Shaping Corporate Culture for Innovative Response

Research conducted by a Stanford  University  professor indicates that the one factor that increases a company’s value the most is people and how they are treated.57  In addition, sur- veys found  that CEOs cite organizational culture as their most important mechanism for attracting, motivating, and retaining  talented  employees, a capability  they consider the single best predictor  of overall organizational  excellence.58 In a survey of Canadian senior executives, fully 82 percent indicated that they believe culture and financial performance are directly correlated.59

Corporate  culture  plays a key role in creating an organizational climate that enables learning and innovative  responses to threats from the external environment,  challenging new opportunities, or organizational crises. Managers, however, realize that they can’t focus all their effort  on values. They also must be committed to solid business performance.


Companies that succeed in a turbulent  world are those that pay careful attention to cultural values and business performance. Cultural values can energize and motivate  employees by appealing to higher ideals and unifying  people around shared goals. In addition, values boost performance by shaping and guiding employee  behavior,  so that everyone’s actions  are aligned with strategic priorities.60 Exhibit 2.6 illustrates four organizational outcomes based on the relative attention  managers pay to cultural values and business performance.61

A company in Quadrant A pays little attention to either values or business results and is unlikely to survive for long. Managers in Quadrant B organizations are highly focused on creating a strong cohesive culture,  but they don’t tie organizational  values directly  to goals and desired  business results.  When cultural values aren’t  connected  to business performance, they aren’t likely to benefit the organization during hard times. For exam- ple, Levi Strauss  placed  a high premium on values, even tying part of managers’ pay to how well they toed the values line. The problem  was that top executives lost sight of the business performance  side of the issue. Thus,  when Levi jeans began losing market share to new, hip rivals, the company  was unable  to adapt quickly to the changing environment.62

Quadrant C represents organizations that are focused primarily  on bottom-line results and pay little attention to organizational values.

Quadrant C courses would  have students engage in cut-throat competition for grades. The teacher doesn’t care about the people, only how well they do on assignments and tests. This approach may be profitable in the short  run,  but  the success is difficult to sustain over the long term because the “glue” that holds the organization together—shared cultural values—is missing.

Think about the numerous get-rich-quick  goals of dot-com entrepreneurs. Thousands of companies that sprang up in the late 1990s were aimed primarily at fast growth and quick profits, with little effort to build  a solid organization based on long-term mission and values. When the crash came, these companies failed. Those that survived typically were companies with strong cultural  values that helped them weather the storm. For example, both eBay and  managers paid careful attention to organizational  culture, as did smaller e-commerce  companies  such as Canada’s Mediagrif Interactive Technologies, an online B2B brokerage that allows businesses to meet online and trade their goods.63

Finally, companies in Quadrant D emphasize both culture and solid business perfor- mance  as drivers  of organizational success. Managers  in these organizations  align values with the company’s day-to-day  operations—hiring  practices, performance management, budgeting, criteria for promotions  and rewards, and so forth. A 2004 study of corporate values by Booz Allen Hamilton and the Aspen Institute found that managers in companies that report superior financial  results typically  emphasize values and link them directly to the way they run the organization.64

A good example is the fast-growing  Umpqua Bank, which expanded from 11 branches and $140 million in assets in 1994 to 92 branches and $5 billion in assets nine  years later. At Umpqua, every element of the culture is directed to serving customers, and every aspect of operations reflects the cultural values.

Consider training programs. To avoid the “it’s not my job” attitude that infects many banks, managers devised the “universal associate” program,  which  trains every bank staffer in every task so a teller can take a mortgage application  and a loan officer can process your checking account deposit. Employees are empowered to make their own decisions about how to satisfy customers, and branches have free reign to devise unique ways to coddle the clientele in their particular location.

Umpqua  also carefully  measures and rewards the cultural  values it wants to maintain. The bank’s executive vice president of cultural  enhancement devised a software program that measures how cultural values are connected  to performance, which the bank calls “return on quality” (ROQ). The ROQ scores for each branch and department  are posted every month,  and they serve as the basis for determining incentives and rewards.65

Quadrant D organizations represent the high-performance culture, a culture that (1) is based on a solid organizational  mission or purpose, (2) embodies shared adaptive values that guide decisions and business practices, and (3) encourages individual employee ownership of both bottom-line results and the organization’s cultural backbone.66

One of the most important things that managers do is to create and influence organiza- tional culture to meet strategic  goals, because culture  has a significant impact on perfor- mance. In Corporate Culture  and Performance, Kotter and Heskett  provided evidence that companies that intentionally managed cultural  values outperformed  similar companies that did not. Research has validated that some elements of corporate culture are positively corre- lated with higher financial performance.67  A  good example  is Caterpillar Inc., which developed  a Cultural Assessment Process (CAP) to measure and manage how effectively the culture contributes to organizational  effectiveness. The assessment gave top executives hard data documenting millions of dollars in savings attributed  directly  to cultural factors.68


A primary way in which managers  shape cultural norms and values to build a  high- performance culture is by being a cultural leader. Managers  must overcommunicate to en- sure that employees understand the new culture values, and they signal these values in ac- tions  as well  as words.

A cultural  leader defines and uses signals and symbols to influence corporate culture. Cultural leaders influence  culture in two key areas:

  1. The cultural leader articulates a vision  for the organizational  culture that employees can believe in. The leader defines and communicates central values that employees believe in and will rally around. Values are tied to a clear and compelling  mission, or core purpose.
  2. The cultural leader heeds the day-to-day activities that reinforce the cultural vision. The  leader makes sure that work procedures and reward systems match and reinforce  the values. Actions  speak louder than words, so cultural  leaders “walk  their talk.”69

Leaders  can create a culture  that brings people together  by ensuring that people have a voice  in what the important values should  be. Managers  at United Stationers built a new, adaptive culture  from the ground up by asking all 6,000 globally dispersed employees to help define the values that would be the building blocks of the culture.70

Managers widely communicate the cultural  values through  words and actions. Values statements that aren’t reinforced by management behavior are meaningless or even harm- ful to employees and the organization. Consider Enron, whose values statement included things like communication,  respect, and integrity. Managers’ actions at the corporation clearly belied those stated values.71

For values to guide the organization, managers have to model them every day. Canada’s WestJet Airlines, which ranked in a survey  as having Canada’s most admired corporate cul- ture, provides an illustration.  WestJet employees (called simply “people” at WestJet) regu- larly  see CEO Clive  Beddoe and other top leaders putting the values of equality, teamwork, participation, and customer service into action. At the end of a flight, for example, everyone on hand pitches in to pick up garbage—even the CEO.

Top executives spend much of their time chatting informally with em- ployees and customers, and they regularly send notes of thanks to people who have gone above and beyond the call of duty. Top executives have been known to visit the call center on Christmas Day to pitch in and to thank people for working on the holiday. Managers don’t receive perks over and above anyone else; they get no assigned parking  spaces and no club memberships. Every person at WestJet is treated like first-class, ex- actly the way leaders want employees to treat every passenger on a WestJet flight.72

Cultural leaders also uphold  their commitment to values during  difficult times or crises, as illustrated  by the example of Bill Greehey at Valero ear- lier in this chapter. On Fortune magazine’s list of “100 Best Companies to Work For,” Valero zoomed from Number 23 to Number 3 based on its treatment of employees following  the devastating 2005 hurricanes. Despite the costs, Valero kept people on the payroll throughout the crisis, set up special booths to feed volunteers, and donated $1 million to the American Red Cross for hurricane relief efforts.73 Upholding the cultural values helps organizations  weather a crisis and come out stronger on the other side.

Creating and maintaining a high-performance  culture is not easy in today’s turbulent environment and changing workplace, but through their words—and particularly their actions—cultural  leaders let everyone in the organization know what really counts.

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.

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