CORPORATE CULTURE

ARRENGED BY: SEVENTH GROUP DETIRA PUTRI M. M. NAHDEE W. M. MUKHTAR NASUTION

Corporate Cu ture
Related Terms: Corporate Image Corporate culture refers to the shared values, attitudes, standards, and beliefs that characterize members of an organization and define its nature. Corporate culture is rooted in an organization's goals, strategies, structure, and approaches to labor, customers, investors, and the greater community. As such, it is an essential component in any business's ultimate success or failure. Closely related concepts, discussed else here in this volume, are corporate ethics ! hich formally state the company's values" and corporate image ! hich is the public perception of the corporate culture". The concept is some hat comple#, abstract, and difficult to grasp. A good ay to define it is by indirection. The $agberg Consulting %roup does &ust that on its 'eb page on the sub&ect. $C% suggests five (uestions that, if ans ered, get at the essence:

What 10 words would you use to describe your company? Around here what's really important? Around here who gets promoted? Around here what behaviors get rewarded? Around here who fits in and who doesn't?

As these (uestions suggest, every company has a culture)but not all cultures !or aspects of them" help a company reach its goals. The (uestions also suggest that that companies may have a *real culture,* discernible by ans ering these (uestions, and another one hich may sound better but may not be the true one.

EMERGENCE AND CHARACTERISTICS

The concept of corporate culture emerged as a consciously cultivated reality in the +,-.s along/side related developments li0e the social responsibility movement)itself the conse(uence of environmentalism, consumerism, and public hostility to multinationals. A areness of corporate culture as undoubtedly also a conse(uence of gro th, not least e#pansion overseas) here corporations found themselves competing in other national cultures. The 1.2. competition ith 3apan, ith its uni(ue corporate culture, as yet another influence. 2o as the rise to prominence of management gurus the dean of hom as 4eter 5ruc0er. As corporations became a are of themselves as actors on the social scene, corporate culture became yet another aspect of the business to atch and to evaluate) alongside the *hard* measures of assets, revenues, profits, and shareholder return. Corporate culture by definition affects a firm's operations. It is also, by definition, something that flo s from management do n ard and out ard. In many corporations, the *culture* as set very early on by the charismatic activity and leadership of a founder. 6ut as ma&or tendencies become deeply institutionalized, corporate culture also becomes an institutional habit that ne comers ac(uire. In actual practice *reinventing* the corporation from the top do n, therefore, is difficult to achieve, ta0es time, and happens only under strong leadership.

7bservers and analysts of the phenomenon tend to subdivide culture into its various e#pressions related either to ma&or constituencies !employees and or0ers, customers, vendors, government, the community" or to methods or styles of operation !cautious, conservative, ris0/ta0ing, aggressive, innovative". A corporate culture may also, by overstepping certain bounds, become suicidal)as the case of 8nron Corporation, the energy trader, illustrates. In the 8nron culture an aggressive, creative, high/ris0 style led to fraud and ultimate collapse. Analysis is helpful in understanding ho a corporate culture e#presses itself in specific areas. $o ever, the concept is social and culture, as the phrase itself implies. It does not lend itself to reorganization by a rearrangement of standard building bloc0s.

CULTURE IN SMALL BUSINESSES

Culture can be a particularly important consideration for small businesses. A healthy company culture may increase employees' commitment and productivity, hile an unhealthy culture may inhibit a company's gro th or even contribute to business failure. 9any entrepreneurs, hen they first start a ne business, (uite naturally tend to ta0e on a great deal of responsibility themselves. As the company gro s and adds employees, ho ever, the authoritarian management style that the business o ner used successfully in a very small company can become detrimental. Instead of attempting to retain control over all aspects of the business, the small business o ner should, as consultant 9orty :efcoe told Nation's Business, strive to *get everybody else in the organization to do your &ob, hile you create an environment so that they can do it.* In a healthy culture, employees vie themselves as part of a team and gain satisfaction from helping the overall company succeed. 'hen employees sense that they are contributing to a successful group effort, their level of commitment and productivity, and thus the (uality of the company's products or services, are li0ely to improve. In contrast, employees in an unhealthy culture tend to vie themselves as individuals, distinct from the company, and focus upon their o n needs. They only perform the most basic re(uirements of their &obs, and their main)and perhaps only)motivation is their paychec0. 2ince every company is different, there are many ays to develop a culture that or0s. ;ollo ing are several main principles that small business o ners should consider in order to create a healthy corporate culture: Prevailing corporate culture begins at the top. 8ntrepreneurs need to e#plain and share their vision of the company's future ith their or0ers. *:et your vision for the company become their vision for the company,* stated 3ohn 7'9alley in his article *$o to Create a 'inning Corporate Culture.* $e goes on to say that *a company ithout a vision is reactive in nature, and its management is seldom confident addressing competitive threats and stepping into the future.* In addition, small business o ners should be a are that their o n behavior and attitudes set the standard for the entire or0force. 2mall business o ners ho set poor e#amples in areas such as lifestyle, dedication to (uality, business or personal ethics, and dealings ith others !customers, vendors, and employees" ill almost certainly find their companies defined by such characteristics. Treat all employees equally. 8ntrepreneurs should treat all employees e(ually. This does not mean that business o ners can not besto e#tra re ards on or0ers ho e#cel, but it does mean that interactions ith all employees should be based on a foundation of respect for them. 7ne particular pitfall in this area for many small business o ners is nepotism. 9any

small businesses are family/o ned and operated. 6ut bloodlines should be irrelevant in daily operations. *2uccessful ' businesses constantly place 'you are no different' e#pectations on family members they employ,* noted 7'9alley. *5oing other ise (uic0ly undermines employees' morale'. 2ho ing favoritism in the or0place is li0e s imming ith shar0s) you are destined to get bitten.* Hiring decisions should reflect desired corporate culture. The ise small business o ner ill hire or0ers ho ill treat clients and fello employees ell and dedicate themselves to mastering the tas0s for hich they are responsible. After all, *good attitude* is an essential component of any healthy corporate culture. 6ut entrepreneurs and their managers also need to ma0e sure that hiring decisions are not based upon ethnic, racial, or gender issues. 6esides, businesses typically benefit from having a diverse or0force rather than one that is overly homogeneous. Two-way communication is essential. 2mall business o ners ho discuss problems realistically ith their or0force and enlist employees' help in solving them ill li0ely be re arded ith a healthy internal environment. This can be an important asset, for once a participatory and engaging culture has been established, it can help propel a small business ahead of its competition. 7n the other hand, problems ith the corporate culture can play a ma&or role in small business failures. 'hen employees only perform the tas0s necessary to their o n &obs, rather than putting out e#tra effort on behalf of the overall business, productivity declines and gro th comes to a halt. 1nfortunately, many entrepreneurs tend to ignore the developing cultures ithin their businesses until it is too late to ma0e needed changes. In an article for Entrepreneur, Robert 9c%arvey outlined some arning signs of trouble ith the company culture, including: increased turnover< difficulty in hiring talented people< employees arriving at or0 and leaving for home right on time< lo attendance at company events< a lac0 of honest communication and understanding of the company mission< an *us/ versus/them* mentality bet een employees and management< and declining (uality and customer satisfaction. A small business e#hibiting one or more of these arning signs should consider hether the problems stem from the company culture. If so, the small business o ner should ta0e steps to improve the culture, including reaffirming the company's mission and goals and establishing a more open relationship ith employees.

S!" Co#po$e$t% o& a Great Corporate Cu ture

The benefits of a strong corporate culture are both intuitive and supported by social science. According to 3ames :. $es0ett, culture =can account for >./?.@ of the differential in corporate performance hen compared ith Aculturally unremar0ableB competitors.C And

$6R riters have offered advice on navigating different geographic cultures, selecting &obs based on culture, changing cultures, and offering feedbac0 across cultures, among other topics. 6ut hat ma0es a cultureD 8ach culture is uni(ue and myriad factors go into creating one, but IBve observed at least si# common components of great cultures. Isolating those elements can be the first step to building a differentiated culture and a lasting organization. '. V!%!o$: A great culture starts ith a vision or mission statement. These simple turns of phrase guide a companyBs values and provide it ith purpose. That purpose, in turn, orients every decision employees ma0e. 'hen they are deeply authentic and prominently displayed, good vision statements can even help orient customers, suppliers, and other sta0eholders. Eonprofits often e#cel at having compelling, simple vision statements. The AlzheimerBs Association, for e#ample, is dedicated to =a orld ithout AlzheimerBs.C And 7#fam envisions =a &ust orld ithout poverty.C A vision statement is a simple but foundational element of culture. (. Va ue%: A companyBs values are the core of its culture. 'hile a vision articulates a companyBs purpose, values offer a set of guidelines on the behaviors and mindsets needed to achieve that vision. 9cFinsey G Company, for e#ample, has a clearly articulated set of values that are prominently communicated to all employees and involve the ay that firm vo s to serve clients, treat colleagues, and uphold professional standards. %oogleBs values might be best articulated by their famous phrase, =5onBt be evil.C 6ut they are also enshrined in their =ten things e 0no to be true.C And hile many companies find their values revolve around a fe simple topics !employees, clients, professionalism, etc.", the originality of those values is less important than their authenticity. ). Pra*t!*e%: 7f course, values are of little importance unless they are enshrined in a companyBs practices. If an organization professes, =people are our greatest asset,C it should also be ready to invest in people in visible ays. 'egmanBs, for e#ample, heralds values li0e =caringC and =respect,C promising prospects =a &ob Hthey'llI love.C And it follo s through in its company practices, ran0ed by ;ortune as the fifth best company to or0 for. 2imilarly, if an organization values =flatC hierarchy, it must encourage more &unior team members to dissent in discussions ithout fear or negative repercussions. And hatever an organizationBs values, they must be reinforced in revie criteria and promotion policies, and ba0ed into the operating principles of daily life in the firm. +. Peop e: Eo company can build a coherent culture ithout people ho either share its core values or possess the illingness and ability to embrace those values. ThatBs hy the greatest firms in the orld also have some of the most stringent recruiting policies. According to Charles 8llis, as noted in a recent revie of his boo0 hat it Ta!es" #even #ecrets of #uccess from the orld$s %reatest Professional &irms, the best firms are =fanatical about recruiting ne employees ho are not &ust the most talented but also the best suited to a particular corporate culture.C 8llis highlights that those firms often have J/>. people intervie each candidate. And as an added benefit, 2teven $unt notes at 9onster.com that one study found applicants ho ere a cultural fit ould accept a K@ lo er salary, and departments ith cultural alignment had ?.@ less turnover. 4eople stic0 ith cultures they li0e, and bringing on the right =culture carriersC reinforces the culture an organization already has.

,. Narrat!-e: 9arshall %anz as once a 0ey part of Caesar ChavezBs 1nited ;arm 'or0ers movement and helped structure the organizing platform for 6arac0 7bamaBs >..J presidential campaign. Eo a professor at $arvard, one of %anzBs core areas of research and teaching is the po er of narrative. Any organization has a uni(ue history ) a uni(ue story. And the ability to unearth that history and craft it into a narrative is a core element of culture creation. The elements of that narrative can be formal ) li0e Coca/Cola, hich dedicated an enormous resource to celebrating its heritage and even has a 'orld of Co0e museum in Atlanta ) or informal, li0e those stories about ho 2teve 3obsB early fascination ith calligraphy shaped the aesthetically oriented culture at Apple. 6ut they are more po erful hen identified, shaped, and retold as a part of a firmBs ongoing culture. .. P a*e: 'hy does 4i#ar have a huge open atrium engineering an environment here firm members run into each other throughout the day and interact in informal, unplanned aysD 'hy does 9ayor 9ichael 6loomberg prefer his staff sit in a =bullpenC environment, rather than one of separate offices ith soundproof doorsD And hy do tech firms cluster in 2ilicon Lalley and financial firms cluster in :ondon and Ee Mor0D There are obviously numerous ans ers to each of these (uestions, but one clear ans er is that place shapes culture. 7pen architecture is more conducive to certain office behaviors, li0e collaboration. Certain cities and countries have local cultures that may reinforce or contradict the culture a firm is trying to create. 4lace ) hether geography, architecture, or aesthetic design ) impacts the values and behaviors of people in a or0place. There are other factors that influence culture. 6ut these si# components can provide a firm foundation for shaping a ne organizationBs culture. And identifying and understanding them more fully in an e#isting organization can be the first step to revitalizing or reshaping culture in a company loo0ing for change.