How to Build a Corporate Culture That Leads to Success

Unternehmenskultur – Mitarbeiter beim Meeting

What precisely is culture? It is values, norms and behaviours. It isn’t always clear which factors have a positive or negative influence on corporate culture, though. A company’s culture should be specific and tangible, as it does impact on employee performance and corporate success. This article explains which factors influence organizational culture and how you in HR can contribute to shaping and even changing this culture.

Definition

Corporate culture is based on a system of shared values, social norms, symbols and attitudes which shape how members of an organization take decisions, act and feel.

It includes the example of lived leadership, of relationships (with colleagues, customers, etc.), of how decisions are taken – all these aspects are grounded in a company’s culture, which extends across all levels of its organization, from senior management all the way through to each and every employee.

Organizational culture can be understood by asking the following questions:

  • What does the organization stand for?
  • What is important to the organization?

What Does Corporate Culture Achieve?

A positive corporate culture forms the basis for:

  • Companies achieving their set goals
  • Employees feeling supported in times of crisis
  • Employees feeling good as part of the company, actively contributing to it and staying with it

Employees are not your company’s most important resource. They ARE your company.

Adam Grant – organizational psychologist, Wharton professor, and bestselling author

Corporate Culture and Corporate Success

Values shape behaviours, and behaviours shape outcomes. According to a study by the German Federal Ministry of Labour, a full third of profit before tax can be attributed to an employee-focused corporate culture.

A positive corporate culture has an effect on employees: Ideally, they will be more satisfied, which conversely means that they will perform better and be more motivated. Moreover, if employees feel good about their workplaces, they are less likely to resign, which results in lower recruitment costs and supports the company’s long-term operational planning processes.

Factors That Shape Corporate Culture

Obviously, market conditions impact a company’s daily operations, but there are other, external social and socio-political factors which also need to be considered.

Twenty-first-century companies are presented with the following challenges:

  • Globalization. Market players act globally, sometimes as part of complex networks and at high speeds. Both market speed and complexity are likely to intensify rather than ease in future.
  • Performance-driven society. More and more is expected to be achieved within ever shorter timeframes. This results in performance pressure, which can cause mental stress and affects not only employees’ health, but also their motivation and performance.
  • Demographics. People work until later in life than they used to, which creates new challenges for workplaces and health care systems. At the same time, younger generations (Gen Y, Z) are expecting a positive work-life balance and flexible working hours.
  • Equal opportunity. Whether this is implemented through quotas or otherwise, most companies need to change their structures and take different HR decisions, both in the medium and in the long term.

These factors demand that companies rethink and reshape their processes and structures. This in turn can initiate a change in culture, as any change in behaviours also means a change in values.

How Companies Can Respond:

  • Companies develop their own identities, which employees are clearly aware of and are able to put into words.
  • Employees know their company’s strategic goals and align their behaviours accordingly.
  • Employees are able to flourish and use their full potential to support the company’s strategic goals.
  • Employees do professional development and are able to meet new challenges successfully.
  • Companies value the ability to innovate and have a positive approach to employees’ mistakes.
  • Communication within the company is transparent.
  • Management relies on cooperation rather than competition.
  • The company successfully engages with all stakeholders, from investors through to customers, the media and the public.
  • The company’s conduct is in line with its vision.

Four Employees are talking

How Is Corporate Culture Expressed in Daily Business?

Company culture can be compared to a company’s character, which is expressed in various domains such as:

  • Handling conflict and mistakes
  • Employee identification with their company
  • Communicative behaviours
  • Appreciation of commitment and performance
  • Engagement with stakeholders
  • Willingness to take risks
  • Feedback culture
  • Family friendliness

How employees and customers experience interactions forms part of the corporate culture. An example would be if a customer makes a purchase, but then does not really hear back from the company afterwards. This lack of communication reflects a certain organizational culture.

Another example, this time of how corporate culture can be experienced internally: Employee Y is working on a difficult task and discusses it with colleagues over lunch. They immediately volunteer to help, even though it will require them to work overtime. This, too, is an example of organizational culture.

Given the above, it does not make a lot of sense to ask applicants about specific values (e.g. “are you proactive?”) during an interview. It is much more productive to ask them about behaviours, where they can demonstrate that they act in line with particular values.

Best-Practice Corporate Culture

An organization can be perceived as being service-oriented and innovative, or backward and unapproachable. This illustrates very clearly that culture is nothing abstract, quite the opposite: It is a concrete factor that promotes or hampers competitiveness.

The following best-practice examples show how a successful corporate culture can be implemented.

Granini: Employees Sharing Management Responsibilities

This company neither regulates nor imposes corporate culture – it is rather its employees’ lived, day-to-day reality. This is the only way if an organization is to reap the full benefits.

“Employees are a lot smarter than many executives and board members in Germany believe”, said Heribert Gathof as he took over as managing director of Granini, a German fruit juice producer. What did he do differently? He involved employees closely in strategic questions, including in investment decisions worth millions.

To do so, Gathof created an interdisciplinary team with members from all levels of the company’s hierarchy, who were tasked with developing a five-year strategy. This team generated ideas which management had never thought of, and it ensured that all employees fully supported the new strategy.

The results speak for themselves: Eckes-Granini Germany increased its sales by 70%. The company’s self-organization model means that employees take on responsibility not by title, but in daily practice.

Schmalz: A Small Company With a Google-Sized Feel-Good Atmosphere

Schmalz, a vacuum technology specialist based in the Black Forest, promotes itself as an employer that truly takes care of all aspects of its employees’ wellbeing. There is a crèche and day-care centre for employees’ children close by; life coaches provide support in the event of private or professional issues; and the company’s internal academy offers a program of 200 professional development and leisure-oriented courses. The Schmalz management is currently exploring options for providing better support to employees with relatives who require care.

Schmalz is doing this to emulate large corporations like Google, but there is one big difference: Keeping work clearly separated from employees’ private lives is sacrosanct for this medium-sized company. “We do that so we can keep up with competitors, who are mostly located in cities’, says Daniel Just, Schmalz’ head of HR. ‘We, in contrast, are located in the Black Forest town of Glatten, and we are very different from what other companies do, including Google, in that we want the leisure time of our 850 employees to be precisely that, without work encroaching. When they clock off, their time is entirely theirs to spend as they wish.”

But Just believes that this all-round support is only one piece in the bigger puzzle that makes up an ideal corporate culture. ‘Corporate culture is decisively shaped by the executive’, he says. ‘Only when a company’s managers are exemplary in their conduct and dealings with employees can a sustainable, thriving corporate culture develop.’

Corporate Culture Models

There are many different models of corporate culture. Read on for an overview of the three which are best known.

McKinsey 7S Framework

Tom Peters and Robert Waterman developed the 7S framework, which is sometimes also referred to as the McKinsey 7S Framework, in the 1970s, when they were working with McKinsey as consultants.

They focused on the company as a whole system whose ultimate success depends on seven hard and soft elements.

While hard elements can be clearly mapped, for example to charts, plans, etc., soft elements are more difficult to grasp, as they describe values, skills, and working styles, which are in constant flux.

McKinsey 7S Framework

All elements – hard and soft – are interdependent. While soft elements are less concrete, they have a stronger effect on corporate culture than hard elements. After all, they form the basis for employees’ day-to-day work, which in turn has an impact on the organization’s outcomes.

According to Peters and Waterman, a company will be successful if it manages to balance all of these elements. If, however, a company only focuses on hard elements and, for example, creates a new department without considering the decision in the context of the other elements – how will departments cooperate? what support measures will be necessary? – it will most likely destabilize rather than improve the organization.

The Cultural Iceberg Model

Edward T. Hall visualized corporate culture in the shape of an iceberg. He understood corporate culture as a pattern of fundamental assumptions used to solve internal and external problems. The pattern includes both visible and invisible aspects, which results in outsiders not always being able to understand it fully.

The tip of the iceberg, i.e. its visible portion, stands for the observable aspects of an organization’s culture. Beneath it, there are hidden structures of the corporate culture, which make up the larger and therefore more important part. These underlying structures determine which elements reach the surface.

The Cultural Iceberg Model

An organization can only shape its culture by addressing its invisible aspects. If it therefore wants a behavioural or cultural change, it first needs to know the hidden aspects: What are employees’ needs? How does the company manage? How do people cooperate? It is at this deeper level where change can be initiated that ultimately rises to the top.

Hofstede’s Model

Hofstede conceived of culture as a kind of ‘software of the mind’, a shared mental programming that provides for differentiation. Different people with different identities, experiences and values come together and ‘develop culture’.

Hofstede chose the image of an onion to distinguish between four layers of cultural manifestation:

Hofstede’s Model

Cultures share an environment and therefore undergo a similar socialisation process, which not only provides guidance and stabilizes the system, but also differentiates one group from the next.

Corporate Culture and Management

Management = culture. That’s it. Short and sweet. If employees are managed well, they have a positive perception of their company’s culture and are therefore more likely to commit to it. Good managers convey the idea that everyone is necessary to reach the greater goal. They motivate, promote identification and generate a sense of belonging, all of which are critical factors for an organization’s success.

Management and corporate culture are expressed in the form of general environmental conditions such as:

  • Working hours
  • Greetings – at Ikea, for example, everybody is on a first-name basis internally, and people are addressed casually in all communications such as job ads, advertising etc. This communicates that Ikea is a friendly workplace.
  • Dress codes
  • Salaries
  • Health care
  • Child care

Good management culture is therefore expressed in many small, sometimes even invisible gestures and initiatives. It is something that can be experienced: Customers feel that they have received good advice; employees feel appreciated. It also impacts the company’s image: Customers recommend the company; employees recommend their employer. While culture is a soft element, it therefore ultimately determines whether somebody will buy a product or service, or if somebody is happy to work for a company and performs well. Nothing more, nothing less.

How to Map Your Company’s Culture

The following framework of eight different cultural styles can give you some guidance. It was developed by the HR consultancy SpencerStuart and the Harvard Business School and is based on a global study of 230 companies and 1300 managers.

Use the following overview to examine your corporate culture and find out which management styles complement each other and which do not, how to foster a target-oriented culture and what recommendations you can derive for your recruiting.

  • Caring means human connection and mutual trust. Managers consider honesty, teamwork and good relationships to be important. Employees are connected through loyalty.
  • Purpose is expressed through idealism and altruism. At this level, employees work towards doing good in the long term. They are tolerant and have empathy. Managers emphasize shared ideals.
  • Learning as a cultural style produces creativity. Employees enjoy trying out new things if they work in an environment with little restriction. Supervisors promote a desire to innovate and increase knowledge.
  • Enjoyment as a cultural style is characterized by enthusiasm and fun. There is joy and a positive attitude throughout the work environment. Managers create an environment that allows for spontaneity and fun at work.
  • Results are defined by an orientation towards outcomes and profit. Employees want the business to succeed, and managers are focused on achieving targets, above all.
  • Authority refers to decisiveness and mental strength in SpencerStuart’s model. The working environment is characterized by competition, with employees predominantly pursuing their personal advantage. Managers lead with courage and confidence, but also through dominance.
  • Safety is achieved through planning and prudence in this model. Employees aware of risks and only take decisions after long, detailed analysis. Supervisors lead with a sense of reality.
  • Order is represented in the form of respect, structure and shared norms. People generally want to fit in at their workplace. Supervisors emphasize proven traditions and processes.

Three Employees are looking on a Computer

The Role of HR

Firstly, HR, just like managers, can be role models for a positive corporate culture. This means that they have internalized the organization’s values to such an extent that they translate them into behaviours. Additionally, HR can help employees understand the organization’s culture. How? By having an HR strategy that promotes professional development, ensures managers are trained regularly (whether internally or externally), and is built on the timely communication of management decisions.

HR can support corporate culture by:

  • Formulating and communicating a mission statement (in cooperation with management)
  • Taking initiatives to develop teams
  • Offering professional development opportunities
  • Organizing events
  • Promoting the exchange of knowledge
  • Sharing information and keeping messages consistent

Moreover, HR can support the organization’s culture as early as during the recruitment process by ensuring that there is a good cultural fit between applicants and the company. To do so, HR should have a standardized process and ask candidates about their values and norms in a behaviouristic manner.

Another task is to convey the company’s culture in external relationships to strengthen its employer branding.

Adapting the Environment

Corporate culture needs to adapt continually to keep up with our rapidly evolving world in which technologies, work methods and goals change all the time. For HR, this means that it needs to recognize and respond to change early on. What sort of environment will employees need to embark on new challenges with confidence and motivation? That is the core question.

Gain an overview of your company, its goals and its market to establish a basis for creating an appropriate environment. Ideally, you will also gather information on how much overlap there is between individual employees and your corporate culture, i.e. to what extent employees’ actions are in line with the company’s values. This can be done by performance analyses or through discussions with managers. Understand who is not aligned with your corporate culture, and why. Learn how to enable managers to have a positive influence.

Changing the Corporate Culture

Hardly any company can afford to resist change, meaning it is all the more important to not only control change processes, but also to evaluate them. After all, studies have shown that over half of all change projects fail completely or fail to deliver the results aimed for. HR can control and support change processes.

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5 Steps Towards Cultural Change

1. The fundamental question

What goal is to be achieved through cultural change? This is the first thing you should establish before you do anything. To do this, your company will ideally have internalized the insight that the best corporate cultures are firmly rooted in both a broad alignment with the company’s strategies and a deep engagement with the challenges of its business environment. Moreover, implementing change should clearly be of great relevance.

2. The status quo: What is your current corporate culture like?

To understand where your corporate culture is currently at, you will need to have a solid grasp of the company’s history, environment and tradition. These are the elements that have shaped its management styles, team dynamics, subcultures and values to date.

3. Discussions with decision-makers

Work together to identify the strengths and weaknesses of the old corporate culture, how the latter can be or could have been addressed, or to what extent they were due to external circumstances.

4. Where do you want to go?

Next, evaluate your company’s and its competitors’ current and future business environment and challenges. In this step, it is essential that you also consider your strategic corporate orientation so that you can define which cultural styles should be emphasized or played down respectively.

5. Formulate a goal

An example could be: We will work together to create a feedback-oriented corporate culture that promotes innovation. Once this is done, set aside the status quo and focus exclusively on the future. The only relevant decision that comes next is, which cultural style will optimally support the intended change. In determining the answer, it is best to focus on management principles, the style of communication within your company, and its organizational structure. This makes it easier to guide cultural change in the right direction.