A big influence on internal corporate culture is the external environment. Cultures can vary widely across organizations; however, organizations within the same industry often reveal similar cultural characteristics because they are operating in similar environments.49 The internal culture should embody what it takes to succeed in the environment. If the external environment requires extraordinary customer service, the culture should encourage good service. If it calls for careful technical decision making, cultural values should reinforce managerial decision making.
1. ADAPTIVE CULTURES
Harvard University researched 207 U.S. firms to illustrate the critical relationship be- tween corporate culture and the external environment. The study found that a strong corporate culture alone did not ensure business success unless the culture encouraged healthy adaptation to the external environment. Adaptive corporate cultures have values and behaviors different from unadaptive corporate cultures. In adaptive cultures, manag- ers are concerned about customers and the internal people and processes that bring about useful change. In unadaptive corporate cultures, managers are concerned about them- selves, and their values tend to discourage risk taking and change. Thus, a strong culture alone is not enough because an unhealthy culture may encourage the organization to march resolutely in the wrong direction. Healthy cultures help companies adapt to the environment.50
2. TYPES OF CULTURES
In considering what cultural values are important for the organization, managers consider the external environment as well as the company’s strategy and goals. Studies suggest that the right fit between culture, strategy, and the environment is associated with four categories or types of culture. These categories are based on two dimensions: (1) the extent to which the external environment requires flexibility or stability; and (2) the extent to which a com- pany’s strategic focus is internal or external. The four categories associated with these dif- ferences are adaptability, achievement, involvement, and consistency.51
The adaptability culture emerges in an environment that requires fast response and high-risk decision making. Managers encourage values that support the company’s ability to rapidly detect, interpret, and translate signals from the environment into new behavior responses. Employees have autonomy to make decisions and act freely to meet new needs, and responsiveness to customers is highly valued. Managers also actively create change by encouraging and rewarding creativity, experimentation, and risk taking.
Lush Cosmetics, a fast-growing maker of shampoos, lotions, and bath products made from fresh ingredients such as mangoes and avocados, provides a good example of an adaptability culture. A guiding motto at the company is: “We reserve the right to make mistakes.” Founder and CEO Mark Constantine is passionately devoted to change and encourages employees to break boundaries, experiment, and take risks. The company kills off a third of its product line every year to offer new and offbeat products.52 Other compa- nies in the cosmetics industry, as well as those involved in electronics, e-commerce, and fashion, often use an adaptability culture because they must move quickly in response to rapid changes in the environment.
The achievement culture is suited to organizations that are concerned with serving specific customers in the external environment but without the intense need for flexibility and rapid change. This results-oriented culture values competitiveness, aggressiveness, personal initiative, and willingness to work long and hard to achieve results. An emphasis on winning and achieving specific ambitious goals is the glue that holds the organization together.53
Siebel Systems, which sells complex software systems, thrives on an achievement cul- ture. Professionalism and aggressiveness are core values. Employees are forbidden to eat at their desks or to decorate with more than one or two personal photographs. People who succeed at Siebel are focused, competitive, and driven to win. Those who perform and meet stringent goals are rewarded handsomely; those who don’t are fired.54
The involvement culture emphasizes an internal focus on the involvement and partic-ipation of employees to adapt rapidly to changing needs from the environment. This culture places high value on meeting employees’ needs, and the organization may be characterized as having a caring, family-like atmosphere. Managers emphasize values such as cooperation, consideration of employees and customers alike, and avoiding status differences.
Consider the involvement culture at Valero, which is partly responsible for helping the company become the top oil refinery in the United States.
Some managers might think putting employees ahead of customers and shareholders is nice, but not very good for business. But at Valero, a strong involvement culture based on putting employees first has paid off in terms of high employee performance and rising market share, profits, and shareholder value.55
The final category of culture, the consistency culture, uses an internal focus and a consistency orientation for a stable environment. Value is placed on following the rules and being thrifty, and the culture supports and rewards a methodical, rational, orderly way of doing things. In today’s fast-changing world, few companies operate in a stable environ- ment, and most managers are shifting toward cultures that are more flexible and in tune with changes in the environment.
But one thriving company, Pacific Edge Software, successfully implemented elements of a consistency culture, ensuring that all its projects are on time and on budget. The husband-and-wife team of Lisa Hjorten and Scott Fuller implanted a culture of order, dis- cipline, and control from the moment they founded the company. The emphasis on order and focus means that employees can generally go home by 6:00 p.m. rather than work all night to finish an important project. Hjorten insists that the company’s culture isn’t rigid or uptight, just careful. Although sometimes being careful means being slow, so far Pacific Edge has managed to keep pace with the demands of the external environment.56
Each of these four categories of culture can be successful. In addition, organizations usually have values that fall into more than one category. The relative emphasis on various cultural values depends on the needs of the environment and the organization’s focus. Managers are responsible for instilling the cultural values the organization must have to be successful in its environment.
Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.