Managing Change: Understanding Corporate Culture (Part 1 of 3)

**************************************************************************************** ACKNOWLEDGEMENT

This article was published in the Jan-Mar 2009 (Vol. 44, No. 1) issue of
Management – the quarterly magazine of The Malaysian Institute of Management

Reproduced here with permission from the author Dr. Victor S. L. Tan

and from
The Malaysian Institute of Management
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Many organisations today are hard pressed to change as they are driven by a strong need to change through this digital and the K-economy era. There is no alternative. They have to change to enable their organisations to compete and survive. However, many CE0s are unhappy because many of the changes implemented are not sustainable.

The scenario sounds too familiar. An organisation suddenly realises the need to change due to external pressure of competition. It decides to take a quick and simple way, i.e. undertake training for staff to improve their competency and motivation. Their staff members are sent off to a nice resort for a couple of days where they brainstorm issues, develop strategies to resolve problems, build team spirit and nurture a sense of camaraderie. When the staff members come back, they are all charged up for two weeks and then the enthusiasm subsides and everyone goes about doing things the old beaten way. The issues are still there. The result is that there is no iota of change happening. It is likewise with the implementation of change initiatives, be they TQM or business process reengineering or the GRID management approach – all started well but have not ended up well.

As a consultant, I have been posed the most common question from CEOS: How do you sustain a change initiative and the enthusiasm for continuous improvement?

There is one great strategic flaw in the way most organisations go about implementing change. They go about managing change in a superficial manner through merely changing the structure, process, strategy and technology without addressing the fundamentals that drive the organisation. And these fundamentals are the components that influence and guide the behaviour of people in organisations. It is these very basic components that make up the corporate culture of an organisation. Unless an organisation takes time to shape its corporate culture to the desired change, the effort and results will not be sustainable.

What is Corporate Culture?

Corporate culture is the way people do things in an organisation. It is a set of norms comprising of beliefs, attitudes, core values and behavioural patterns shared by people in an organisation.

It is these shared beliefs, core values and patterns of behaviour which influence the performance of an organisation. Beliefs are the assumptions or perceptions about things, which people and the organisation as a whole take as true or valid. For example, an organisation may have a shared belief about the great potential of its people. Core values are the primary or dominant values that are accepted throughout the organisation, e.g. the core value of respect. A pattern of behaviour is the way people act towards one another. For instance, an organisation that has the belief in the potential of its people and has the core value of respect will have the desired pattern of behaviour of treating people well.

KL Strategic Change Consulting Group, in its consulting work with over 250 Asian organisations, has found that the corporate cultures of Asian organisations play a significant role in determining the capability and speed of leading change within the organisations as well as in the industry. Thus corporate culture is important as it will determine whether or not an organisation survives in the face of changes, turbulence and challenges in the environment. The model developed by KL Strategic Change Consulting shows a direct correlation in how an organisation's beliefs and assumptions influence the core values, which in turn shape the behaviour of people. And it is this behaviour pattern that ultimately affects the performance of an organisation.

Characteristics of Corporate Culture

How does one go about specifically to describe the corporate culture of an organisation? There arc certain characteristics that an organisation values, which distinguish it from other organisations. It is this set of characteristics that provide a start for describing the corporate culture of an organisation. Overall, organisation behaviour experts can agree that there arc about 10 characteristics which collectively provide insights into the essence of the culture of an organisation. The following are the 10 differential characteristics:

1. Individual initiative: the degree of responsibility, freedom and independence that individuals have
2. Risk tolerance: the degree to which employees are encouraged to be aggressive, innovative and risk-taking
3. Direction: the degree to which the organisation creates clear objectives and performance expectations
4. Integration: the degree to which the units within the organisation are encouraged to operate in a coordinated manner
5. Management support: the degree to which managers provide clear communication, assistance and support to their subordinates
6. Control: the number of rules and regulations, and the amount of direct supervision that is used to oversee and control employee behaviour
7. Identity: the degree to which members identify with the organisation as a whole rather than with their particular work group or field of professional expertise
8. Reward system: the degree to which reward allocations (i.e. salary increase and promotions) are based on employee performance in contrast to seniority, favouritism and so on
9. Conflict tolerance: the degree to which employees are encouraged to air conflicts and criticisms openly
10. Communication patterns: the degree to which organisational communications are restricted to the formal hierarchy of authority

To understand the corporate culture of an organisation, employees are invited to participate in rating these characteristics on a continuum from low to high that corresponds with a scale from 1 to 10. By collating the input from a representative sample of employees, a composite picture of the organisation culture can then be determined. This description will provide a good starting point for employees to develop a common understanding about the organisation, the way things are done and how people are supposed to behave.

The Benefits of Corporate Culture

How does corporate culture help an organisation? What benefits can an organisation derive from developing a strong and conducive corporate culture? In our corporate culture work, we have found that our clients benefited in the following ways:

• It helps align the company towards achieving its vision, mission and goals.
• It increases the team cohesiveness of various departments, divisions or units within an organisation as its corporate culture serves as the 'glue' that bonds people together.
• It shapes the behaviour of staff at work by encouraging the assimilation of core values and the desired behaviour, thereby enabling the organisation to be more effective and efficient.
• A common culture promotes consistency, resolves conflict and facilitates coordination and control.
• It increases staff motivation through a sense of belonging, loyalty and common beliefs and values, which encourage them to think positively of themselves and their organisations.
• A strong culture enables an organisation to pull all its people together and maximise their potential; this certainly provides a competitive edge.

A study of 200 companies by Harvard Business School researchers John Kotter and James Heskett found that corporate culture has a strong impact on the performance of organisations. This landmark study provides four significant conclusions as follows:

• Corporate culture can have a significant impact on a firm's long-term economic performance.
• Corporate culture will probably be an even more critical factor in determining the success or failure of firms in this new millennium.
• Corporate cultures that inhibit strong long-term financial performance are not rare; they develop easily, even in firms that are full of reasonable and intelligent people.
• Although difficult to change, corporate cultures can be made more performance enhancing.

A company with a strong positive culture will motivate people to continue growing, learning and improving. Research has shown that employees have higher motivation and satisfaction working in organisations which are well managed with managers and employees who practise sound principles, common beliefs and shared values.

Thus it can be seen that to enable change initiatives and the enthusiasm for continuous improvement to be sustained, organisations need to develop a conducive corporate culture to support such efforts. They need to inculcate beliefs, assumptions and core values that shape behaviour towards the desired results. To do this requires more than just simply instituting a performance management system. It requires a mindset change of the way people create their own identities, make sense of their working lives and find meaning from their work. And that is going to the core of fundamental change – the change in corporate culture.

Written by Dr. Victor S. L. Tan. Dr. Tan is the Chief Executive Officer of KL Strategic Change Consulting Group. He is an author of five management books. His latest book is The Secret of Change. For more information, visit www.klscc.com or contact the author at victorsltan@klscc.com