Corporate culture

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Organizational culture

  • Corporate culture refers to the beliefs and behaviors that determine how a company's employees and management interact and handle outside business transactions. It can be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction and every other aspect of operations.
  • Corporate cultures, whether shaped intentionally or grown organically, reach to the core of a company’s ideology and practice, as well as affect every aspect of business from each employee to customer to public image. The current awareness of corporate culture is more acute than ever.
  • Visible aspects of culture, such as an organization’s rituals, stories and symbols, are only the tip of the iceberg.
  • Its beliefs, values, attitudes, and basic assumptions are hidden but definitive.
  • The term “organizational culture” only became part of the business lexicon in the early 1980s, following the publication of Culture’s Consequences by the Dutch cultural psychologist and management expert Geert Hofstede in 1980.
    • The first of Hofstede’s dimensions— power distance—refers to the distance in authority between manager and subordinates. Business cultures that have a high power distance tend to be rule-driven and hierarchical (everyone “knows their place”). In Russia, for example, employees have little access to executives (power distance is high). Conversely, in low power-distance cultures, such as many companies in Australia, decision making is distributed more evenly throughout the organization. Anthropologists have long theorized that collectivist cultures control members through external societal pressure (shame), whereas individualistic cultures control their members more through internal pressure (guilt).
    • In his second dimension, Hofstede proposed that this tendency toward collectivism or individualism can be most clearly seen in the difference between Asian and US companies. When problem-solving, US businesses tend to look to the individual for a solution, whereas Asian companies prefer to pose the problem to a group.
    • Masculinity and femininity, Hofstede’s third cultural dimension, are viewed differently from one organization to another. Some place great emphasis on masculine traits (such as status, assertiveness, and advancement), while others accord feminine traits (such as humanism, cooperation, collegiality, and nurturance) greater value. Italian organizations, for example, tend to have assertive, competitive cultures.
    • The fourth of Hofstede’s dimensions is known as uncertainty avoidance. This is the extent to which workers feel threatened by ambiguous situations. The more uncomfortable people are with “not knowing” how to react in a certain scenario, the more rules and policies the company will need to introduce to reduce that uncertainty. Companies with a low degree of uncertainty avoidance are likely to thrive in more uncertain and ambiguous situations. British organizations, for example, are considered fairly at ease with unstructured and unpredictable situations.
    • Hofstede’s fifth dimension, long vs. short-term orientation, is the extent to which organizations privilege the short-term (profit) over the long-term (value generation). Japanese businesses, for example, think very much in the long-term: Toyota Motor Corporation has a 100-year business plan.
  • Terrence Deal and Allan Kennedy’s 1982 publication Corporate Cultures outlined a range of cultural phenomena. The authors suggested that culture is composed of a framework of six interlocking elements:
    • a company’s history;
    • its values and beliefs;
    • its rituals and ceremonies;
    • its stories;
    • the heroic figures whose words and actions embody corporate values;
    • and the cultural network.
  • The cultural network, devised by Deal and Kennedy, refers to the informal channels in a company—storytellers, gossipers, and whisperers—through which culture is formed and passed on. Deal and Kennedy also defined four types of organizational culture, which emerge from the interplay between a company’s attitude to risk, and the speed of feedback and reward.
    • In the tough-guy, “macho” culture, rapid feedback and reward are combined with a high tolerance of risk, as in the advertising industry.
    • In the work-hard, play-hard culture —such as a sales company—risk is less prevalent, but rapid feedback and reward produce a high-pressure environment.
    • In the “bet-your-company,” high-stakes culture, the risk attached to decisions is high, but feedback on success or failure is slow. The oil industry is typical of the high-stakes culture.
    • In a process culture, such as an insurance company or government agency, feedback is slow and risks are low.
  • 1992 Harvard professor John Kotter claims that in an 11-year period, organizations with rich cultures see net income growth of 756 per cent, compared to one per cent in those with less-defined cultures.
  • 2002 Watson Wyatt develops the Human Capital Index, demonstrating the economic value of business cultures that maintain good practice in human resources.
  • The Harvard Business Review identifies six important characteristics of successful corporate cultures in 2015. 
    • First and foremost is "vision":from a simple mission statement to a corporate manifesto, a company’s vision is a powerful tool. For example, Google’s modern and infamous slogan: “Don’t Be Evil” is a compelling corporate vision.
    • Secondly, "values," while a broad concept, embody the mentalities and perspectives necessary to achieve a company’s vision.
    • Similarly, "practices" are the tangible methods, guided by ethics, through which a company implements its values. For example, Netflix emphasizes the importance of knowledge-based, high-achieving employees and, as such, Netflix pays its employees at the top of their market salary range, rather than an earn-your-way-to-the-top philosophy. "
    • „People" come next, with companies employing and recruiting in a way that reflects and enhances their overall culture.
    • Lastly, "narrative" and "place" are perhaps the most modern characteristics of corporate culture. Having a powerful narrative or origin story, such as that of Steve Jobs and Apple, is important for growth and public image.
    • The "place" of business, such as the city of choice and also office design and architecture, is also one of the most cutting-edge advents in contemporary corporate culture.

Just as national cultures can influence and shape a corporate culture, so does a company’s management strategy. In top companies of the 21st century, such as Google, Apple Inc. and Netflix Inc., less traditional management strategies that include fostering creativity, collective problem solving, and greater employee freedom have been the norm. It has been argued that this is also the key to these companies’ success. Progressive policies such as comprehensive employee benefits and alternatives to hierarchical leadership – even doing away with closed offices and cubicles – are a trend that reflect a more tech-conscious and modern generation. This trend marks a turning away from aggressive, individualistic and high-risk corporate cultures such as that of former energy company Enron.

Case study: Google Inc. is a company that is well-known for its employee-friendly corporate culture. It explicitly defines itself as unconventional and offers perks such as telecommuting, flextime, tuition reimbursement, free employee lunches, on-site doctors and, at its corporate headquarters in Moutain View, Calif., on-site services like oil changes, massages, fitness classes, car washes and a hair stylist. Google's corporate culture has helped it to consistently earn a high ranking on Fortune magazine's list of 100 Best Companies to Work For.

Case study: Nike: Strong cultures give staff a sense of belonging, which in turn brings benefits, such as job satisfaction and staff retention. At Nike, staff are considered rookies if they have been at the company for less than a decade. Moreover, culture defines “the rules of the game,” simplifying priorities. Decision making is faster and easier if everyone understands company values, beliefs, and vision. Deeply embedded cultures also improve the customer experience; if staff believes in the product, they will transfer this belief to customers. Culture also protects an organization from the whims of charismatic leadership and the fickleness of fashion. A leader may influence corporate culture, but a successful culture should endure even when management changes.

Case study: Innovative cultures

1. Kayak

Former CEO Paul English left his mark on this thriving travel company in the form of a philosophy that states that personal engagement between employees and customers fosters a more intimate work and travel experience.

Their 150+ team gets perks like travel bonuses, team excursions, flexible hours, drinks and games but they never lose sight of who they are working for at Kayak. Every employee picks up the phone and handles service calls. Every employee is hired on the basis of being the smartest person that somebody knows. Every employee is encouraged to think beyond the company line and put their ideas to the test.

In their open-concept office, decision-making meetings do not require more than three people because Paul English has never believed that it takes more than three heads to come to a decision.

2. W. L Gore

The makers of the perennially time-honored fabric, Gore-Tex, may not have all the trappings of the modern-day corporate playlands that are often mentioned in articles about Google and Warby Parker. However, the absence of themed lunches has not prevented this 57-year-old company from appearing on Fortune’s "100 Best Companies to Work For" list every year since 1998.

Unlike many startups with great cultures that prioritize young, fresh ideas, Gore has kept some of the same employees for over 20 years. In fact, older employees are known as The Wise. These kinds of titles have replaced typical office terminology: employees are called "Associates," and rather than "managers," Gore has "leaders.” This is in keeping with their slogan, “We don’t manage people, we expect people to manage themselves.”

The closest thing they have to a showy, off-the-wall office is their proudly touted Gore Capabilities Center, a cross between a science center, museum and workspace. It features interactive modules that educate potential partners, buyers and employees on fabrics and fluoropolymers.

3. SolarCity

SolarCity was founded by brothers, Lyndon and Peter Rive (cousins of the superstar-genius Elon Musk) in 2006 and is quickly climbing to the top of the renewable energy sector. This rapidly growing solar energy provider is hiring aggressively, and they have expanded into 17 states across the United States, including their massive HQ in San Mateo, Calif.

Specifically listed in their hiring page are positions for military veterans, which is an overlooked group in the workforce, as well as college and university students who have a passion for reversing climate change. With such heavy social and global responsibilities built into the product and the organization’s culture, the main motivator for SolarCity to continue to innovate is a shared passion towards renewable energy sources.

As Lyndon Rive once said, “What’s important is the mission. If I wanted money, I would have cashed out a long time ago.” All of their (enormous) cash flow is reinvested into growth, which is how they have been able to expand so quickly. With their bottom-line desire to make solar energy more accessible and cheaper than fossil fuels, it is not hard to see how they succeed in building a strong, unified company culture.

4. Edward Jones

Another mainstay on Fortune’s “100 Best Companies to Work For” list, Edward Jones is the financial services firm that has placed a high value on making sure their customers are as happy as their employees. They have put their money where their mouth is to ensure this is the case. Every associate has the opportunity to become partner (7,944 branch office administrators have been promoted to partner). During the recession of 2008, the giant firm worked together to cut costs and managed to keep all of their employees.

They are a 100-year old firm with more than 11,000 branch offices in the United States, but they are not to be confused with the bigger banks that seem to be guided by their Wall Street bottom lines. In contrast, most of their associates live in the small cities and towns where they do business. Edward Jones also prefers to run the opposite of the cold, male-centric office environment that is propagated through the finance industry. Instead, 63 percent of their employees are female.

5. KalpTree Energy

KalpTree Energy is moving up the ranks of admired companies for its innovative technology to completely revolutionize batteries, as well as open the door to new types of products. This would not be possible without their culture, which is anchored to an innovation management approach. The underlying objective is to create things that make life progress in new directions and in interesting ways. To truly foster innovation at KalpTree, leadership built a team from the ground-up who are self-motivated and are not afraid to fail. From there, the focus has been to develop a positive environment that is centered on setting specific goals with a timeline.

To bring innovation to market, the KalpTree team encourages what is called CPR, which stands for Collaboration, Persistance and Results. To generate this encouragement requires communication, talent alignment to the job requirement, challenges, midcourse corrections (if necessary) and reward for results. The team at KalpTree knows that this cannot all be accomplished by non-stop work. Instead, everyone has to make time for fun as this opens the mind and stimulates the creativity and free thought necessary to drive the innovation process.

6. Airbnb

A year ago, at the height of their success, Airbnb founder and CEO released an article on Medium that has inspired me over the past two years simply titled, “Don’t f*ck up the culture.”

He argued that culture is the most important part of the company and that, when a company lives its core values through all aspects of what they do -- from hiring, sending out emails, programming APIs, and shipping products -- the less corporate processes a company needs. When commissioning a design for their San Francisco headquarters, they invited their interior designers to become a fabric of the offices for four months to experience the culture and take part in the activities.

As a result, the headquarters building is stunning: a completely collaborative space that prioritizes green spaces and open areas with many different types of culture walls meant to inspire their employees. The kitchen belongs in someone’s home, and their meeting rooms evoke living rooms. This encourages a real exchange of ideas where each team member is able to take on their own projects with the intent of developing better tools and processes.

For example, when Hurricane Sandy hit New York, one host decided to open up her home for free to anyone who was stranded. This inspired a team of eight Airbnb employees to create a way for other hosts in New York to offer their support. In the end, 1,440 hosts in New York provided homes for the temporarily displaced.

7. Etsy

Etsy is well-known for its vibrant, diverse and purely stunning corporate culture. Much lauded (and envied) by Buzzfeed, Fast Company and a handful of other publications, Etsy is mostly recognized for its hyper-aestheticized Brooklyn headquarters. Most of the furniture was built in their own woodshop. There is a meditative “breathing room,” company meals are locally-sourced and organic, a “greenhouse” communal workspace is lit by windows and lined with houseplants, a board game library, tapestries and crafts on the wall and everything else you can imagine at the home of handmade products.

However, the main driving point of their corporate culture extends far beyond its Maker Funhouse aesthetic. Their initiatives include aggressively hiring female junior engineers, maintaining a gender-balanced senior team, keeping track of their diversity metrics, working with the Hacker School and B-Corp to train and educate employees as well as hire managers, and decreasing the management hierarchy to make sure all employees have a voice.

It is with these core values that that Etsy has helped this 10-year-old company sustain its success and go public as a leader of a new consumer-facing marketplace.

8. Zappos

Though under recent heat for some of their culture, much has been written about Zappos’ eccentric CEO, Tony Hsieh, a multi-millionaire who prefers to sleep in an airstream trailer with his alpaca in a downtown Las Vegas trailer park he set up to accommodate visiting coders and tech entrepreneurs. Though Zappos emerged as one of the largest shoe retailers in the world (it was acquired by Amazon in 2009 for a reported $1.2 million), Zappos may be better known for its company culture.

At their Las Vegas headquarters, there is very little of the traditional management structure. Instead, it operates through a social governance system called Holacracy where all 1,500 employees define their job titles and everybody has a voice. Employees conduct their work and report to teams rather than managing individuals, and they learn new skills by earning badges. Call center employees are encouraged to speak without a script, and there are no limits on call times. New hires are given something of a quitting bonus so that, if they feel after training that the job is not for them, they are offered $3,000 on top of the wages that they have already earned.

While Hsieh has been fighting some controversy since implementing Holacracy (14 percent of his staff left after being offered a generous buy-out option), these efforts have resulted in a unique work environment with only the concerns of Zappos employees and customers in mind.

9. Netflix

In 2009, Netflix CEO Reed Hastings (who is also the former Chief Hiring Officer) put together an exhaustive 124-slide document that has since become legendary in tech culture, garnering over 11 million views and being hailed by Facebook COO Sheryl Sandberg as the “most important document ever to come out of Silicon Valley.”

This document was called the "Netflix Culture Deck," and it outlined the corporate values and hiring strategies of the now-behemoth media company. Netflix pays well and honors freedom, trusting their employees with a no-questions-asked expense policy (for more on its philosophy, please see “Act in Netflix’s Best Interest”), unlimited vacation time, flexible work schedules, no traditional yearly performance reviews and top-end pay.

However, they only keep the best employees, the pro league players and the A+ performers. For example, one of the slides clearly states: “Sustained B-level performance, despite "A for effort," generates a generous severance package, with respect.” Netflix encourages its employees to ask their managers, “If I told you I were leaving, how hard would you work to change my mind?”

By following their highly demanding process and hunger for passion and consistently high-performing employees, Netflix has transformed from a DVD rental service to one of the biggest entertainment and content producers in the world. And, more than office kegs, foosball tables and adult play-pens, Netflix’s values have led to a sustainable and successful corporate culture.

They also recently announced that they have a year maternity leave for all employees leading many more people to love their company culture.

10. Pixar

It’s no surprise that one of the most important movie animation studios in history makes the cut for a list of unique company cultures. Much has been written about Pixar’s 22-acre campus in Emeryville, California. Its headquarters have secret speakeasy offices, statues of the studio’s most beloved characters, cereal bar, soccer field, swimming pool, gourmet cafeteria, billiards and foosball tables and other dream amenities for the top animators and engineers in the country.

However, fancy things do not necessarily create a productive culture, and staff members have admitted that they “have a problem with the parent coming in and saying, ‘You’ve been studying a lot, I think you need to go out and have a social life.’”

The real advantage of working at Pixar is that they have the means and passion to foster creativity and ideas on a larger scale than any other company. For example, to fully understand what goes into making the scene from "Toy Story 3" where Buzz and Woody are running through a garbage incinerator, management set up an inflatable hallwayfull of common detritus for their animators to run through. It is this kind of attention to detail that leads Pixar alums to stay the course as successful entrepreneurs, lead national healthcare initiatives, and tackle creative endeavors in the entertainment industry.

 Exercise 1: Types of corporate cultures

 Exercise 2: Strong vs Toxic Corporate Cultures

 Exercise 3: Mission statements

 Exercise 4: Mission statement and values

 Exercise 5: Company profile sample

 Exercise 6: Company profile BOSCH

 Video 1: Anand Mahindra: Core values

How would you define the following terms by analyzing the following picture?

 Video 2: Ricardo Semler: How to run a company with almost no rules 

Which one of the management practices do you agree with?

  • Three decades ago, Ricardo Semler, the CEO of Brazilian conglomerate Semco, began to challenge deeply ingrained corporate practices. His revolutionary management techniques were so ahead of their time that they are only now starting to gain a foothold in the corporate world. Semler then brought this same radical, democratic spirit to education, and his foundation operates three schools “designed for wisdom.”
  • If your doctor gave you just six months to live, you might vow to visit new places or spend more time with your family. Instead of waiting for a dismal diagnosis, Ricardo Semler, CEO of Brazilian conglomerate Semco, designated two “terminal days” in his personal workweek to devote to the activities he’d do if his time was running out. He understands the paradox of leisure time: People pack it with activities. Moreover, at the stages of your life when you have the most money, you have little free time. Conversely, when you have idle time, you’re either too infirm or too poor to enjoy it.
  • Thus, 30 years ago, Semco began allowing employees to purchase one day a week for 10% of their salary to use for leisure.“We’ve come from an age of revolution, industrial revolution, an age of information, an age of knowledge, but we’re not any closer to the age of wisdom.” Semco implemented further revolutionary workplace practices.
  • It shed "boarding school" processes such as monitoring workers’ hours.
  • The firm revamped its hiring process, inviting all interested candidates to spend a day at the company to see if it was the right fit.
  • Semco’s leaders undergo employee evaluations every six months in order to remain in their positions.
  • The company invites staffers to determine their own pay rates based on comparative salaries within and outside of the company, as well as on the profitability of the company.
  • Soon, Semco stopped checking expense reports and tracking work hours or vacation time.
  • The company opens two seats on the board for individuals at any level of the organization in order to keep the firm honest.

 Video 3: Netflix CEO

  • Netflix's CEO who has pioneered a radical management style, he allows unlimited holiday, expects every employee to fight for their position and tells them to never ever try to please their boss.
  • In your book, you lay out a very unconventional way that you run the company, you call it a unique cultural experiment.
  • For 300 years the factory has dominated our economy and so it's natural that the factory metaphor, the top-down boss, all the rules, a focus on efficiency becomes the dominant paradigm for management; but when your company is really about idea generation, about creativity, there's a different way to manage, there's a different way to lead.
  • So, we tell people don't manage, try to inspire, try to support and we do get some chaos and we do get some mistakes, but we also get some great ideas that help us evolve and stay relevant.
  • We want people to be independent thinkers.
  • Most of our industrial culture is not really focused on creativity, it's focused on error prevention and that's good if you're an airline or a hospital; but if you're a creative organization, what you want to do is make it safe for people, to make mistakes and to try things, sort of managing on the edge of chaos.
  • We model ourselves on professional sports where you want the team to really work well together and to play their heart out. I mean athletes know that they can be injured at any moment but they don't focus on it, they focus on how do they play the best game that they can. And our employees are similar, they focus on how to do, they have an incredible professional experience, learn a lot, grow an incredible amount and change the company for the better.
  • We're very considered and thoughtful but we do say that everybody's playing for their position and that's how you get championship performance.
  • We encourage people to take holiday and to refresh and recharge, but we don't manage how much they take, so formally it's unlimited holiday, they can do whatever they want. And we leave it to people's judgment, but I would say we encourage everyone to set a good example and to take vacation and to think broadly and you know, also to read and exercise and you know just generally be healthy.
  • The painful learning was in my first company which was about 30 years ago was a technical software company and I wrote about this in the book. Every time someone made a mistake, I put a process in place so we didn't make that mistake again. And over time we can get filled with process, and we had the people who liked following process and then the market shifted and we were unable to adapt because people weren't thinking about the right thing for the business, they were thinking about following the process and that's when I realized that if you optimize for efficiency, you don't have much flexibility and for a creative business that's going to change a lot, it's better to focus on flexibility and tolerate less efficiency, kind of managing on the edge of chaos.

 Video 4: The Company Men

Dialogue from the movie for discussion

  • SALINGER: I only closed two of the shipyards, I should have closed all three. Our stock’s in the … toilet.
  • GENE: Everybody’s stock’s in the toilet.
  • SALINGER: The stockholders need to see their share value maximized.
  • GENE: Then sell the damn Degas…
  • SALINGER: Heard you put on quite a show in Chicago. You told a roomful of analysts you’re not going to generate any growth next year?
  • GENE: Three thousand jobs?
  • SALINGER: Ship System’s labour costs are the highest in the industry, your health care and pension obligations are exploding.
  • GENE: We’re in a capital intensive industry – in case you forgot – and credit markets are frozen. We’re looking for new ways to cut costs…
  • SALINGER: You’re getting killed by the Japanese and the Koreans. Hell, even the … Vietnamese are handing you your lunch.
  • GENE: We’ll figure it out, I just need…
  • SALINGER: Christ Gene, we’re not some shittly little shipyard anymore! I can’t keep pouring money into your…
  • GENE: We innovate, we re-tool…
  • SALINGER: American heavy manufacturing is dead. Steel, autos, and your precious ship yards. Our future is in health care, infrastructure, power generation.
  • GENE: I have to be included in any decision that involves one of my divisions.
  • SALINGER: You wouldn’t have agreed to the cuts. You would have gone behind my back to the Board again! Right…?
  • GENE: They were good people, Jim.
  • SALINGER: They’re not our responsibility. We work for the stockholders now.