What’s Wrong With Corporate Culture As A Management Tool? Almost Everything!

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Jun 25, 2018

The top 15 most damaging shortcomings of managing using your culture

It’s no secret that most in HR and many CEOs are enamored with “corporate culture,” which is essentially the “invisible hand” that helps guide the behavior of your employees. And because every firm has a corporate culture, the mere existence of one isn’t sufficient to guarantee better business results

It is my contention that in a fast-changing world, your firm may be damaging its business results when it relies on your well-established corporate culture as a management tool. The damage occurs for two primary reasons:

First, a corporate culture develops over time based on historical institutional lessons. These “this is how we do things” historical expectations may result in a deliberate slowing of the rate of change required to dominate in your rapidly changing business environment.

The second major cause of damage occurs because corporate cultures evolve, which means that they are not proactively managed. And without having someone with authority in charge to monitor its effectiveness, corporate cultures may unintentionally weaken over time. As a result, the required behaviors will not be adequately encouraged, reinforced or executed.

In a fast-changing world, it’s time to rethink relying on your corporate culture to manage behaviors.

So, rather than assuming that managing a firm with an almost invisible corporate culture automatically produces stronger business results, I instead recommend you view corporate culture from the cynical eyes of a shareholder. They know that many firms with well-recognized strong cultures like GE, Kodak, Xerox, and HP haven’t fared very well in the marketplace. So, consider taking a new, and more modern, cynical view of managing by relying on your corporate culture. Below is my list of potential shortcomings of corporate culture as a management tool.

“Any culture, by definition, exists primarily to prevent change, to set in stone the lessons of the past.”

— Robert Eaton, former chairperson of Chrysler

The top 15 most damaging shortcomings of corporate culture

Listed below are the most damaging shortcomings of using your corporate culture as a management tool with the most impactful shortcomings listed first under each category.

A slowly evolving corporate culture may actually decrease your rate of corporate change

1. Set-in stone behaviors / expectations may be problematic in a fast-changing world – The primary goal of corporate culture is arguably to drive consistent behaviors over time. But this strength may also be the corporate culture’s most significant weaknesses in a rapidly changing business environment. Corporate cultures by definition evolve quite slowly, which will be problematic when the marketplace evolves much faster. A culture that inadvertently maintains the status quo for too long may even be detrimental to the survival of the firm (as it was at Kodak, Polaroid, and Xerox).

2. An overly deliberate corporate culture may also reduce innovation – Our fast-changing highly competitive business world requires a high level of innovation throughout the corporation. Unfortunately, if your culture emphasizes deliberate decision-making, risk avoidance or only funding sure things, the innovation that you need will be delayed. Innovation requires new ways of thinking and doing things, and a culture that does not proactively change will limit innovation.

3. A corporate culture may not shift or evolve fast enough — Because a firm’s corporate culture is seldom formally managed, it may never change without a formal effort to consistently update it. Firms leave it to chance that the culture will adapt as fast as the marketplace demands. Unfortunately, a culture won’t automatically shift and align when there is a significant change in corporate strategic goals, mission or vision. In fact, there is little evidence that firms know which proactive actions can successfully shift a corporate culture. So, a culture that doesn’t shift when the environment changes can threaten the future of the organization.

Operationally, the corporate culture may not drive the right actions

4. There are no enforcement mechanisms covering corporate culture expectations – Almost all actions that are critical to a corporation’s success have some set of formal enforcement mechanisms. But because corporate culture is supposed to drive action automatically, there are no enforcement mechanisms to ensure that the right behaviors occur. In addition, business units and functions are not periodically measured on how well their actions fit the requirements of the culture and without business unit adherence metrics, there are no continuous improvement mechanisms or consequences for noncompliance.

5. There are no metrics covering individual adherence – Occasionally, a candidate’s fit with the culture is measured during the hiring process. But there is no process for determining whether that initial assessment was accurate. And after the employee is hired, their adherence to the corporate culture is not measured during employee and manager performance appraisal or during the promotion processes.

Employee surveys may cover employee perceptions of the corporate culture, but they don’t measure its actual execution.

6. The actions driven by the corporate culture may not be consistently executed across the firm – In theory, a corporate culture automatically guides the right actions and behaviors equally across the corporation. But the reality is that employees don’t always act in the way prescribed by the corporate culture. In large corporations, when execution is measured, the range of actual behaviors varies dramatically among business units and functions. As a result, business units may learn to “talk the culture,” but then not actually act in accordance with its expectations. Obviously, you can’t determine whether your corporate culture is consistently powerful or weak without a formal set of metrics covering corporate culture.

7. Your corporate culture is guaranteed to be diluted over time as a result of growth – One of the goals of a corporate culture is to maintain it consistently over time. However, with a 20% normal turnover, a merger or any degree of job growth, you will be continually adding people that could dilute your culture. And because there is no evidence that corporate culture can be effectively taught during onboarding, a high volume of new hires will almost guarantee that your culture will be diluted.

 Corporate culture doesn’t meet the characteristics of other high-value corporate management initiatives

8. Culture isn’t directly linked to positive business results – To be strategic, the results of any corporate area must be directly connected with business results. Since every firm has a culture, it’s difficult to prove a cause-and-effect link between a powerful corporate culture and revenue or profits. Few firms have hard evidence showing that the business units that adhere more closely to the corporate culture produce higher business results. And without a formal measure of the power of a corporate culture, it’s almost impossible for an individual corporation to demonstrate to its shareholders the correlation between an increase in the power of their culture and an increase in profits or shareholder value.

9. Does it provide a competitive advantage? — Every firm has a corporate culture; its mere existence doesn’t automatically mean that it allows for a competitive advantage. So, without hard data and competitive analysis to prove that it encourages the right behaviors better than your competitor’s corporate culture, it’s best to assume that your corporate culture does not provide a competitive advantage.

10. All high-value factors appear in corporate reports – Legally, all things that have a significant economic value must appear in financial reports. If a corporate culture provides financial value, that value should be quantified and then reported in dollars. But it never is. When the corporate culture does appear in the annual report, it may be vaguely described, but once again it is not quantified.

11. A corporate culture is rarely clearly defined – Everything that provides significant economic value within a corporation is clearly defined. You can look far and wide within most corporations and you won’t find a formal written definition that includes the driving elements of a corporate culture. Without a clear definition, employees are often confused about the overlap among corporate culture, corporate values, ethics, celebrated traditions and corporate policies. And without a communicated working list of its essential elements, consistent employee behavior is not likely to be achieved.

12. No one with authority owns corporate culture – All high-value corporate areas are managed with accountability, budget and authority. Although there are a few “Chief Culture Officers,” at most firm, no single individual is formally responsible for managing corporate culture. And when someone is assigned, they have no budget, power or formal authority for developing, reinforcing and, when necessary, changing it. Assigning it to HR rather than senior executives may further reduce the perception of its importance.

13. Rather than a defined process, corporate culture relies on the vague concept of a shared mindset – rather than specific rules, rewards and punishments that direct behavior. A corporate culture operates under a type of “shared mindset” which is supposed to drive the right employee actions automatically. An individual or corporate mindset is almost impossible to define or measure. So, you can’t tell if a shared mindset is enough to drive behavior.

Other miscellaneous shortcomings associated with corporate culture

14. The external perception of your culture may be different – Frequently, the corporate culture is used as an attraction tool. But there is almost always no formal method of communicating it externally. So, the external image of your corporate culture may be significantly less attractive than your actual culture.

15. Your culture may clash with those of your partners – In today’s highly interconnected business world, it may be challenging to find vendors, suppliers and strategic partners that have a culture that doesn’t clash with yours. This incongruence is an even more serious problem when dealing with international suppliers from less developed countries.

The top 10 most effective approaches for eliciting the desired employee behaviors and actions

Avoid the “trap” of relying on your corporate culture as a management tool. Here are recommendations for more manageable and adaptable processes and actions.

1. Goals create focus – Set and communicate clear corporate goals and priorities so that everyone knows what he or she should be focusing on.

2. What you measure sends a clear message – Develop performance assessment systems that are continually updated to fit the new corporate expectations.

3. What you recognize, reward and punish matters – Develop reward, recognition and praise systems that clearly differentiate between employees that do or don’t do “the expected things.” In the same light, realize that what you punish — and performance management systems also help — ensures everyone knows what behaviors are discouraged.

4. What you communicate makes it clear what’s important — Make sure that “what you care most about” dominates all forms of written and verbal corporate communications. Continually talking about a topic helps to elevate its importance.

5. What you widely report sends a clear message – of what’s important. Widely report your critical measures and results so every manager and employee know what performance and focus areas everyone will see. This might entail dismantling some antiquated reporting systems that focus on reporting “fit in the culture,” rather than shifting the emphasis to reporting outputs and results.

6. Budget allocations signal what’s important – Change your budget and resource allocation system to ensure that the highest priority items get the lion’s share of the funding.

7. Whom you hire impacts team behaviors eventually – It’s essential that a firm develop hiring and promotion procedures that ensure those selected are those most capable of meeting the current and changing behavioral expectations. Also, be careful that “fit” assessment isn’t overly emphasized when hiring for positions where innovation and rapid change are required.

8. Recruiting and branding messages are also important – Both applicants and employees see a firm’s recruiting messages. Build a great internal and external employment brand that spreads the word about your specific management practices and actions (rather than your culture).

9. Onboarding messaging plays a vital role – Replace any often “feeble” attempts to explain the corporate culture to new hires during orientation. Instead, provide a specific list of what the corporation expects when it comes to behaviors and executing on values. Make it clear to new employees how they will know when those expectations change.

10. Countering traditionalists may also be necessary – Be aware that the most stalwart champions of corporate culture may be “corporate dinosaurs” who consistently resist change. Employees who overly defend tradition and the dated aspects of the corporate culture may need to be counseled or even managed out. It may be equally important that the firm develops processes that celebrate and treat “contras” (those that think out of the box and that clearly deviate from the “old” culture) as heroes.

The advantage of each of the above approaches is that they are flexible. They can change with the shifting focus of the business. When corporate or market expectations change rapidly, your goals, what you measure, talk about and reward can be altered and quickly communicated so that everyone understands what is now needed.

Agility and flexibility make the above 10 management processes superior to managing using the invisible and unmanaged hand of the corporate culture.

Final thoughts

As HR shifts to a more data-driven model, many traditional management approaches will go by the wayside. In my view, the most widely used and poorly managed concept of managing your workforce with “an invisible corporate culture” should be the first to be degraded to go under detailed scrutiny. The time has passed when any management tool can be allowed to exist without being continually managed and improved.

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