Corporate culture, sometimes also called organizational culture, refers to the shared values, attitudes, standards, codes, and behaviors of a company's management and employees. Some would argue that the corporate culture extends to the broader circle of relationships a business maintains, such as with customers, vendors, strategic partners, and so forth. Corporate culture is rooted in an organization's goals, strategies, structure, and approaches to business activities.
Organizations' cultures, of course, emanate largely from the mix of individuals—especially leaders—who are (or were) part of the organization and from the diverse personal histories and experiences they bring. To take a simplistic example, a business led for years by an impersonal, hierarchy-oriented owner or chief executive would be expected to have a different culture than one led by a very informal, nontraditional leader. Corporate cultures are also influenced by organizational history and the processes, market conditions, and other business factors specific to the company. Thus, for example, a relatively new company that has fought bitterly for its slim share of the market would be expected to possess a culture unlike that of its well-established, industry-leading competitor. Finally, when considering multinational enterprises, corporate culture is also dictated in part by the broader values and customs of the country or region in which it is located.
An early and well-known examination of corporate culture was offered in William Hollingsworth Whyte's 1956 book The Organization Man. Its contribution was in taking a close look at how individuals shape and are shaped by the companies they work for. The book chronicled the lives of suburban middleclass employees—all men—of large corporations. Although often understood as a critique of the conformity Whyte's subjects displayed, the book was a rather ambivalent documentary about individuals who based a significant part of their identity on the companies they worked for and the surrounding social milieu. Perhaps with a hint of irony, Whyte labeled himself an organization man, too.
In the wake of The Organization Man, business scholars and social scientists alike have focused their attention on the nature and problems of corporate culture. There is general agreement that
Many of the writings on corporate culture have searched for a system that explains the main variations between different corporate cultures. As a result, numerous typologies or schemes of "culture types" exist, identifying several broad categories into which the different cultures fit. Although all of these classification schemes are open to interpretation and none may be considered comprehensive, they can provide a useful framework for understanding corporate culture.
Geert Hofstede, a respected Dutch organizational studies professor, published with three of his colleagues an important analysis of organizational practices. First published in 1990, the work focused on what the authors called the six dimensions that separate and define organizational cultures:
By mixing and matching different combinations of the Hofstede dimensions, one can obtain reasonably detailed and specific profiles (64 unique combinations, to be exact) of corporate cultures. The recurring theme in this scheme, as in many others, is separating authoritarian and formal practices from democratic and informal ones. The essential issues are how the organization handles interpersonal relations and power. A secondary theme, also the focus of many other writings, is whether an organization's policies and practices are static or dynamic; that is, how easily is the corporate paradigm shifted or modified? This aspect affects everything from work procedures and processes to marketing strategy and new product conception.
Needless to say, not every individual in an organization shares in the dominant values. According to Edgar H. Schein, an oft-cited management professor at the Massachusetts Institute of Technology, three core subcultures can be identified in most—indeed, he claims, every—business organization. They are: (I) an operator culture, which is concerned with practical know-how and getting the work done effectively; (2) an engineering culture, which is a sort of technocratic approach to work emphasizing technical solutions and innovations to optimize the work process; and (3) an executive culture, which takes a financial and public relations approach to problems. One can easily surmise that other kinds of subcultures, either more specific or more general than these, also exist. Schein argues that his three subcultures could clash and lead to severe consequences for the business, and this is particularly likely to occur when a business's technology or other process factors are in transition.
Many executives seek to change their corporate cultures for various reasons. Most obviously, this occurs when the management perceives the present culture to be interfering with business functions. They may also wish to do so based on personal beliefs and leadership philosophy. Other times, such as with mergers and acquisitions, management must reconcile the different cultures of the organizations being joined.
These tasks are not easily accomplished, however, as research by Sue Cartwright and Cary L. Cooper suggests. They found evidence that many mergers and acquisitions are failures in practice specifically because the combined organizations don't work together as smoothly as the merger's architects had planned. This occurs because cultural compatibility is usually not a primary consideration—if any consideration at all—when executives agree to merge their businesses. Furthermore, some merged companies do little to integrate the cultures of the former segments even after the merger transaction is completed. This area represents one of the very practical needs for understanding corporate culture; if the cultures of the merged companies aren't compatible, some would argue, on purely economic grounds the merger shouldn't take place.
But perhaps the most common concern business leaders have about changing organizational culture is regarding whether and how the existing corporate culture might be modified to improve the bellwether emblems of business success—profitability, quality, customer satisfaction, and the like. To this end, a host of books and articles and consulting services have proffered solutions for troubled or merely lackluster organizational climates. Some of these possess serious and enduring value, but many fall into the category of management fad.
Tom Peters and Robert Waterman's In Search of Excellence (1982), which by all accounts was not simply a fad, defined many traits of business culture that are still highly valued today. Because these ideas have received extensive coverage in the business literature, most are familiar, some even cliche. They include: encouraging entrepreneurship within the organization; fostering close customer relationships; recognizing and treating employees as important assets; leading by doing and by embodying corporate values; maintaining loose control (democratic and informal) at the work team level but tight control over corporate values like quality and customer service. Additional widely prized attributes of corporate culture include high rates of innovation, employee motivation (and, conversely, low turnover), open communication, and rapid decision-making, among others.
Once management recognizes the existing culture in its organization and identifies areas it would like to modify, it is still a major undertaking to successfully nurture a different corporate culture. Doing so requires serious commitment from all levels of the organization, but especially all of the senior management. The management must accept that some employees will resist change and should be prepared to gain their cooperation rather than attempting to enforce it. Most of all, executives must understand that it takes time and consistency to establish a positive organizational culture.
Cartwright, Sue, and Cary L. Cooper. Managing Mergers, Acquisitions, and Strategic Alliances: Integrating People and Cultures. 2nd ed. Oxford, UK: Butterworth-Heinemann Ltd., 1996. Goffee, Rob, and Gareth Jones. "What Holds the Modem Company Together?" Harvard Business Review, November-December 1996.
Hofstede, Geert, et al. "Measuring Organizational Cultures." Administrative Science Quarterly 35 (1990), 286-316.
"How to Make Mergers Work." Economist, 9 January 1999. Oden, Howard W. Managing Corporate Culture, Innovation, and Intrapreneurship. Westport, CT: Quorum Books, 1997.
Schein, Edgar H. "Three Cultures of Management: The Key to Organizational Learning." Sloan Management Review, fall 1996.