Corporate Culture

Drucker’s famous quote “Culture eats strategy for breakfast” doesn’t mean that strategy is unimportant. While most interpretations state that while strategy IS important, a fit-for-purpose organizational culture is a more assured route to success for an organization. The work of Hofstede and Waisfisz states that organizational culture and strategy are ideally linked.

The quote “People do not quit companies, managers, or leaders – they quit organizational cultures” kind of sums it up. The addition of the word ‘just’ makes the quote more all-encompassing:

“People do not just quit companies, managers, or leaders – they quit organizational cultures”

Basically, the quote has been modified to emphasize that while individual behaviors on behalf of a manager or leader can induce employees to leave, in most cases, it is not enough by itself. The non-functional organizational culture that allows the leader or manager to continue his or her poor behavior is what will ultimately make the employee leave. In a functional organizational culture, the company’s response would most likely be to investigate the situation in line with guidelines (for instance the ACAS grievance procedure in the UK) and take the appropriate action.

So, what is culture?

Geert Hofstede defines culture as:

“The programming of the human mind by which one group of people distinguishes itself from another group”

When talking about organizational culture, the groups referred to are organizations. According to Hofstede, culture consists of layers, and the four layers described by Hofstede are shown in Figure 1 below:

The concept of practices is important. Using the Cambridge Dictionary, practice is defined as:

“Action, rather than thought or idea”

While values are rarely directly visible as practices, in a strong culture, they will underpin rituals, heroes and symbols, which in most cases are directly visible as practices.

It is worth noting that Hofstede considers the main differences in organizational cultures to be more apparent in the practices of an organization, whereas for national cultures, the differences will be more apparent in the values.

Linking strategy and culture

Rather than describing an organizational culture as good or bad, the words functional and non-functional were used earlier. To describe a culture as functional or non-functional, it needs to be compared to or measured against some reference culture, and it makes sense that this reference is the optimal culture.

This optimal culture depends on a range of factors such as country, industry, nature of the business, specific factors relating to the way the company operates and the chosen strategy of the organization in question.

So, how does the strategy affect the optimal culture?

As a very oversimplified example, let’s consider the headline statement from Royal Dutch Shell PLC’s strategy day held earlier this year:

“Shell today set out its strategy to accelerate its transformation into a provider of net-zero emissions energy products and services, powered by growth in its customer-facing businesses. A disciplined cash allocation framework and rigorous approach to driving down carbon emissions will deliver value for shareholders, customers and wider society.”

In terms of culture, there are two themes that stand out:

1. Growth in customer-facing businesses will require an emphasis on customer orientation. When reading this, it’s normal to think of call centers and customer loyalty programs, but it’s just as important to have that customer orientation within the business as well as when dealing with external customers.

• Think about it, if the business areas dealing with external customers are not themselves treated as a customer when collaborating with other business areas, external customer-orientation will likely suffer. It therefore makes sense that customer-orientation features prominently in the organizational culture, in this case.

2. Rigorous approach to driving down carbon emissions will require a stricter work discipline around activities involving significant emissions. While ‘strict work discipline’ tends to have largely negative connotations these days, there are many ways to implement such discipline without introducing negative emotions.

• Communication and rewards feature heavily in promoting a strict work discipline, but so do standards and accountability. The practices employed in implementing this strict discipline would likely form part of the organizational culture, in this case.

Cultural diversity

According to Hofstede and Waisfisz, there are certain aspects of organizational culture that can have diversity (or variation) within a company. This is particularly true around the trade-off between safety and productivity, one of the six autonomous dimensions of the Hofstede organizational culture model.

To illustrate, let’s consider a downstream oil and gas organization and split it into 4 distinct, virtual units:

Figure 2: Safety vs Productivity trade-off in conceptual downstream oil & gas organization

A refinery is considered a very high-risk operation, and therefore will have a strong process safety-focus. This does not imply that productivity isn’t important and shouldn’t be measured in a refinery, it simply implies that safety is never traded off against productivity.

Retail stations (assuming they have hydrocarbons or gas supply) may be considered, at certain times, such as fuel transfer to storage, high-risk operations, and only minor trade-offs can be made between safety and productivity.

Wholesale operations can be assumed to be medium-risk (significant volumes of storage and transport) and a wider scope of trade-offs can be made between safety and productivity.

Finally, with the support functions, productivity or value for money is the focus, and risks are limited, so higher levels of productivity could and should be pursued.

Although cultural diversity should be avoided as much as possible, there are areas within organizational culture where diversity makes a lot of sense, and is in fact, required.

The Hofstede model

For more information on the Hofstede model, please read the Hofstede Insights page on the multi-focus model on organizational culture. Briefly explained, it measures organizational culture across 6 autonomous dimensions and 2 semi-autonomous dimensions.

It is the only organizational culture model based on extensive research, that has been refined through use in thousands of companies since its inception, and it also includes a database of proposed actions for given cultural gaps across the autonomous dimensions, based on earlier measurements and experience.

The journey

Organizational culture transformation (or change) projects are some of the hardest to implement, in that it involves behavioral change across an entire company. They are, however, also some of the most impactful and satisfying projects to undertake.

In terms of timing, it is considered better to initiate a corporate culture transformation (or change) project during a ‘calmer’ period. While there are very few calm periods for most businesses, doing a corporate culture measurement immediately after a large organization change initiative or during a pandemic will likely see personal emotions affecting the results of the measurements, and perhaps even the optimal culture definition.

Some of the benefits of an organizational culture change project are: