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Cover Story (June--July 2010)

Corporate Culture and Cultural Change

By Tan Chee Teik

 
There is no right or best corporate culture for an organisation. Management needs to select suitable culture to fit the business environment at a particular time. No business strategy can succeed without the right organisational culture in place. Strong cultures built over the years cannot be easily changed overnight.

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Large organisations, especially multinationals, may have hundreds of subcultures.








ALL organisations have their own corporate culture. Strong cultures built up over the years cannot be easily changed overnight. Changes in corporate culture are made when a new board of directors or a new chief executive takes over the reins of a company. They feel more comfortable working in the new environment if the culture is more like that of their previous company. Invariably, they impose their own version of corporate culture to the company by making changes for better or worse. The clash of cultures can have devastating results on the profitability and longterm survival of the firm. Strong cultures will resist major changes and invariably, the newcomer will have to submit to the existing cultural mindset.
       There is no right or best corporate culture for an organisation. Management needs to select suitable culture to fit the business environment at a particular time. No business strategy can succeed without the right organisational culture in place.
       It is not easy to define corporate culture. Culture is a common way of thinking. Culture comprises the organisation’s shared values, behaviours, symbols, and assumptions. Ask an employee what corporate culture is and he may say: “It’s the way we do things around here.”
       This kind of culture can be easily observed. For example, in some companies, managers who have a room to themselves do not close the doors during working hours. Those who want to speak to them have easy access. Culture represents the behaviour patterns of an organisation that new employees are encouraged to follow by their coworkers.
       At the less visible level, culture refers to values that are shared by the people in a group that tend to persist over time even when the group membership changes.
       For firms with strong corporate culture, the ideas often seem to be related with a founder or early leaders who call them “vision”, business strategy, or philosophy.
       Cultures may be very stable over time but they can change. A major crisis may force the group to re-evaluate some values. For example, in the last economic downturn, many Asian companies abandoned the “iron rice bowl” principle and began retrenching staff to perpetuate its own survival although historically the firm had never resorted to termination to reduce head counts. Other factors affecting cultural change could be resignation of key staff, rapid hiring of recruits, diversification into new business, or geographical expansion.
       Firms put their shared values in a creed or mission statement for all managers to follow. Shared values and behaviours make people feel good about working for the firm. The feeling of commitment or loyalty makes the staff strive harder.
       While the corporate culture that has been developed over the years is valuable, it needs to be altered over time. Don’t expect a static culture to last forever. Globalisation is one reason for change. For instance, multinational corporations have offices in more than one country; they hire people with different cultures; and employees may speak different languages.
       The fast pace of information communications technology affects cultural change: we don’t have the luxury of waiting some time before we alter our corporate culture. With intense competition, we need to move fast to counter the rivals.
 With fewer employees in a flattened organization structure and large dependence on outsourcing, we may find it more difficult to adhere to a unique corporate culture.
       When there is a change of a company’s core product, this will also affect the company’s culture. For example, there are no longer factories producing typewriters, today—they produce personal computers that can also do word-processing. Their workers have to adapt to electronics and information technology rather than depend on mechanical power. They have to adapt to an industry that moves at high speed.
       When IBM engaged in an historic alliance with Lenovo, it made this public announcement: “To bring long-term value for clients, companies need to continually reinvent themselves. IBM’s multi-year agreement with Lenovo is broad-based and allows IBM to continue to provide end-to-end solutions to our clients. Lenovo is now the preferred provider of IBM-branded personal computers to our clients, and IBM will continue to provide financing and maintenance services for those PC solutions.”
       It should be noted that Lenovo could not copy IBM culture; it is a Chinese IT company that has its own culture which was very different from that of IBM. The IBM staff and suppliers who wanted to be employed or do business with Lenovo had to adapt to the new culture.
       When you join a company, you have to accept its culture. Only those at the very top of the organisation have the power to change a company’s culture.

Strong Culture at Royal Dutch Shell
       My contact, Mr Lee, a senior manager with over 30 years of experience with Royal Dutch Shell Plc shared with me the company’s strong corporate culture.
       Shell’s employees try to work and live by certain core values—honesty, integrity, respect for people, professionalism, trust, pride in Shell, and openness. They bring these values into play in everything they do. Shell hires 102,000 employees in more than 100 countries so it is of importance that all employees think and work as one.
       Lee has to travel often to several capitals in Asia to conduct strategic meetings with subsidiaries reporting to the Singapore office. He notes that since Shell’s corporate culture is so strong, he forgets whether he is at an office in Tokyo, Manila, or Singapore. The employees act as though they have come from the same mould. The staff is focused on the company’s business strategy.
       Since they believe in openness, they are unafraid to give their frank views. Once when Lee was chairing a managerial meeting at the Tokyo subsidiary, the Japanese manager told him loudly: “You know that Japan is the second largest economy in the world. Singapore is unplaced. Why should we be taking orders from you?”
       Lee calmly replied: “Where I come from does not matter. Since you report to me, you will take orders from me.” There was no acrimony. In other corporate cultures, someone who questions authority will be charged with insubordination.
       Later, when Lee retired from Shell, he was asked to take charge of the new building project for his church. Since he had some free time, he volunteered his services. He was so used to the Shell way of managing projects that he automatically applied certain procedures and audits. The church building committee comprises members from various cultures each with their own ideas of how the building should look. He had a difficult task winning them over to his perspective. It took time and patience to change their culture and there were many compromises but eventually the church was built although not all committee members were happy.

Culture Infusion
       Since many managers like to hire people who have many of the same characteristics as themselves, much like how we choose our partners in life, the corporate culture is often strengthened by the recruits hired.
       Large organisations, especially multinationals, may have hundreds of subcultures. Within each division of a company, there could be different divisional culture. With globalisation, MNCs may have branches in over 20 countries. So while the parent company in France may have a strong French culture, its subsidiary in Taiwan may have some Chinese culture infused in the corporate culture, while its Indonesian factory may have more than an element of local culture in the management of the company. Studies on corporate culture have observed that people who follow cultural norms will be rewarded but those who do not will be penalised.
       In the book The Welch Way, the author provided details of how Jack Welch was forced to change the corporate culture of General Electric.
When Jack became GE’s CEO, he had the unenviable task of changing the company’s way of doing things and reinventing the company from the executive level to the bottom level of the hierarchy.
       Over the years, the company had created a bloated bureaucracy, which caused waste, slow decision-making, unnecessary approvals, and other tasks that impeded the company’s competitiveness.
       Jack advocated “blowing up the bureaucracy”. This concept of disdaining bureaucracy became an important part of GE’s shared values.
       He borrowed an idea from sports and successfully added it to the company culture. He urged his managers to “involve everyone in the game” as found in good teamwork in the sporting arena. In team sports, everyone must put in a shoulder in order to win. His new initiative ensured that everyone in the company has a say in how things should be run.
       In the old days, managers made the decisions and workers were expected to carry them out whether they agreed with them or not. Under the new system, the person with the best idea often wins. The rank and file could freely contribute ideas and new ideas were rewarded and celebrated.

HP Way
       The role of a company leader, particularly the founder, in building culture is critical. A change of CEO can affect the culture of a company. If the CEO is promoted from within, the effect is less. Over the years, founders Bill Hewlett and Dave Packard evolved the HP Way. Put simply, it stressed serving everyone who has a stake in the business with integrity and fairness. This meant that the company shared its success with its employees, recognising their individual achievements, giving them opportunities to upgrade their skills and abilities, and always showing them trust and respect.
       For HP customers, the firm provided them with products and services of the greatest value. HP promised stockholders large profits and not getting itself involved in businesses not meaningful to the bottom line.

Cultural Clash
       Corporate culture is built up over the years by top management and the other staff who look for cues from the higher management levels. When I was working in a Japanese firm, I observed the management style of the 50-year-old managing director, Mr Taguchi.
       At that time, the business world was looking towards Japan as its economy was bounding so quickly that nothing could go wrong. The MD was steeped in Confucianism teachings. He respected the local staff and never raised his voice in anger, he only need to raise his eyebrows. When they made a mistake he would patiently correct the employee with a smile.
       Although he had a large office to himself, he preferred to sit at a standard desk among the employees, to be one of them. During the lunar new year, without fail, he would give each employee a red packet from his own pocket. He treated everyone like a family member and they worked very hard for him and the company.
       One fine day, he broke the news that he was being recalled to Tokyo and a new Japanese MD with many years of experience in the company’s buying office in New York would take his place. The new MD, a Japanese imbued with American culture, was impatient to change the company’s culture. He felt that if he moved quickly, he could save the company from the losses that it was suffering annually.
       He abandoned the Japanese paternalism that the former MD had built up. He was loud when employees made mistakes and he often used the threat “I’ll fire you if you do this again”. In trying to impose “American” culture into a Japanese firm, he hastened the closure of the Singapore office. Key personnel resigned and within a year, the company in Singapore folded.

Quality in China’s SOE
       In John and Doris Naisbitt’s latest book, China’s Megatrends, they wrote about changing the quality culture of one Chinese state-owned enterprise (SOE). In 1984, a bureaucrat Zhang Ruimin was sent to run a state-owned electronics company in Qingdao. About 600 workers managed to produce 100 substandard refrigerators each month. He had a big challenge when he tried to change their work attitudes and culture.
       One day, Zhang was so fed up with the lack of quality of the firm’s refrigerators that he lined up 76 defective fridges on the factory floor and ordered those responsible to smash the fridges with a sledgehammer in front of the entire staff. That woke them up and quality controls were observed seriously.
       Zhang managed to turn that lacklustre plant into China’s largest appliance maker with US$2.1 billlion in annual sales today. The company is better known as Haier Group Co.

Philosophy, Values, and Credo
       Corporate culture can be transferred through statements of a company’s philosophy, values, charter, and credo. Stories, legends, and myths of key people and events in the firm’s history help to inspire the employees. Staff of such companies feel very proud when they give out their business cards. For example, many Chinese medical products use the photo of their founder as a trade mark. This picture of an aged founder helps to spell out the message of reliability and proven quality over the years.

Key People
       The main factor for Sony Corporation’s success can be attributed to the culture instilled by Akio Morita and Masaru Ibuka. For them, Sony’s people are like a family. Every member of the company should be treated like they were part of a family. Between Ibuka and Morita was a friendship and trust somewhat like brotherly love. The founders’ conviction trickled throughout the company.
       Sony’s founders encouraged the employees to be independent and take calculated risks. While employees at many factories are punished for their mistakes, Sony executives find it unwise and unnecessary to define individual responsibility too closely.
       Corporate culture is found in the organizational systems and procedures. If there are well-documented systems and standard operational procedures, the staff can respond quickly to problems and this leads to better efficiency.

Caste Culture
       A woman Indian engineer working in Singapore pointed out two common corporate cultures in the workplace in India: “Because of the privileges accorded to the lower caste after independence, many have risen to senior positions in the company. But the Brahmins find it difficult to take orders from supervisors from the lower caste.”
       She observes: “In traditional Indian society, women are subservient to men. This mindset is carried over to the modern workplace so that male engineers find it difficult to take orders from their female superiors. I am glad that this practice is not condoned in Singapore.”
       It has been found that successful major cultural changes are found to be implemented by someone who already had a track record for leadership and was selected to head an organisation.
       Each new leader has a team that established a new vision and a set of strategies for achieving that vision. The leaders persuade certain groups and individuals in the firm to commit themselves to the new direction and energise the personnel to make it happen.

Copyright © 2014 Singapore Institute of Management.