e"pressed differently and a 1estern manager would cause a lot of offence by suggesting otherwise. ;. Businesses are not places with a homogenous culture. +ost businesses are too large for people to identify across the whole organisation. 'nstead, people identify with smaller subgroups. !o a business is, in fact, a mi"ture of sub-cultures some of which may even be deviant. #here is also a strong likelihood of conflict between some of the different sub-cultures. <. #he relationship between a strong corporate culture and improved business performance is, as far as the data can tell, very weak. 't may be then that corporate cultures are less about improved performance and more about making the managers feel they have achieved something/ a cynic might argue that managers like to be surrounded by copies of themselves. =. Business is rarely simple, clear and unambiguous enough to allow of one simple message of the kind envisaged by proponents of the corporate culture idea.

/ business uses inputs of resources to ma.e goods and ser!ices which it sells.

Thats it.
....)h, one more thing. business pays out money ,costs- to use the resources and takes in money ,revenue- for its sales. #he difference between the two ,revenue less costs-is profit>loss. Profit 0? 8-. #hat really is it. &ow you understand what businesses do. :verything else is detail. 2igure "3 What Businesses 4o

#he diagram shows that the full picture is quite complicated. ll of the different bo"es represent something that affects what businesses do. :ach bo" contains important detail that leads to a full understanding of how businesses work. But the basic truth that underlies all the detail is still the same simple message given at the top of the page. 1hen you feel yourself beginning to drown in all the details, go back to the simple underlying truths and then all the detail will fall into its proper place. Business )esources #he use of resources represents a cost to business. Businesses try to make a profit. #his means they try to reduce costs. #his means they try to use fewer resources. ". 5and. #his means what is grown from land, what is dug up from under it, what is built on it, and what comes from the sea. 't means raw materials and is also called the (primary sector %. @sually it is used to mean a piece of land for building a business on and rent is paid for the use of this land. (8enewable resources% are those that can be replaced, like trees can be re-grown in the same place once thy have been cut down. (&on-renewable% resources can only be used once, such as oil and iron ore. #here is a lot of concern about non-renewable resources and not over-using them. #. 5abour. #his means the workers a business employs. #hey are paid a wage or salary. #he level of skills and motivations is very important. #his helps to boost productivity. #his is a very important word which means (how much output one worker produces in one unit of time%. 'n modern businesses labour is often referred to as (Human 8esources% to draw attention to the importance of using the resource to its ma"imum. %. Capital. #his means the equipment workers use to make goods and services ,output-. 'nterest is paid for the use of it. 1e have to be careful with this word. 'n finance (capital% means more e"actly the stock of money a business has available to finance its operations. #his

use of (capital% is one part of the wider use of the word (capital% because money is needed to pay for machinery, and money is worth the rate of interest. &. 6nterprise. #his means the skills and ideas of the managers and>or owners in putting the other three resources together into a successful business. )ne of the key roles is to be able to change ideas when the world changes ,which is most of the time-. nother key role is to organise and motivate the workers to be productive. #he owners of the business put their money up to create the business. 'n doing this they take a risk, because the business may not do well, or may even close. Profit is paid in return for this risk. Business 2unctions Businesses are divided up into specialist units ,or departments- which do each of the different jobs needed to run a successful business. 'n a small business these jobs may be done simultaneously by one or two managers. ". 1ar.eting. #his means trying to bring your product to the attention of buyers and make more people buy it. #his makes 8evenue and ,hopefully- profit. #. roduction. #his means making the product you are selling. %. urchasing. #his means buying all the different inputs the business needs in order to do its work. &. Human )esources. #his means looking after your workers and their needs. #he point of this is to improve motivation which improves productivity so more product is made. 1hen this e"tra product is sold this means 8evenue and profit. '. 2inance. #his means looking after all the money needed to run the business. (. )esearch 7 4e!elopment. #his means trying to make e"isting products better and also trying to come up with new products. *. 5ogistics8Transport. #his means moving around inputs and outputs from where they are made to where they are needed. +. 1anagement. #his means planning for the future, making decisions about the present, and organising the business in the most efficient manner. ,. /dministration. #his means looking after the day-to-day needs of the business and making sure everything runs smoothly. ll businesses organise themselves slightly differently from one another, but the list above includes all the departments ,functions- that are usual in the typical business. 't is important that all these separate functions are properly integrated and co-ordinated so all the separate bits of the business are working together towards the same objectives. Types of 0utput &ot all businesses produce consumer goods that we buy in the shops. #here is a lot of buying and selling between businesses that we don%t see.

". Consumer 9oods. #his is the normal output of things we buy in the shops. #. Consumer $er!ices. #hese are things like insurance, holidays and hair-cuts. %. 4urable 9oods. #hese are consumer goods which aren%t consumed straightaway ,like food aka non-durable goods- but last quite a long time, such as washing machines and #As. &. Capital 9oods. #his means productive equipment used by other businesses, such as machinery and vehicles. '. )aw 1aterials. #his means the basic starting ingredients of the productive process, such as wheat which ends up as bread or cake. (. $emi:2inished 9oods. #his means components which one business buys from another and turns into something else eg components that go to make up a finished car. *. 2inished 9oods. Businesses buy lots of finished goods eg cars for managers or P.s for employees. +. Business $er!ices. Businesses also buy services such as insurance and banking services. 'n part two to 8ichardBs guide to C1hat Businesses DoC, we look at the e"ternal factors that affect a business and then conclude by thinking about the role of CmoneyC

what businesses do : part ;#<

#he second part of 8ichard BowettBs introduction to what it is that businesses actually doE

6=ternal 2actors Businesses are surrounded by all sorts of e"ternal factors which influence what businesses do and how they do them. !ome of the main ones areF4. The 9o!ernment does many important things which affect how businesses operate. 4.4. 2aws which control what can and cannot be done. )ne of the basic and most important matters is the enforcement of contracts. 't would be very difficult to do any business if you could never be sure people would do what they had promised. contract is a legally binding promise to do something ,eg supply goods- so you can be sure it will be done. 4.;. Build and maintain infrastructure such as roads, railways, water and sewerage supplies, and so on. 4.<. #a"ing the earnings of businesses and employees. ;. #he economic climate also makes a key difference. #his means, broadly, are things going well with plenty of demand for buying, or have things slowed up with people being very careful about what they buy0 <. World e!ents can also make a huge difference, such as the tragic events of 44th !eptember which caused many people to be very worried about the future. The )ole of 1oney Business without money is very inefficient. *ou can use barter, but then you have the problem of (the double co-incidence of wants% which means you have to find someone who not only has

what you want but also wants what you%ve got. #his can take ages and then there%s the problem of how much of is worth how much of B. #he advantage of money is that is acts as a (medium of e"change% ie it lets people buy and sell without the problems mentioned above. 't also allows people to save ie not consume everything now. nd money allows for deferred payment ie payment at a later date. Trends in Business /cti!ity &othing stays still in business for very long. #he world is always changing, and businesses are always changing to adapt to changes in the world outside. #hese changes often take the form of gradual patterns of change which are known as (trends%. 'dentifying trends, and considering whether or not they will continue into the future, is a very important part of the job of management in planning for the future and making decisions for the present. )ne of the key trends in @G business ,and similar economies- is (de-industrialisation% which means the traditional manufacturing businesses and their jobs are in slow decline, and are being replaced by new businesses and new jobs primarily in services. #here are a number of reasons for thisF". Changes in consumer demand. s people get richer they spend relatively less on goods and relatively more on services such as foreign holidays. #. Changes in the competiti!eness of >? manufacturing. +any manufacturing jobs are lowtech and low-skill which means they can be done as easily but more cheaply in other countries such as : :urope. %. Increased competition from o!erseas businesses. #he @G economy has become more (open% which means imports and e"ports become more widespread. #his is especially noticeable with other :@ businesses. &. / lac. of in!estment in manufacturing. #his is a bit of a vicious circle. 1ithout investment in new production technology, it is increasingly difficult for a business to remain competitive. But if the business isn%t competitive, it%s not an attractive place to invest in. nd so on. '. Trade >nion restricti!e practices. #his was an enormous problem but since the changes in #rade @nion law in the 45H7s it has become much less of a problem. &onetheless, the decline in @G manufacturing has continued. (. >nhelpful go!ernment policies. +anufacturing businesses frequently complain that government doesn%t take their problems seriously enough. $or e"ample, they claim that the government has allowed the I to become too high for them to e"port competitively. #hey also complain that the ta" system doesnBt encourage investment enough.