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Measuring and Managing

Corporate Culture
Stephen M. Bookbinder
This article defines corporate culture and its vita! role in human resource planning. It
presents a five-step plan for identifying an organization's culture. Stephen Bookbinder is a Consultant with Towers, Perrin, Forster & Crosb];.
"Corporate culture" is a phrase often heard in the boardrooms, offices and corridors of American business. Yet the concept is not new. It has always been accepted that
different industries, even different companies, have distinctive norms, values, styles -all the factors associated with the concept of "culture." What has kindled the new
interest in this subject? The rising concern with why companies are not able to achieve
the goals they set for themselves. And the need to manage more effectively in the
uncertainty of today's business environment.
A company committed to growth and competitive success must be sensitive to its
corporate culture. It has become painfully clear that any attempts to bring about significant changes that fly in the face of an organization's culture will be short-circuited. A
change can be put into effect by executive order, but frequently it will be at the cost of so
much organizational strain and friction that the results will inevitably fall short of the
vision.
Why should it be so difficult to reconcile cultural concerns with corporate goals?
Probably because most organizations do not try to measure or manage their culture
systematically. For every IBM orGE whose tremendous efforts to develop a distinctive
organizational culture are well known, there are hundreds of companies that have only
a superticial understanding of their cultures. Management may believe that it firmly
and consistently promotes certain values, but the message received by the rest of the
company is unclear, mixed, even directly contradictory.
Recently, many companies have begun to study their corporate cultures and to
use the results to refine their management systems and increase their capacity to
implement their strategies. This article presents a qualitative and quantitative methodology for studying the culture of an organization, and an analytical approach that
stresses measurement of the differences between the existing culture and the culture
necessary to attain the company's strategic goals.
CULTURE: THE ELUSIVE FORCE
Part of the reason companies find their cultures difficult to manage is because the
term itself is frequently defined in different ways. One useful definition is:
Culture is a pattern of beliefs and expectations shared by the organization's members. These beliefs and expectations produce norms that powerfully shape the behavior of individuals and groups in the organization.*
A more succinct way to refer to this "pattern of beliefs and expectations" is to use the
term values.
Another problem is that the term culture is easily confused with the term climate.
Climate refers to the set of attitudes employees have toward a number of issues (e.g.,
pay, benefits, supervision, leadership) at a given time. An understanding of a compa'Davis & Schwartz, Organizotional Dynamics. Summer 1981, p.33.
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ny's climate is like a snapshot of the prevailing perceptions. As such, it may be a useful
first step in understanding the corporate culture, pointing up where possible trouble
spots may lie. What is important is to go deeper and determine the origin of those
perceptions, the underlying values that dictate employee reactions to events.
Elusive as culture may seem, it does have a powerful impact on a company's longterm goals. If a company undergoes a significant change, it is important to know
whether its culture will be a force that impedes or facilitates the change. For
example:
New !eadership of a company may not fully understand the fundamental nature
of the organization and may develop a strategy not in keeping with the culture.
The integration of a new acquisition may result in conflicts between the acquired
and acquiring company that can be reduced once the different cultures are
clearly understood.
Rapid growth rates, such as those experienced by high-technology firms, often
produce growing pains that can be traced to the failure to transform an entrepreneurial culture into one that embodies the management systems necessary for a
large organization.
Changing markets or industries such as banking and insurance present companies with challenges of positioning that may well strain the limits of their traditional cultures.
The failure to understand the organization's culture and to take it into account in
designing strategies may explain why the efforts of strategic planners have not had
more of an impact on the operations of U.S. companies.
There are many classic examples of the pitfalls of ignoring culture. In one instance,
a CEO decided that a more aggressive management style would give his high-technology manufacturing company the orientation to results and profits that it would
need to achieve its growth potential. His strategy for making the change was to bring in
new key executives from well respected, bigger companies in other industries. Once he
did so, short-term results and profits did improve. But morale sank and turnover
among essential technical staff reached a critical level. What had happened was that
the new, more aggressive executives brought a set of values that emphasized high
output and cost efficiencies rather than quality control, a situation that the long-service
employees found unacceptable. If theCEO had assessed the corporate culture before
acting on his strategy, much damage could have been averted. A study of the culture
identified the problem, clarified the conflicting values, and suggested ways to reduce
the organizational strains and still achieve the company's strategic goals.

AN APPROACH TO STUDYING CORPORATE CULTURE


Underlying the following approach to studying corporate culture are four interrelated assumptions:
1. The long-term success of an organization depends on there being a good fit
between its strategy, its culture and its management systems.
2. A strategy can succeed only to the extent that the culture desired by senior
management is congruent with the actual culture.3. There is not an "ideal" set of values that will best meet the needs of all
companies.
4. The dynamics of leadership are crucial to both strategy and culture.
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A good fit: Figure 1 illustrates how strategies, systems and cultural values are
interrelated. The diagram shows a sample strategy, a crucial supporting program, and
three examples of values and systems essential to achieving the strategy. As shown, a
company may devise a strategy to acquire major national accounts that requires the
creation of a new sales force of major account executives. If pushing down decision
making is stated as a value crucial to the success of this strategy, then decision-making
systems that include significant sign-off or approval authority at lower levels must exist.
Likewise, reward, development and many other values and systems must be consistent
with the strategy.
In studying an organization, it is necessary to examine the congruence between
the different segments, and to determine ways to fit them together more tightly. Each
value should be analyzed in terms of its consistency with the existing systems and with
the strategy.

FIGURE 1
Fit Between Culture. Systems and Strategy

V>^

.Lh, High Poleniia, r.

^Cc

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The desired and actual culture: The key to this approach is the comparison of
cultural values management wants the company to have with those it actually has. For
example, senior executives of a large financial services company had always believed
that the organization valued creativity and innovation. The reward systems, however,
did not foster those values; middle managers perceived that raises and promotions
came to those who put in long hours and produced solid financial results. Yet the
words "creativity" and "innovation" were held up to them as desirable characteristics.
Naturally, the managers were frustrated by these conflicting signals. The source of the
problem, as a culture study revealed, was that top management had a specific understanding of what was meant by innovation. Risk taking was not a part if it; innovation
meant being a "quick second" in the industry - allowing other companies to do the
pioneering work on a new product and then rapidly following them into the market
with a refined and somewhat differentiated copy. Once the source of the confusion was
isolated, it was easier for this company to carry out its strategy. A lagging cultural
misunderstanding is often an obstacle to a company's efforts to implement its strategy.
This is a difficult fact for many executives to accept because they assume they understand their company's culture. Perceptive executives generally do understand some
aspects of it, but they lack a deep, detailed and structured understanding. This is what a
culture study can provide.
No ideal set of values: A common misconception about corporate culture is
that there is one ideal pattern or set of values that will spell success for every company.
The approach proposed here is different. The peculiar strengths and weaknesses of an
organization's culture are identified. Simultaneously, the strong values and practices
of other companies in an industry should be examined to determine whether they can
or should be replicated. There is marginal utility in examining companies in other
industries, no matter how widely heralded they are for cultural achievements.
Leadership: The final assumption of this approach to studying culture is attention to the dynamics of a company's leadership. Many different leadership styles may
prove effective for any given culture, as long as they take the culture into consideration. Good leaders will not always act in ways consistent with their culture -- at times
they must take actions that will conflict with the established values. But if they act with
an awareness of the culture, they will be prepared to deal with the fallout from their
actions.
For example, the CEO of a highly successful company had always allowed his
senior management team of ten vice presidents to act completely independently. The
company had no performance appraisal system, nor any formal way to measure the
productivity of employees. The board of directors finally demanded that the CEO
establish such systems. The CEO felt this would be very difficult because he sensed that
his vice presidents and their subordinates would be hostile to any formal management
systems. He retained a consultant to gain a clearer understanding of the cultural values
concerning reward and performance management systems.
Some of the findings were quite surprising to the CEO- Contrary to his expectations, most of his senior- and middle-level managers were not averse to performance
appraisal systems. Only two of the most vocal vice presidents and their middle-level
subordinates were adamant about maintaining the status quo. Also, much of the wariness about performance appraisal systems was because they had been closely identified by employees with the idea of a forced salary distribution system that would restrict
the number of people who could receive good increases. This need not be the case,
and a number of similar misconceptions were identified.
In the end, the CEO was compelled to order the two reluctant vice presidents to
implement the new systems, which was an action contrary to the corporate culture. But
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the study had identified the negative and positive fallout from this decision, a great deal
of possible conflict and confusion was avoided, and both the board and the majority of
managers were satisfied.
STEPS IN A CULTURE STUDY
Within the broad framework indicated above, studies of corporate culture should
be designed and constructed to take advantage of qualitative and quantitative
methods. Different studies vary in scope and emphasis, but a five-step process is
generally necessary:
1. Develop a perspective on the existing culture, systems and strategies.
In this information-assessing step, review such written documents as present and
past statements of business mission, general policies and procedures, organizational memorandums, annual reports and employee communication materials. Also, take more direct approaches to learn about the internal workings of
the company and how it develops and markets its products or services. For
example, in a high-technology company, it is necessary to spend time observing
how employees work together to design, manufacture, test, sell and deliver the
product - an experience without which the dynamics of the organization cannot
be truly perceived. With this experience, the cultural implications of the production flow problems of the company will be clearly understood. This step might
seem unnecessary to some well informed employees of an organization, but it is
necessary to take a "fresh," comprehensive look at how the basic activities of the
organization are accomplished.
2. Define the desired culture. Interview members of senior management to
determine how they view the company at present and what they would like it to
be in the future. In analyzing the findings, areas of disagreement from these interviews will provide clues to possible incongruities among strategy, systems and
culture that can be explored in subsequent steps. In fact, disagreement among
senior management is often one of the crucial reasons that other employees do
not have a clear understanding of the desired culture.
3. Measure the present culture. Use all the information gathered so far to design
a questionnaire to be administered to the company's employees. This will determine the extent to which the values, views and strategy of senior management
are common to the other segments of the organization. The questions should be
cast in the organization's own terminology and concern the kinds of issues
widely discussed in the company. Employees frequently comment, in answering
such a questionnaire, that they are surprised by how closely the questions
themselves reflect the organization's culture.
Analyze questionnaire responses through such statistical techniques as
analysis of variance or factor analysis to establish the relationships among
various concems of the organization. For example, do managerial employees of
a commercial bank feel that their rewards depend on producing short-term
financial results, managing subordinates well, providing good customer service,
or developing new products and services? Is there a positive or negative relationship between these goals? Do their supervisors see the relationships differently?
Do loan officers see them differently from other managers? Only a quantitative
instrument can provide precise and detailed answers to questions such as these,
tailored to the particular situation of the bank (e.g.. location in a fast-growing
area, international orientation).
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4. Confirm and expand statistical findings. Though the statistical analyses


explain with considerable accuracy what the dimensions of the culture are. they
can also raise issues that require clarification and elaboration. Therefore, hold
small focus group discussions with employees, or conduct further interviews to
explore salient issues identified by the questionnaire.
For example, in one company, a questionnaire showed that employees of a
small division felt that their efforts were not recognized or rewarded adequately.
Focus group discussions explored how a contemplated organizational change to increase the company's profit-center orientation - would remedy or aggravate
this situation. Because the division produced very profitable results, the change
would mean higher compensation for divisional employees. However, it would
also make transfers to larger divisions less likely and limit career opportunities
within the company. The questionnaire had determined the division's major concerns, and the group discussions amplified the company's understanding of how
an organizational change would affect these concems.
Finally, integrate quantitative and qualitative findings to create a composite
picture of the culture. Also, consider the cultural characteristics of competitors to
see whether they function as the company does. You may want to interview the
company's suppliers, customers, or credit analysts to get their perspective on the
company's and its competitors' strengths and weaknesses.
5. Recommend changes in culture, systems, or strategy that will position
the organization better to achieve its long-term goals. A culture study
concludes with a set of recommendations for change, presented initially to top
management. The recommendations might focus on the whole organization, a
single unit (e.g.. a division or department), or even a few crucial leaders. They
identify possible changes in aspects of the culture, systems, or strategy and
suggest action steps to achieve the changes. Recommendations may involve
significant shifts in the allocation of rewards, the utilization of resources, or the
organizational structure.
A case example will show the type of results that can be obtained from statistical
analyses of questionnaire results. Senior management of a company in a rapidly
changing industry was curious about the employee population's views on the challenges of the future. This company had made special efforts to communicate strategy
and corporate values to its employees. Using the statistical technique, factor analysis*,
to interpret the data on the values and expectations of employees, the analysis disclosed six broad, but totally independent dimensions of the culture. They were:
good management of employees
ability to cope with pressure
quality orientation
vision of the future
willingness to take risks and be innovative
production of good financial results.
The independence of these dimensions indicated that, contrary to the company
documents and the statements of senior management, employees did not associate
strong financial results with producing quality products or taking business risks. In fact,
many employees felt that there was a negative relationship between these dimensions
"This technique establishes common properties in a list of values and groups these values into dimensions
(factore).
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that the need to produce strong financial results worked contrary to the goal of
delivering high-quality products to the customer.
When the same data were analyzed with different techniques, other important
issues were uncovered. The broad dimensions discussed here were broken down into
more specific value statements, and this showed that each division and each major
salary level of the company ranked the importance of more specific values differently.
For example, senior management felt it was very important that employees be flexible
and able to cope with change, and were not as concerned with the quality of service
after the product was delivered. Lower-level employees felt just the opposite. They
were very concerned with the quality of service delivered after the product was sold
and felt that the emphasis on change was threatening the company's strong service
Image. In the past, senior management had just assumed that all employees agreed on
the goals of the company. Even among senior management there was disagreement
about the strategic significance of the service component of the business. Some senior
managers felt that service should not be an important concern of top management,
while others disagreed. However, as a result of this study, it was generally agreed that
even if service was not a major concem of senior management, its importance should
continue to be emphasized at lower levels and various suggestions for implementing
this action were proposed.
In this case, by focusing on the meaning of different values to different employee
groups, the company clarified the cultural divergences and communicated more effectively about corporate goals.
Inconsistency in communication and practice cannot be ignored if an organization wants to achieve long-term growth in these difficult times. Using quantitative and
qualitative methods, a company can clearly and accurately understand its culture,
change its management systems and communicate values that are congruent with its
strategy. This will enable management to realize the potential of technical, financial
and human resources.

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