The Neglected Power of Organizational Culture
by William E. Schneider, Ph.D.
The following story is true.
XYZ company is a multi-billion dollar manufacturer of products that are very powerful, potentially harmful, and very expensive. When a customer utilizes these products they must work the first time. There is no margin for error.
XYZ company is organized in a highly structured manner. People within the company operate with strict policies and procedures. Planning, engineering design and strict implementation are critical to success. Leadership and management are quite authoritative, directive, and systematic. The nature of work is strongly functional in nature. Decision-making is very methodical, objective, data-based, and careful. Issues of certainty, predictability, systematism, and safety pervade most of what happens every day. It is imperative that this organization stay in control.
In the organizational culture framework of our consulting firm, this company is a control core culture organization. Organizational culture will be discussed in much more depth and detail later in this article. For the moment, identifying this company as a control core culture organization is sufficient for purposes of this story.
In 1987 an internal Organizational Development department was established to help increase organizational effectiveness. The number of staff in this department grew to ten professionals plus a Director-level manager. During the next eight years this internal group and numerous external consultants enlisted by this group brought in a series of new management ideas that they believed critically important for this company to adopt. These internal and external professionals insisted that the existing culture present within this client organization was ineffective, outdated, outmoded, harmful to people, and anachronistic. This was the “old way” of leading and managing, they said. They insisted that the following management ideas were the proper and more effective way for this company to go:
By the end of 1996, all of these professionals had been asked to leave. None of the external consultants were still involved with the company. The company had spent $30 million on the above interventions. The only initiatives from this list that have been accepted and adopted by this company are statistical process control and manufacturing-requirements planning systems. Both of these remaining initiatives were embedded in a much larger Total Quality Management (TQM) program that was initiated during the years 1990-1992. The company did its best to adopt all of these “better” management ideas, but by far the majority of them didn’t work.
Senior and middle management in this company have reached consensus on one thing: they will never allow something like this to occur again. All of those internal and external consultants were good-willed, bright and highly capable professionals. They did everything they could to make a significant contribution. Company executives and personnel did everything they could to make all these interventions work. Why did this happen? What went wrong?
Unfortunately this kind of story is, too often, the rule and not the exception. Why? Why do some management ideas take root and remain viable and others wither and die?
This article offers four fundamental reasons, listed in their order of importance. These four reasons are:
Organizations are living social organisms, each with its own culture, character, nature, and identity. Every organization has its own history of success, which reinforces and strengthens the organization’s way of doing things. The older and more successful the organization, the stronger its culture, its nature, its identity becomes.
Organizations are “communities of people with a mission” (Putman, 1990), not machines. They have machine-like characteristics, but these must serve the needs of the community and not vice versa (see de Geus 1997). Organizations exist to fulfill their mission and to contribute to the larger world around them, including their marketplace. They do not exist just for shareholders. They exist for the communities they serve, the society within which they are embedded, their employees, their customers, and their shareholders. They exist for all of these stakeholders, all together, all the time. Profits are important because they allow the organization to survive, reinvest, and grow. They are analogous to air and water. They are necessary for survival and growth, but they are not the purpose or the mission of the organization. “Good management means doing the decent thing by both workers and consumers, not just amassing profits for bosses. ‘An organization is a human, a social, indeed a moral phenomenon,’ [Peter] Drucker notes, in a phrase that today’s reengineers ought to be forced to learn. Drucker has argued that the best managers are driven by the desire to create value for customers, and that the best way to do this is to treat workers not just as costs of production, but as resources, capable of making a sustained and valued contribution” (Micklethwait & Wooldridge, 1996, p.78).
There is a natural hierarchy of living systems. The basic nature of a living social organism is naturally more fundamental, deeper in the hierarchy, and therefore much more powerful than business work processes, financial systems, business strategy, vision, supply chains, information technology, lean manufacturing, marketing plans, team behavior, corporate governance, Wall Street’s investor reports, and so on. All of these phenomena are important. But they are less fundamentally important than the basic nature of organizations as living social organisms. This critically important reality must be where any intervention starts. When this occurs, the intervention has a chance of working. When this does not occur, the probability of failure is high. It may look like an intervention is working in the short term, but what is usually happening is the living system is yielding short-term financial cost savings which start creeping back over the intermediate and long term. This is most evident in the example of ‘surgical’ interventions, such as reengineering, de-layering, and downsizing. There are times when ‘surgery’ is necessary; but ‘surgery’ is not the solution all the time, with every organization, everywhere. Yet, quite a few recent management thinkers would lead one to believe that ‘surgery’ is the only treatment that will work for all organizations.
All living systems, including organizations, grow and develop from the inside out. They start from their core and grow and evolve over time from that core. They operate for a purpose. That purpose is always greater than the self-interests of the organism itself. People, organizations, communities, societies exist in relationship with one another. Each establishes its own unique pattern. Self-sufficiency is a myth. All living organisms operate in a non-linear manner, in a core and periphery manner. That core is central to any one living system’s nature. Organizations follow the same laws of natural living systems that all other kinds of living systems follow (e.g., sub-atomic cells; biological systems; ecological systems; societal systems; inter-planetary systems; etc.).
One central reason that management ideas work or don’t work has to do with whether or not they are based on non-linear, natural paradigms. The more an idea operates from the paradigm of organization as machine the greater the likelihood that management idea will not work. The more machine-like the idea, the more the living system will take the hit and, as soon as possible, start the process of reconstituting itself, just the way the human body operates when it has been damaged or injured. Indeed, all the evidence is that system-attack, machine-paradigm-based, interventions (i.e., reengineering, downsizing) do not last. Every time, the living system reconstitutes itself, heals itself. The organization’s “immune system” begins developing ways to neutralize its “attackers.”
Conversely, the more a management idea builds on the nature and strengths of a particular living social organism and honors the integrity of that organism, the greater the likelihood that the idea will be adopted and integrated into the fabric of that organism.
For any consulting organization to claim that they are in the “organizational transformation” business is unrealistic and bordering on grandiose. All any one, inside or outside the organization, can do is identify the nature, integrity, beauty, identity, and strengths of an organization and do their best to develop, refine, and work to make things more efficient and effective. Living systems are dynamic. Change is the constant. Like the human body, the solar system or sub-atomic cells, the organization is already in its own unique process of patterned change and development. Whether a particular management idea works or not is related to the extent to which that idea takes this constant process of patterned change into account.
Determining where an organization has been, where it is currently, and where it is primarily poised to go next is critically important before any attempt to “change” anything is attempted. Indeed, what organizational consultants can do is help their client organization discover its own unique patterns and processes and, then, work to influence it in a manner that helps the organization to help itself function more efficiently and effectively.
Research into the nature of living systems reveals that all living systems, including living social organisms (organizations), have certain inalienable and consistent characteristics (Capra, 1996). When it comes to the true nature of living systems, reality turns out to be a pattern of dynamic relationships.
The pattern of dynamic relationships at the organization level is culture, which explains why organizational culture is so powerful. So powerful, in fact, that its impact supersedes all other factors when it comes to organizational economic performance (Kotter & Heskett, 1992). When examining the research of Collins and Porras (1994), it is strikingly evident that organizational culture lies at the center of what differentiates “visionary” companies from comparison companies (and, parenthetically, significantly greater economic performance over the long-term).
Culture, “how we do things around here in order to succeed” (Schneider, 1994, 1997) is an organization’s way, identity, pattern of dynamic relationships, “reality.” It has everything to do with implementation and how success is actually achieved. No management idea, no matter how good, will work in practice (implementation) if it does not fit the culture. An organization can have the most superb strategy, but if its culture is not aligned with and promotative of that strategy, the strategy will either stall or fail. Culture establishes and underpins: order, structure, membership criteria, conditions for judging effective performance, communication patterns, expectations and priorities, the nature of reward and punishment, the nature and use of power, decision making practices, and management practices.
While no one organization has a pure culture throughout, every successful organization has a core culture. The core culture is central to the functioning of the organization, forming the nuclear core for how that organization operates in order to succeed. It is critical that this core or lead culture is aligned with the organization’s strategy and core leadership practices. This alignment is, in our research, central to any organization’s effectiveness. Without it, focus is lost and energy wasted, as people, systems and processes work at cross-purposes with one another. See Collins and Porras (1994) for independent and confirming research.
Our research indicates that there are four core cultures: control, collaboration, competence and cultivation. Leaders create one of these four core cultures, consciously and/or unconsciously, from their own personal history, nature, socialization experiences, and perception of what it takes to succeed in their marketplace. Each of the four core cultures emerges from the following social organization archetypes:
There is a strong connection between strategy, culture, and leadership. The fundamental connections are shown in Table 1. The four ‘epistemologies’ that correspond to each of the four core cultures are also listed. By ‘epistemology’ I mean the primary or central way that each core culture knows and understands. This notion of epistemology for each core culture is particularly important for any kind of intervention or practice. The more that an intervention adapts to the epistemology appropriate to the core culture in question, the more probable that intervention will take hold and significantly impact the organization.
The four core epistemologies mean the following:
Control: This culture is all about certainty. It fundamentally exists to ensure certainty, predictability, safety, accuracy, and dependability. Organizational systematism means that the fundamental issue in a control culture is to preserve, grow, and ensure the well-being and success of the organization per se. The organization as a system comes first. Accordingly, the design and framework for information and knowledge in the control culture is built essentially around the goals of the organization, and the extent to which those goals are met. This culture is centered on organizational goal attainment.
Collaboration: This culture is all about synergy. It fundamentally exists to ensure unity, close connection with the customer, intense dedication to the customer. Experiential knowing means that the fundamental issue in a collaboration culture is the connection between people’s experience and reality. The organization moves ahead through the diverse collective experience of people from inside and outside the organization. Collaboration culture people know something when diverse collective experience has been fully utilized. This culture is centered on unique customer goal attainment.
Competence: This culture is all about distinction. It fundamentally exists to ensure the accomplishment of unparalleled, unmatched products or services. This is the culture of uniqueness per se, of one-of-a-kind products or services. Conceptual systematism means that the fundamental issue in a competence culture is the realization of conceptual goals, particularly superior, distinctive conceptual goals. The framework for information and knowledge is built essentially around the conceptual system goals of the organization and the extent to which those goals are met. This culture is centered on conceptual goal attainment.
Cultivation: This culture is all about enrichment. It fundamentally exists to ensure the fullest growth of the customer, fulfillment of the customer’s potential, the raising up of the customer. This culture is all about the further realization of ideals, values, and higher order purposes. Evaluational knowing means that the fundamental issue in the cultivation culture is the connection between the values and ideals of the organization and the extent to which those values and ideals are being operationalized. The key emphasis in this culture is the connection between what is espoused and what is put into operation. This culture is focused on value-centered goal attainment.
Table 1: Strategy, culture and leadership connections
These four core cultures are fully elaborated and compared with one another in this writer’s book, The Reengineering Alternative: A Plan for Making Your Current Culture Work. Examples of actual companies that typify each of the four core cultures are as shown in Table 2.
Table 2: Company examples
When looked at together, the four core cultures reveal an even more fundamental underlying pattern that delineates what drives these four cultures. This underlying pattern is illustrated by two basic axes that, when combined with one another along two separate axes, yield a four-element table. Each section in this four-element table represents one of the four core cultures.
The vertical axis considers what an organization pays primary attention to, or the content of the culture. The horizontal axis considers how an organization primarily makes decisions or forms judgements, or the process of the culture. The content axis is bounded by actuality and possibility; the process axis is bounded by impersonal and personal. Please see Table 3.
Table 3: Organizational content and process
Collaboration and control are actuality cultures; cultivation and competence are possibility cultures. Collaboration and cultivation are personal cultures; and control and competence are impersonal cultures. Each core culture is a unique blend of one content element and one process element. Control is an actuality-impersonal culture; competence is a possibility-impersonal culture; cultivation is a possibility-personal culture; and collaboration is an actuality-personal culture.
Organizational content: what the organization pays attention to
At the most basic level, every organization focuses either on what is actual or what is possible. Actuality has to do with what is; possibility has to do with what might be. The content of an actuality culture has to do with concrete, tangible reality; facts; what has occurred in the past and is occurring in the present; actual experience and actual occurrence; practicality; utility; what can be seen, heard, touched, weighed or measured. The content of a possibility culture has to do with insights; imagined alternatives; what might occur in the future; ideals; beliefs; aspirations; inspirations; novelty; innovations; creative options; theoretical concepts or frameworks; underlying meanings or relationships.
Organizational process: how the organization decides
The other basic dimension that underlies organizational culture is how the organization forms judgements. Every organization emphasizes either impersonal analysis or personal/interpersonal involvement. Impersonal analysis entails the use of detached reasoning. Personal and interpersonal involvement entails the use of people actively judging, deciding, and acting.
The process of an impersonal culture is: detached, system, policy, and procedure oriented; formula oriented; scientific; objective; principle and law oriented; formal; emotionless; prescriptive. The process of a personal culture is people driven; organic; evolutionary; dynamic; participative; subjective; informal; open-ended; important-to-people oriented; emotional.
These two dimensions are critical when working with each of these four core cultures. An intervention will work much more effectively if the content and process of the organization’s culture are carefully taken into account before and during implementation.
Diagonally opposite cultures on the grid (i.e., control and cultivation; collaboration and competence) are diametrically opposite cultures from one another. Trying to adopt the management ideas from one culture into the opposite diagonal culture is almost guaranteed to not work. Trying to adopt the management ideas from an adjacent culture has at best a fifty-percent chance of working.
This framework for understanding and measuring organizational culture is a kind of unified field theory for this critically important organizational phenomenon. It gives us a way of understanding and a paradigm from which we can interpret why any management idea works or doesn’t work in any one organization. If the management idea fits the nature of the organizational culture the probability is very high that that idea will work. If it does not fit the nature of the organizational culture, it will most likely fail.
The two essential areas of core culture that must be prioritized and understood before undertaking any intervention are the epistemology of the core culture and the content and process of the core culture. Culture is deeper in the hierarchy of natural living social systems and usually should be given first priority before any intervention is attempted. Culture is not just another variable to consider, among many. Remember that culture is any one living social system’s pattern of dynamic relationships. Or, put another way, culture is any one living social system’s fundamental reality. Consultants and managers ignore culture at their own risk and wasted expense.
The second reason, then, that management ideas succeed or fail has to do with the extent to which consultants and managers honor the power of organizational culture and whether or not they practice any management idea in a manner congruent with the organization’s core culture.
By far the majority of management ideas heralded at one time or another during the past 40 years can be shown to be a natural fit with one (at times, two) of the four core cultures discussed above. And, the majority of them can be shown to not fit the other core cultures. Please see Table 4. Most of the management ideas listed below were taken from Harvard Business Review’s supplement (September-October 1997). This writer added a few.
Table 4: Management Ideas by Core Culture
This reason is closely related to reasons one and two, but bears discussion. The more component-centered the management idea, the less likely it will work. Indeed, the more component-centered the idea the more the buyer should beware! There is no such thing as ‘one size fits all.’ The more the consumer of these ideas is encouraged to imitate or copy what others are doing well the more the buyer should beware. In almost every instance, when this approach is proffered, the component-centered idea has a strong characteristic of ‘you need what I can do’ behind it.
Component-centered ideas that do not fit the core culture of the organization in question only pull the organization off center. In the intermediate, and certainly the long, term they just fade away or run out of energy and commitment from others. Unfortunately, they also waste time, energy, and money and leave employees confused and often less respectful of management.
An important distinction here is the distinction between practices and principles. The principles of many component-focused interventions are usually valuable for any one organization and core culture to consider. The practices of that component-centered intervention are a different matter. For example, take “empowerment.” Empowerment is a component-centered idea that will work (in practice) most naturally in a cultivation culture. Empowerment is, in many ways, what the cultivation culture is all about. But, the practice of empowerment programs will not work in a control culture, which is premised upon the exact opposite epistemology and content and process of the cultivation culture. But, the principles embedded in empowerment are relevant to the control culture. All one has to do is to simply ask “what does ‘empowerment’ mean in a control culture?’ The answer is to actively get input about implementation matters and to actively encourage employees to come up with as many ideas as they can when it comes to implementing things more efficiently and effectively. This same line of reasoning can be applied to each of the four core cultures regarding many of the management ideas listed in Table 4.
Any intervention must fit the system, the core culture, the nature of the living system. If it does not, the chances of it beneficially impacting that system are 50-50 at best. “After all, it is much easier to sell a medicine with a label saying ‘This will cure you, no matter what your complaint,’ than it is to sell one with a label saying ‘This treatment may or may not succeed, depending on your circumstances. It is likely to be painful and could well have unintended side effects’” (Micklethwait & Wooldridge, 1996. P. 41).
When it comes to adding value to an organization, to benefiting an organization, the decider is strategy, not consultant’s or manager’s personal theories about “the right way” to lead, manage, operate, produce, or win. Unless and until any management idea can be clearly linked to the strategy of the organization in question it needs to be viewed with skepticism at the very least. If the clear link between the idea and the organization’s strategy cannot be made, the idea is very likely more tied to what the purveyor of the idea can do or to the personal value and belief system of the purveyor and nothing more. Implementing such an idea runs great risk of pulling the client organization off center in order to accomplish the purpose(s) of the consultant or the manager, not the purpose (strategy) of the organization being impacted.
Alignment between strategy, culture and leadership is critical. It is, indeed, the central definition of organizational effectiveness (Goll & Sambharya, 1995; Barney, 1986; Lorsch, 1986; Schwartz & Davis, 1981; Shrivastava, 1985). Effective and long-term financially successful organizations are focused and aligned. They establish clear ideologies, strong and clear cultures, and methods for selecting and developing people that encourage people to work in concert with the strategy and leadership of the organization (Collins and Porras, 1994). When Collins and Porras synthesized their results regarding visionary companies they concluded that the most distinguishing feature of the visionary companies was that they constantly emphasized alignment.
Once an organization’s strategy is established, then the appropriate core culture and set of core leadership practices are already preordained. The mission or strategy of the organization sets the stage for what that organization is all about. There is an aligned core culture and set of core leadership practices for every singular strategy. The key is to measurably link the three together and to, then, pinpoint where the organization needs to be more aligned.
Case Study Example
The following case study exemplifies how the issues raised in this article get translated into action in the real world of business and organizational productivity.
What the client learned after administration of Corporate Development Group’s Culturetek™ system:
What changes were made by the client following the analysis:
What results occurred:
Management ideas designed to improve organizational effectiveness will succeed the more they:
Additional implications offered are the following:
Capra, F., The Web of Life: A New Scientific Understanding of Living Systems. New York: Anchor Books. 1996
Collins, J.C. & Porras, J.I., Built To Last: Successful Habits of Visionary Companies. New York: HarperCollins Publishers, Inc. 1994
Conger, J.A. & Associates, Spirit at Work. San Francisco: Jossey-Bass Publishers, Inc. 1994
Covey, S.R., Principle-Centered Leadership. New York: Fireside. 1992
Covey, S.R., The Seven Habits of Highly Effective People. New York: Simon and Schuster, Inc. 1989
DePree, M., Leadership is an Art. New York: Dell Publishing. 1989
Grove, A.S., High Output Management. New York: Vintage Books. 1995
Kotter, J.P. & Heskett, J.L., Corporate Culture and Performance. New York: The Free Press, Inc. 1992
De Geus, A., The Living Company. Boston: Harvard Business School Press. 1997
Donnithorne, L.R., The West Point Way of Leadership. New York: Currency/Doubleday. 1993
Goll, I. & Sambharya, R.B. “Corporate Ideology, diversification and firm performance.” Organization Studies, Winter 1995, v. 16, n. 5, 823-847.
Lorsch, J.W. “Managing culture: The invisible barrier to strategic change.” California Management Review, 1986, 28/2: 95-109
Micklethwait, J. & Wooldridge, A., The Witch Doctors: Making Sense of the Management Gurus. New York: Times Books. 1996
Oakley, E. & Krug, D., Enlightened Leadership. Denver, CO: StoneTree Publishing. 1991
Peters, T.J. and Waterman, R.H., Jr.. In Search of Excellence: Lessons from America’s Best-Run Companies. New York: Harper & Row Publishers, Inc. 1982
Putman, A.O., “Organizations.” Advances in Descriptive Psychology, 1990, v.5, 11-46.
Schneider, W.E., The Reengineering Alternative: A Plan for Making Your Current Culture Work. Burr Ridge, IL: Irwin Professional Publishing, Inc. 1994
Schneider, W.E., “Aligning strategy, culture and leadership.” In Neumann, J.E.; Kellner, K.; & Dawson-Shepherd, A. (Eds.), Developing Organisational Consultancy. London: Routledge. 1997
Schwartz, H. & Davis, S. “Matching corporate culture and business strategy.” Organizational Dynamics, 1981, 9(Summer): 30-48
Shrivastava, P. “Integrating strategy formulation with organizational culture.” Journal of Business Strategy, 1985, 5/3: 103-111
Sibbet, D. and the Staff of HBR., 75 Years of Management Ideas and Practice 1922-1997: A Supplement to the Harvard Business Review. Harvard Business Review, September-October 1997
Treacy, M & Wiersema, F., The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market. Reading, MA: Addison-Wesley Publishing Company. 1995
Wheatley, M.J. & Dellner-Rogers, M., A Simpler Way. San Francisco: Berrett-Koehler Publishers, Inc. 1996
About the Author
This manuscript first appeared in Focus on Change Management, May-June, 1998. It is reproduced here with permission.