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UNIVERSITY OF LUGANO MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success Presented to: University of Lugano MScom Excellence-in-Communications Lecture Series Presented by: Eric G. Flamholtz, Ph.D. Professor Anderson School of Management University of California at Los Angeles
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Corporate Enigmas: The US • How does a little company headquartered in Bentonville Arkansas become one of the largest retailers in the world with more than $288 billion in sales (Wal*Mart)? • How does a company selling a commodity product grow from $122 million in sales to more than $5 billion in slightly more than a decade (Starbucks)? • How does a company retain its vitality for more than 100 years (GE)? • How does a company with a dominant market position (more than 42% market share) fall from grace over a period of 20 years (General Motors)?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Corporate Enigmas: Europe • Why have the acquisitions by Allianz worked well while the acquisitions of Baskin Robbins and Duncan Donuts by Allied-Domecq experienced difficulties? • What caused Reuters to lose its dominant market position? • Why does the Movenpick web site just mention Ueli Prager and its history, while Disney has an entire “Walt Disney Family Museum” on its web site?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Answer is Corporate Culture: The Invisible Asset (Or Liability!)
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Corporate Culture Enigma • • • • • You You You You You can can can can can not not not not not see it touch it taste it hear it smell it
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture: The Invisible Asset • But it is there, and although it is invisible, it is a fundamental reason why some organizations are successful and others not over the long run.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES OUR PURPOSE • What is the role of corporate culture in organizational success? • How can we measure and manage corporate culture to utilize it as an organizational asset? • What companies manage corporate culture well? • What are some of the significant differences in culture in US and European organizations?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Perspective: Practical Management Theory • Theory which is empirically sound and scientifically validated, but is relevant and practical for leaders, managers, and investors to use. • Derived from research on organizational success and failure.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Research on Organizational Success and Failure:  What role does Culture play in organizational Success?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Research on Organizational Success and Failure Paired Comparisons Successes Failures/Difficulties Starbucks Boston Market PacifiCare MaxiCare Southwest People Express Nike L.A. Gear Wal*Mart K-Mart
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is Success? • There are varying degrees of corporate success: – – – – – Survival, including the ability to continue to employ people Continuing to grow Becoming a market leader Becoming the market leader Increasing shareholder value
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is the Role that Corporate Culture Plays in Organizational Success?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Role of Culture in organizational Success • Culture is the ‘secret’ ingredient in organizational success
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Enigma of Wal*Mart Versus K-Mart • In 1960 Sears was the largest US retailer and K-Marts’ parent company was the number 1 discount retailer? • How did Wal*Mart from humble beginnings become the largest U.S. retailer with more than $288 billion is sales revenue?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Wal*Mart vs. K-Mart, 1990’s $300.00 $200.00 * $150.00 Adjusted for splits Wal-Mart K-Mart $100.00 $50.00 Year 19 99 19 98 19 97 19 96 19 95 19 94 19 93 19 92 19 91 $19 90 Stock Price* $250.00
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Wal*Mart vs. K-Mart, 2000-2003 $250.00 $200.00 Adjusted for splits ** K-Mart filed for Chapter 11 bankruptcy during 2002. $150.00 Wal-Mart $100.00 K-Mart $50.00 Year 20 02 ** 20 01 $20 00 Stock Price* *
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Enigma of Wal*Mart Versus K-mart • There are no products that Wal*Mart has that K-mart cannot have. • The explanation for the difference in success must be somewhere else. • The explanation is inside “the black box” of how Wal*Mart operates, which includes its culture.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Secret to Wal*Mart’s Success: Its Culture Two key Dimensions of “The Wal*Mart Way” – Respect for the individual, and – Focus upon the customer.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Growth of Starbucks? • How does a company producing a commodity product (Coffee) grow so rapidly to become the market leader? • In 1993 Starbucks had $122 million in sales and 220 stores. • In 1994 when they had $165 million in revenues, Starbucks set the goal to grow to $2 billion in revenues and 2000 stores by the year 2000. • Starbucks has more stores in California than all of its competitors combined have throughout the US!
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Starbucks Success is Not Just About Coffee • The real reason for Starbuck’s success is its culture, which is invisible to the outside observer. • Howard Schultz says that when people ask him to tell them the reasons for Starbuck’s success, he tells them something that they are surprised to hear: “The most important single reason for Starbuck’s success is its people.” • One of Starbuck’s core beliefs is: “The way we treat our people affects the way they treat our customers and, in turn, our financial performance.”
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Starbucks Cultural Principles • Provide a great work environment and treat each other with respect and dignity. • Embrace diversity as an essential component in the way we do business. • Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee. • Develop enthusiastically satisfied customers all of the time. • Contribute positively to our communities and our environment. • Recognize that profitability is essential to our future success.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is Corporate Culture?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is Organizational Culture? • Culture is “corporate personality.” • The underlying values, beliefs, and norms which govern the behavior of people as members of an organization. • Example of Values, Beliefs, and Norms: Ritz Carlton
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ritz-Carlton Values • The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests is our highest mission. • We pledge to provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed yet refined ambience. • The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ritz-Carlton Beliefs “We are Ladies and Gentlemen Serving Ladies and Gentlemen”
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ritz-Carlton Norms • A warm and sincere greeting. Use the guest’s name, if and when possible. • Anticipation and compliance with guest needs. • Fond farewell. Give them a warm good-bye and use their names, if and when possible.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES IBM Core “Values” • Respect for the individual. • Excellence in customer service. • Excellence in everything we do.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES American Century Guiding Principles • Providing value for our investors. • Challenging and inspiring the best people.  Personal responsibility.  Organizational commitment.  Teamwork. • Building a financially sound company. • Being adaptable and innovative. • Working with integrity.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture Influences The Success of People Microsoft Reorganizes; President Belluzzo is Out “The reorganization ends an awkward 2 1/2 year relationship between the software behemoth and Belluzzo, a veteran of Silicon Valley hardware stalwarts Hewlett-Packard Co. and Silicon Graphics Inc. Since joining Microsoft in September 1999, insiders say he failed to embrace the company’s distinctive corporate culture - a shortcoming the led to his ouster. Source: Los Angeles Edition, April 4, 2002, Section C, Business, p. 1.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations. • Research has indicated that culture is one of the six “key strategic building blocks” of successful organizations.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture is a Key Building Block of Success Corporate Culture Management Systems Operational Systems Resources Products Markets Financial Performance
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations. • Culture is one of the six “key strategic building blocks” of successful organizations. • Culture is an invisible key to organizational success.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture is an Invisible Key to Success • Culture is a sustainable competitive advantage. • It is invisible to competitors. • It cannot be copied easily.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations. • Culture is one of the six “key strategic building blocks” of successful organizations. • Culture is an invisible key to organizational success. • Culture has a direct impact upon financial performance.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture Has a Direct Impact On Financial Performance • Our research has shown that the extent to which there is an agreement between the culture of organizational units and overall corporate culture has a statistically significant impact upon financial performance. • Culture accounts for 46% of EBIT.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Research at Banner Corporation • Approximately $800 (US) million in revenue. • 18 business units or divisions. • All divisions with revenues between $25 - $100 million (Stage III). • Most divisions with revenues of $25 - $50 million.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Divisional Cultural Buy-in vs. EBIT 20 EBIT 15 10 5 0 -5 25 35 45 55 65 Approval with Culture 75 85
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What You Need to Know for Effective Culture Management • There are “strong” and “weak” cultures.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Strong and Weak Cultures • A “strong” culture is one where there is a high level of understanding of what the culture is as well as a strong commitment to the core values. • A “weak” culture is where there is not a high level of understanding of what the core values are or a high degree of commitment to them.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What You Need to Know for Effective Culture Management • There are “strong” and “weak” cultures. • There are “functional” and “dysfunctional” cultures.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Functional and Dysfunctional Cultures • A functional culture is one which enhances organizational performance and success. • A dysfunctional culture is one which leads to suboptimal or underperformance.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples of Companies of Each Culture Type: Strong and Weak; Functional and Dysfunctional Functional Strong Weak Dysfunctional J&J Starbucks GE The Body Shop Countrywide Financial Wal*Mart Kodak Reuters The Body Shop Disney Wal*Mart PowerBar Movenpick Amgen Navistar Allied Domecq/Baskin Robbins UAL
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Where would you place the following: Nestle? Allianz? Unilever? Functional Strong Weak Dysfunctional
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What You Need to Know for Effective Culture Management • There are “strong” and “weak” cultures. • There are “functional” and “dysfunctional” cultures. • There is sometimes a difference between “Stated” and “Real” Culture.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Difference Between “Real” and “Nominal” Cultures Nominal (Stated) Culture: What we say our culture is with respect to how we treat our customers, our people, and the standards we have. Real Culture: The culture that our employees “live and breathe.”
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES IBM Stated versus Real Culture • Stated Culture: – Respect for the individual. – Excellence in customer service. – Excellence in everything we do. • Real Culture (“Organizational Reciprocity”): – “Your take care of IBM, and IBM will take care of you.”
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What are the Key Dimensions of Corporate Culture?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Five Key Aspects of Culture • Customer-Client Orientation. • Employee Orientation. • Performance Standards/Accountability. • Openness to Change. • Company Norms.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Corporate Culture Map Cultural Dimension Customer Orientation Employee Orientation Performance Standards/ Accountability Openness to Change Company Norms Values Beliefs Norms
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Additional Research on Key Dimensions of Culture • Factors which directly affect financial performance: – – – – Customer Focus Identification with the company Performance & behavior standards Corporate citizenship • Factors which indirectly affect financial performance: – Human resource practices – Communication
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES How can Corporate Culture be Measured?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Sample Culture Survey Current Culture Current Statement We keep our commitments 1. to our customers/business partners. Our people are the 2. Company’s most valuable asset. 3. Our company reacts quickly to changes in the marketplace. 4. Our leaders act and communicate with integrity at all times. 5. People are rewarded based on their performance. 6. Good planning is rewarded. 7. Company policies are applied consistently.. 8. Changes that affect employees are communicated quickly and effectively. To A Very Slight Extent To A Slight Extent To Some Extent To A Great Extent Desired Culture To A Very Great Extent To A Very Slight Extent To A Slight Extent To Some Extent To A Great Extent To A Very Great Extent
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Key Things to Measure Using Surveys • Cultural Alignment: Agreement with the proposed culture. • Behavioral Consistency: The extent to which behavior is consistent with the desired culture. • Cultural Gaps: The difference between the stated or desired culture for a given value and the actual or observed culture in practice.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Euroco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 19 People have different interpretations of our corporate values, beliefs, and norms. 3.3 0.0 66.7 33.3 26 Corporate values are understood clearly by all employees. 3.0 33.3 33.3 33.3 31 We focus more on sales than on profitability as a measure of performance. 3.3 33.3 0.0 66.7 34 The people who best represent our corporate values get rewarded. 3.3 33.3 0.0 66.7 36 Our leadership spends time communicating the company’s values. 4.0 0.0 33.3 66.7 40 Planning and systematic execution of plans are rewarded more than “crisis management.” 4.0 0.0 0.0 100.0 41 We encourage and reward appropriate innovation and risk-taking among employees. 3.7 0.0 33.3 66.7 46 Employees are encouraged to make suggestions and offer constructive criticism. 4.0 0.0 0.0 100.0 48 We live quality in service, products, and processes at all levels of the company. 4.0 0.0 33.3 66.7 49 We demonstrate fairness and consistency in our supervision of employees. 4.0 0.0 0.0 100.0
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Euroco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 50 We expend too much energy on protecting our turf. 3.7 0.0 33.3 66.7 52 Planning is a "way of life" in our organization. 3.3 0.0 66.7 33.3 53 People feel free to bring up sensitive issues to corporate/senior management. 3.7 0.0 33.3 66.7 Culture Totals 3.7 7.1 23.8 69.0
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES How Can Culture be Managed?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture Management Process Define the Culture Needed to Support Long-Term Success (“Desired Culture”) Identify the Current Culture Identify And Analyze Significant Gaps Between Desired Culture And Current Culture Develop Culture Management Plan Communicate The “New” Culture, As Well As The Steps Being Taken To Manage It Monitor Implementation Of Desired Culture And Update/Refine The Culture Management Plan
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES To what Extent is Corporate Culture Similar or Different in European and US Organizations?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Mean Score Survey Results for Culture Items – Swissco. versus USCO. A and USCO. B Item Swiss Co. US Co. A US Co. B 19 People have different interpretations of our corporate values, beliefs, and norms. 2.6 3.6 3.3 26 Corporate values are understood clearly by all employees. 2.7 3.5 3.4 31 We focus more on sales than on profitability as a measure of performance. 3.2 3.4 3.1 34 The people who best represent our corporate values get rewarded. 2.7 3.3 3.3 36 Our leadership spends time communicating the company’s values. 3.4 3.9 3.6 40 Planning and systematic execution of plans are rewarded more than “crisis management.” 3.0 3.0 3.7 41 We encourage and reward appropriate innovation and risktaking among employees. 2.8 2.7 3.6 46 Employees are encouraged to make suggestions and offer constructive criticism. 3.2 3.9 3.6 48 We live quality in service, products, and processes at all levels of the company. 3.5 3.9 4.2 49 We demonstrate fairness and consistency in our supervision of employees. 3.5 3.4 3.8
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Mean Score Survey Results for Culture Items – Swissco. versus USCO. A and USCO. B Item Swiss Co. US Co. A US Co. B 50 We expend too much energy on protecting our turf. 3.4 3.6 4.1 51 We do an effective job of balancing strategic performance with long-term success. 3.3 N/A N/A 52 Planning is a "way of life" in our organization. 3.4 2.7 3.1 53 People feel free to bring up sensitive issues to corporate/senior management. 2.6 3.1 3.3 54 All employees understand the informal rules that we operate with around here. 2.8 N/A N/A 55 Informal communication channels are more informative than formal communication channels. 3.0 N/A N/A 68 The slogan “Proud of the past; Prouder of the future” reflects precisely our mission. 3.9 N/A N/A Culture Totals 3.1 3.4 3.6
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What are the Key Differences? • “People have different interpretations of our corporate VALUES, BELIEFS, AND NORMS.” • “Corporate values are understood by all employees.” • “The people who best represent our corporate values get rewarded.” • “People feel free to bring up sensitive issues to corporate/senior management.”
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What Can Your organization do to manage culture more effectively? Ten tools to manage culture
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples • • • • Johnson & Johnson Credo Ritz Carleton Starbucks IBM
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values • Recruit and Select People for Cultural Fit
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Hewlett Packard Hewlett Packard puts prospective employees through a day-long series of interviews with eight HP employees (the "interview team") in order to effectively screen for culture compatibility.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Avon Cultural Fit Selection • Management Systems is currently working with Avon Supply Chain Operations to develop a tool for identifying people who are most likely to fit in to their culture. • Involves identifying the criteria for people’s success. • Involves identifying questions to be used in interviews to determine people likely to fit those criteria. • Involves a validation of the selection tool.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values • Recruit and Select People for Cultural Fit • Manage Culture through Socialization and Training
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Disney Theme Parks Training Practices • New “cast members” (not employees) go through “Traditions 1” course upon entry. • All people are cast for a “Role” in a Live Stage Production. • All cast members are trained by another employee (Mentor system) in the same role after completing Traditions 1.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values • Recruit and Select People for Cultural Fit • Manage Culture Through Socialization and Training • Retain People Who “Fit” With the Culture
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: GE Cultural Management CULTURAL ACCEPTANCE Low High High Outsiders Stars 3 4 PERFORMANCE Low Losers 1 2 Question Marks
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Motorola Leadership Training • All managers were trained in participative management.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Countrywide Financial Corporation Leadership Program • Senior leadership is trained in “new” leadership practices. • Expected to function as change agents and cascade the different practices throughout the company.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: 3M 3M Corporation rewards employees for successfully championing a new product by making them the head of that product division.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples • Berkshire Hathaway uses a tiny corporate staff to support the value of business autonomy, but selects only those companies which fit its culture. • Johnson & Johnson uses a group and divisional structure to emphasize a balance between entrepreneurship and overall coordination. • McDonalds uses a centralized approach to support consistency throughout the system.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values • Embed Core Values in Performance Standards and Procedures
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: McDonalds To reinforce its value for consistency, McDonald’s strictly enforces adherence to cooking and preparation guidelines for each menu item so that a Big Mac in Pacoima is indistinguishable from one in Poughkeepse.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values • Embed Core Values in Performance Standards and Procedures • Use Symbols to Reinforce Corporate Values
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Knapp Communications: Architectural Digest, Bon Appetit Knapp created a special Gold “K” pin as a symbol of Outstanding Performance.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values • Embed Core Values in Performance Standards and Procedures • Use Communication to Reinforce Corporate Values
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples • Jack Welsh regularly visited the GE Leadership Training Facility to talk about GE’s core values. • Bill Hewlett and Dave Packard formalized the tactic of “Management by Walking Around.” • Sam Walton visited Wal*Marts. • Angelo Mozilo uses annual meetings to talk about the history of Countrywide, the reasons for its success, and (by implication) its core values.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Final Thoughts • Culture is invisible but real • It constitutes an asset, intangible but real • Although it is invisible and intangible, it can be measured • Although invisible and intangible, it can be managed • If managed appropriately, it can have a positive impact upon “the bottom line” of financial performance • If managed inappropriately, it can lead to organizational distress and failure.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES References • Flamholtz, E. (1995). Managing Organizational Transitions: Implications for Corporate and Human Resource Management. European Management Journal, 13 (1), 39-51. • Flamholtz, E. (2001). Corporate Culture and the Bottom Line. European Management Journal, 19 (3), 268-275. • Flamholtz, E. And Rangapriya Kannan-Narasimhan,(2005). Differential Impact of Corporate Cultural Elements on Financial Performance. European Management Journal, 23 (1), 50-64. • Eric Flamholtz and Stanford Kurland, “Strategic Organizational Development and Financial Performance: An Empirical Investigation, unpublished Working paper to be presented at the UCLA/Oxford University “Empirical Research in Entrepreneurship Conference,” June 23-25, 2005 • Flamholtz, E. and Hua, Wei, (2002). Strategic Organizational Development and the Bottom Line: Further Empirical Evidence, European Management Journal, 20 (1), 72-81. • Eric G. Flamholtz and Yvonne Randle, Growing Pains, Jossey-Bass Publishers, Inc. (2000). • Eric G. Flamholtz and Yvonne Randle, Changing The Game: Transformations of the First, Second and Third Kinds, Oxford University Press (September 1998).
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Please note that all of the materials in this slide presentation are the proprietary intellectual property of Eric G. Flamholtz, Ph. d, and Management Systems Consulting Corporation and may not be reproduced or otherwise distributed without written permission. For more about reproduction rights or other information on this presentation, please contact: Management Systems Consulting Corporation 10990 Wilshire Blvd., Ste. 1420 Los Angeles, CA 90024 (310) 477-0444 www.mgtsystems.com
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Appendix A: How to See (read) Culture • Language: How we talk about ourselves and our customers. • Symbols: What represents value to people. • Rituals: Events that promote culture. • Rewards: How we recognize people and behavior that is valued by us. • Heroes: The role models for success in our company. • Web Sites: How we present ourselves.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Appendix B: • Steps in Culture Management
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 1: Define the Culture Needed to Support Long-Term Success (“Desired Culture”) Key Question: What should our culture be, given our current stage of development and our future goals?
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Define the Culture Needed to Support Long-Term Success (“Desired Culture”) • Identify The Elements of Your Organization’s Culture With Respect to: – – – – – Treatment of Employees Treatment of Customers/Clients Performance Standards/Accountability Openness to Change Company Norms
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 2: Identify Your Current Culture • Methods to Identify Your Current Culture – Stories – What is life like here? – Interviews. – Analysis of symbols, language, rites/rituals, rewards, heroes, and web sites (“Artifacts”). – Surveys to Measure Culture.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 3: Identify and Analyze Significant Gaps Between Desired and Current Culture Identifying Gaps Using Qualitative Methods • Analyze information collected about the organization’s current culture. • Identify the “key elements” of the current culture, based on this analysis. • Compare current to desired culture and identify gaps.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 3: Identify and Analyze Significant Gaps Between Desired and Current Culture Identifying Gaps Using Quantitative Methods • Survey Scores: – Mean Scores – Percent Favorable
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Swissco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 19 People have different interpretations of our corporate values, beliefs, and norms. 2.6 45.5 42.5 12.0 26 Corporate values are understood clearly by all employees. 2.7 46.1 40.7 13.2 31 We focus more on sales than on profitability as a measure of performance. 3.2 20.1 47.5 32.4 34 The people who best represent our corporate values get rewarded. 2.7 46.5 36.8 16.8 36 Our leadership spends time communicating the company’s values. 3.4 21.5 27.0 51.5 40 Planning and systematic execution of plans are rewarded more than “crisis management.” 3.0 29.8 36.6 33.6 41 We encourage and reward appropriate innovation and risk-taking among employees. 2.8 39.2 41.2 19.6 46 Employees are encouraged to make suggestions and offer constructive criticism. 3.2 24.3 32.5 43.2 48 We live quality in service, products, and processes at all levels of the company. 3.5 15.3 33.1 51.6 49 We demonstrate fairness and consistency in our supervision of employees. 3.5 14.1 31.9 54.0
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Swissco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 50 We expend too much energy on protecting our turf. 3.4 21.9 23.2 54.8 51 We do an effective job of balancing strategic performance with long-term success. 3.3 15.0 44.2 40.8 52 Planning is a "way of life" in our organization. 3.4 24.7 24.7 50.6 53 People feel free to bring up sensitive issues to corporate/senior management. 2.6 45.8 34.5 19.6 54 All employees understand the informal rules that we operate with around here. 2.8 38.4 39.6 22.0 55 Informal communication channels are more informative than formal communication channels. 3.0 32.5 28.2 39.3 68 The slogan “Proud of the past; Prouder of the future” reflects precisely our mission. 3.9 10.1 22.8 67.1 Culture Totals 3.1 28.9 34.5 36.6
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Interpreting Scores – % Favorable Scores equal to or greater than 90% on Desired Culture items or dimensions suggest alignment. – % Favorable Scores equal to or greater than 50% on Current Culture items or dimensions are positive. – % Favorable Scores less than 50% on Current Culture items or dimensions are considered somewhat negative. – A 10 percentage point difference between Current and Desired Culture % Favorable Scores on individual items or dimensions is considered significant.
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Steps 4 to 6: Develop, Implement and Monitor a Culture Management Plan • Identify Strengths and Opportunities to Improve • Identify Areas of Focus and Analyze • Develop the Culture Management Plan • Implement the Culture Management Plan • Monitor Results
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Appendix C: The pyramid of organizational Development
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Pyramid of Organizational Development Corporate Culture Values Beliefs Norms Management Systems Planning Accounting: • Billing • Payroll Organization Management Development Operational Systems Production: Marketing: •Shipping • Selling Perf. Mgmt. Personnel: • Hiring • Compensation Resources Management Financial Resources Human Resources Technological and Physical Resources Products & Services Develop Products (Services) Markets Define Market Segments and Niche Business Foundation • Business Definition • Strategic Mission • Core Strategy
Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES

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Culture examples

  • 1. UNIVERSITY OF LUGANO MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success Presented to: University of Lugano MScom Excellence-in-Communications Lecture Series Presented by: Eric G. Flamholtz, Ph.D. Professor Anderson School of Management University of California at Los Angeles
  • 2. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Corporate Enigmas: The US • How does a little company headquartered in Bentonville Arkansas become one of the largest retailers in the world with more than $288 billion in sales (Wal*Mart)? • How does a company selling a commodity product grow from $122 million in sales to more than $5 billion in slightly more than a decade (Starbucks)? • How does a company retain its vitality for more than 100 years (GE)? • How does a company with a dominant market position (more than 42% market share) fall from grace over a period of 20 years (General Motors)?
  • 3. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Corporate Enigmas: Europe • Why have the acquisitions by Allianz worked well while the acquisitions of Baskin Robbins and Duncan Donuts by Allied-Domecq experienced difficulties? • What caused Reuters to lose its dominant market position? • Why does the Movenpick web site just mention Ueli Prager and its history, while Disney has an entire “Walt Disney Family Museum” on its web site?
  • 4. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Answer is Corporate Culture: The Invisible Asset (Or Liability!)
  • 5. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Corporate Culture Enigma • • • • • You You You You You can can can can can not not not not not see it touch it taste it hear it smell it
  • 6. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture: The Invisible Asset • But it is there, and although it is invisible, it is a fundamental reason why some organizations are successful and others not over the long run.
  • 7. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES OUR PURPOSE • What is the role of corporate culture in organizational success? • How can we measure and manage corporate culture to utilize it as an organizational asset? • What companies manage corporate culture well? • What are some of the significant differences in culture in US and European organizations?
  • 8. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Perspective: Practical Management Theory • Theory which is empirically sound and scientifically validated, but is relevant and practical for leaders, managers, and investors to use. • Derived from research on organizational success and failure.
  • 9. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Research on Organizational Success and Failure:  What role does Culture play in organizational Success?
  • 10. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Research on Organizational Success and Failure Paired Comparisons Successes Failures/Difficulties Starbucks Boston Market PacifiCare MaxiCare Southwest People Express Nike L.A. Gear Wal*Mart K-Mart
  • 11. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is Success? • There are varying degrees of corporate success: – – – – – Survival, including the ability to continue to employ people Continuing to grow Becoming a market leader Becoming the market leader Increasing shareholder value
  • 12. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is the Role that Corporate Culture Plays in Organizational Success?
  • 13. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Role of Culture in organizational Success • Culture is the ‘secret’ ingredient in organizational success
  • 14. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Enigma of Wal*Mart Versus K-Mart • In 1960 Sears was the largest US retailer and K-Marts’ parent company was the number 1 discount retailer? • How did Wal*Mart from humble beginnings become the largest U.S. retailer with more than $288 billion is sales revenue?
  • 15. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Wal*Mart vs. K-Mart, 1990’s $300.00 $200.00 * $150.00 Adjusted for splits Wal-Mart K-Mart $100.00 $50.00 Year 19 99 19 98 19 97 19 96 19 95 19 94 19 93 19 92 19 91 $19 90 Stock Price* $250.00
  • 16. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Wal*Mart vs. K-Mart, 2000-2003 $250.00 $200.00 Adjusted for splits ** K-Mart filed for Chapter 11 bankruptcy during 2002. $150.00 Wal-Mart $100.00 K-Mart $50.00 Year 20 02 ** 20 01 $20 00 Stock Price* *
  • 17. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Enigma of Wal*Mart Versus K-mart • There are no products that Wal*Mart has that K-mart cannot have. • The explanation for the difference in success must be somewhere else. • The explanation is inside “the black box” of how Wal*Mart operates, which includes its culture.
  • 18. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Secret to Wal*Mart’s Success: Its Culture Two key Dimensions of “The Wal*Mart Way” – Respect for the individual, and – Focus upon the customer.
  • 19. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Growth of Starbucks? • How does a company producing a commodity product (Coffee) grow so rapidly to become the market leader? • In 1993 Starbucks had $122 million in sales and 220 stores. • In 1994 when they had $165 million in revenues, Starbucks set the goal to grow to $2 billion in revenues and 2000 stores by the year 2000. • Starbucks has more stores in California than all of its competitors combined have throughout the US!
  • 20. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Starbucks Success is Not Just About Coffee • The real reason for Starbuck’s success is its culture, which is invisible to the outside observer. • Howard Schultz says that when people ask him to tell them the reasons for Starbuck’s success, he tells them something that they are surprised to hear: “The most important single reason for Starbuck’s success is its people.” • One of Starbuck’s core beliefs is: “The way we treat our people affects the way they treat our customers and, in turn, our financial performance.”
  • 21. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Starbucks Cultural Principles • Provide a great work environment and treat each other with respect and dignity. • Embrace diversity as an essential component in the way we do business. • Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee. • Develop enthusiastically satisfied customers all of the time. • Contribute positively to our communities and our environment. • Recognize that profitability is essential to our future success.
  • 22. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is Corporate Culture?
  • 23. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What is Organizational Culture? • Culture is “corporate personality.” • The underlying values, beliefs, and norms which govern the behavior of people as members of an organization. • Example of Values, Beliefs, and Norms: Ritz Carlton
  • 24. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ritz-Carlton Values • The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests is our highest mission. • We pledge to provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed yet refined ambience. • The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests.
  • 25. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ritz-Carlton Beliefs “We are Ladies and Gentlemen Serving Ladies and Gentlemen”
  • 26. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ritz-Carlton Norms • A warm and sincere greeting. Use the guest’s name, if and when possible. • Anticipation and compliance with guest needs. • Fond farewell. Give them a warm good-bye and use their names, if and when possible.
  • 27. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES IBM Core “Values” • Respect for the individual. • Excellence in customer service. • Excellence in everything we do.
  • 28. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES American Century Guiding Principles • Providing value for our investors. • Challenging and inspiring the best people.  Personal responsibility.  Organizational commitment.  Teamwork. • Building a financially sound company. • Being adaptable and innovative. • Working with integrity.
  • 29. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important?
  • 30. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations.
  • 31. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture Influences The Success of People Microsoft Reorganizes; President Belluzzo is Out “The reorganization ends an awkward 2 1/2 year relationship between the software behemoth and Belluzzo, a veteran of Silicon Valley hardware stalwarts Hewlett-Packard Co. and Silicon Graphics Inc. Since joining Microsoft in September 1999, insiders say he failed to embrace the company’s distinctive corporate culture - a shortcoming the led to his ouster. Source: Los Angeles Edition, April 4, 2002, Section C, Business, p. 1.
  • 32. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations. • Research has indicated that culture is one of the six “key strategic building blocks” of successful organizations.
  • 33. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture is a Key Building Block of Success Corporate Culture Management Systems Operational Systems Resources Products Markets Financial Performance
  • 34. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations. • Culture is one of the six “key strategic building blocks” of successful organizations. • Culture is an invisible key to organizational success.
  • 35. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture is an Invisible Key to Success • Culture is a sustainable competitive advantage. • It is invisible to competitors. • It cannot be copied easily.
  • 36. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Why is Culture Important? • Culture influences the success of people in organizations. • Culture is one of the six “key strategic building blocks” of successful organizations. • Culture is an invisible key to organizational success. • Culture has a direct impact upon financial performance.
  • 37. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture Has a Direct Impact On Financial Performance • Our research has shown that the extent to which there is an agreement between the culture of organizational units and overall corporate culture has a statistically significant impact upon financial performance. • Culture accounts for 46% of EBIT.
  • 38. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Research at Banner Corporation • Approximately $800 (US) million in revenue. • 18 business units or divisions. • All divisions with revenues between $25 - $100 million (Stage III). • Most divisions with revenues of $25 - $50 million.
  • 39. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Divisional Cultural Buy-in vs. EBIT 20 EBIT 15 10 5 0 -5 25 35 45 55 65 Approval with Culture 75 85
  • 40. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What You Need to Know for Effective Culture Management • There are “strong” and “weak” cultures.
  • 41. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Strong and Weak Cultures • A “strong” culture is one where there is a high level of understanding of what the culture is as well as a strong commitment to the core values. • A “weak” culture is where there is not a high level of understanding of what the core values are or a high degree of commitment to them.
  • 42. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What You Need to Know for Effective Culture Management • There are “strong” and “weak” cultures. • There are “functional” and “dysfunctional” cultures.
  • 43. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Functional and Dysfunctional Cultures • A functional culture is one which enhances organizational performance and success. • A dysfunctional culture is one which leads to suboptimal or underperformance.
  • 44. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples of Companies of Each Culture Type: Strong and Weak; Functional and Dysfunctional Functional Strong Weak Dysfunctional J&J Starbucks GE The Body Shop Countrywide Financial Wal*Mart Kodak Reuters The Body Shop Disney Wal*Mart PowerBar Movenpick Amgen Navistar Allied Domecq/Baskin Robbins UAL
  • 45. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Where would you place the following: Nestle? Allianz? Unilever? Functional Strong Weak Dysfunctional
  • 46. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What You Need to Know for Effective Culture Management • There are “strong” and “weak” cultures. • There are “functional” and “dysfunctional” cultures. • There is sometimes a difference between “Stated” and “Real” Culture.
  • 47. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES The Difference Between “Real” and “Nominal” Cultures Nominal (Stated) Culture: What we say our culture is with respect to how we treat our customers, our people, and the standards we have. Real Culture: The culture that our employees “live and breathe.”
  • 48. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES IBM Stated versus Real Culture • Stated Culture: – Respect for the individual. – Excellence in customer service. – Excellence in everything we do. • Real Culture (“Organizational Reciprocity”): – “Your take care of IBM, and IBM will take care of you.”
  • 49. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What are the Key Dimensions of Corporate Culture?
  • 50. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Five Key Aspects of Culture • Customer-Client Orientation. • Employee Orientation. • Performance Standards/Accountability. • Openness to Change. • Company Norms.
  • 51. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Corporate Culture Map Cultural Dimension Customer Orientation Employee Orientation Performance Standards/ Accountability Openness to Change Company Norms Values Beliefs Norms
  • 52. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Additional Research on Key Dimensions of Culture • Factors which directly affect financial performance: – – – – Customer Focus Identification with the company Performance & behavior standards Corporate citizenship • Factors which indirectly affect financial performance: – Human resource practices – Communication
  • 53. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES How can Corporate Culture be Measured?
  • 54. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Sample Culture Survey Current Culture Current Statement We keep our commitments 1. to our customers/business partners. Our people are the 2. Company’s most valuable asset. 3. Our company reacts quickly to changes in the marketplace. 4. Our leaders act and communicate with integrity at all times. 5. People are rewarded based on their performance. 6. Good planning is rewarded. 7. Company policies are applied consistently.. 8. Changes that affect employees are communicated quickly and effectively. To A Very Slight Extent To A Slight Extent To Some Extent To A Great Extent Desired Culture To A Very Great Extent To A Very Slight Extent To A Slight Extent To Some Extent To A Great Extent To A Very Great Extent
  • 55. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Key Things to Measure Using Surveys • Cultural Alignment: Agreement with the proposed culture. • Behavioral Consistency: The extent to which behavior is consistent with the desired culture. • Cultural Gaps: The difference between the stated or desired culture for a given value and the actual or observed culture in practice.
  • 56. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Euroco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 19 People have different interpretations of our corporate values, beliefs, and norms. 3.3 0.0 66.7 33.3 26 Corporate values are understood clearly by all employees. 3.0 33.3 33.3 33.3 31 We focus more on sales than on profitability as a measure of performance. 3.3 33.3 0.0 66.7 34 The people who best represent our corporate values get rewarded. 3.3 33.3 0.0 66.7 36 Our leadership spends time communicating the company’s values. 4.0 0.0 33.3 66.7 40 Planning and systematic execution of plans are rewarded more than “crisis management.” 4.0 0.0 0.0 100.0 41 We encourage and reward appropriate innovation and risk-taking among employees. 3.7 0.0 33.3 66.7 46 Employees are encouraged to make suggestions and offer constructive criticism. 4.0 0.0 0.0 100.0 48 We live quality in service, products, and processes at all levels of the company. 4.0 0.0 33.3 66.7 49 We demonstrate fairness and consistency in our supervision of employees. 4.0 0.0 0.0 100.0
  • 57. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Euroco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 50 We expend too much energy on protecting our turf. 3.7 0.0 33.3 66.7 52 Planning is a "way of life" in our organization. 3.3 0.0 66.7 33.3 53 People feel free to bring up sensitive issues to corporate/senior management. 3.7 0.0 33.3 66.7 Culture Totals 3.7 7.1 23.8 69.0
  • 58. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES How Can Culture be Managed?
  • 59. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Culture Management Process Define the Culture Needed to Support Long-Term Success (“Desired Culture”) Identify the Current Culture Identify And Analyze Significant Gaps Between Desired Culture And Current Culture Develop Culture Management Plan Communicate The “New” Culture, As Well As The Steps Being Taken To Manage It Monitor Implementation Of Desired Culture And Update/Refine The Culture Management Plan
  • 60. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES To what Extent is Corporate Culture Similar or Different in European and US Organizations?
  • 61. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Mean Score Survey Results for Culture Items – Swissco. versus USCO. A and USCO. B Item Swiss Co. US Co. A US Co. B 19 People have different interpretations of our corporate values, beliefs, and norms. 2.6 3.6 3.3 26 Corporate values are understood clearly by all employees. 2.7 3.5 3.4 31 We focus more on sales than on profitability as a measure of performance. 3.2 3.4 3.1 34 The people who best represent our corporate values get rewarded. 2.7 3.3 3.3 36 Our leadership spends time communicating the company’s values. 3.4 3.9 3.6 40 Planning and systematic execution of plans are rewarded more than “crisis management.” 3.0 3.0 3.7 41 We encourage and reward appropriate innovation and risktaking among employees. 2.8 2.7 3.6 46 Employees are encouraged to make suggestions and offer constructive criticism. 3.2 3.9 3.6 48 We live quality in service, products, and processes at all levels of the company. 3.5 3.9 4.2 49 We demonstrate fairness and consistency in our supervision of employees. 3.5 3.4 3.8
  • 62. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Mean Score Survey Results for Culture Items – Swissco. versus USCO. A and USCO. B Item Swiss Co. US Co. A US Co. B 50 We expend too much energy on protecting our turf. 3.4 3.6 4.1 51 We do an effective job of balancing strategic performance with long-term success. 3.3 N/A N/A 52 Planning is a "way of life" in our organization. 3.4 2.7 3.1 53 People feel free to bring up sensitive issues to corporate/senior management. 2.6 3.1 3.3 54 All employees understand the informal rules that we operate with around here. 2.8 N/A N/A 55 Informal communication channels are more informative than formal communication channels. 3.0 N/A N/A 68 The slogan “Proud of the past; Prouder of the future” reflects precisely our mission. 3.9 N/A N/A Culture Totals 3.1 3.4 3.6
  • 63. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What are the Key Differences? • “People have different interpretations of our corporate VALUES, BELIEFS, AND NORMS.” • “Corporate values are understood by all employees.” • “The people who best represent our corporate values get rewarded.” • “People feel free to bring up sensitive issues to corporate/senior management.”
  • 64. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES What Can Your organization do to manage culture more effectively? Ten tools to manage culture
  • 65. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values
  • 66. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples • • • • Johnson & Johnson Credo Ritz Carleton Starbucks IBM
  • 67. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values • Recruit and Select People for Cultural Fit
  • 68. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Hewlett Packard Hewlett Packard puts prospective employees through a day-long series of interviews with eight HP employees (the "interview team") in order to effectively screen for culture compatibility.
  • 69. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Avon Cultural Fit Selection • Management Systems is currently working with Avon Supply Chain Operations to develop a tool for identifying people who are most likely to fit in to their culture. • Involves identifying the criteria for people’s success. • Involves identifying questions to be used in interviews to determine people likely to fit those criteria. • Involves a validation of the selection tool.
  • 70. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values • Recruit and Select People for Cultural Fit • Manage Culture through Socialization and Training
  • 71. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Disney Theme Parks Training Practices • New “cast members” (not employees) go through “Traditions 1” course upon entry. • All people are cast for a “Role” in a Live Stage Production. • All cast members are trained by another employee (Mentor system) in the same role after completing Traditions 1.
  • 72. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management • Develop a Clear Statement of the Company’s Culture/Values • Recruit and Select People for Cultural Fit • Manage Culture Through Socialization and Training • Retain People Who “Fit” With the Culture
  • 73. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: GE Cultural Management CULTURAL ACCEPTANCE Low High High Outsiders Stars 3 4 PERFORMANCE Low Losers 1 2 Question Marks
  • 74. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices
  • 75. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Motorola Leadership Training • All managers were trained in participative management.
  • 76. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: Countrywide Financial Corporation Leadership Program • Senior leadership is trained in “new” leadership practices. • Expected to function as change agents and cascade the different practices throughout the company.
  • 77. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System
  • 78. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: 3M 3M Corporation rewards employees for successfully championing a new product by making them the head of that product division.
  • 79. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values
  • 80. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples • Berkshire Hathaway uses a tiny corporate staff to support the value of business autonomy, but selects only those companies which fit its culture. • Johnson & Johnson uses a group and divisional structure to emphasize a balance between entrepreneurship and overall coordination. • McDonalds uses a centralized approach to support consistency throughout the system.
  • 81. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values • Embed Core Values in Performance Standards and Procedures
  • 82. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Example: McDonalds To reinforce its value for consistency, McDonald’s strictly enforces adherence to cooking and preparation guidelines for each menu item so that a Big Mac in Pacoima is indistinguishable from one in Poughkeepse.
  • 83. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values • Embed Core Values in Performance Standards and Procedures • Use Symbols to Reinforce Corporate Values
  • 84. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Knapp Communications: Architectural Digest, Bon Appetit Knapp created a special Gold “K” pin as a symbol of Outstanding Performance.
  • 85. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Ten Key Tools of Culture Management (cont’d) • Change Leadership Practices • Change the Reward System • Set Up the Structure to Support Core Values • Embed Core Values in Performance Standards and Procedures • Use Communication to Reinforce Corporate Values
  • 86. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Examples • Jack Welsh regularly visited the GE Leadership Training Facility to talk about GE’s core values. • Bill Hewlett and Dave Packard formalized the tactic of “Management by Walking Around.” • Sam Walton visited Wal*Marts. • Angelo Mozilo uses annual meetings to talk about the history of Countrywide, the reasons for its success, and (by implication) its core values.
  • 87. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Final Thoughts • Culture is invisible but real • It constitutes an asset, intangible but real • Although it is invisible and intangible, it can be measured • Although invisible and intangible, it can be managed • If managed appropriately, it can have a positive impact upon “the bottom line” of financial performance • If managed inappropriately, it can lead to organizational distress and failure.
  • 88. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES References • Flamholtz, E. (1995). Managing Organizational Transitions: Implications for Corporate and Human Resource Management. European Management Journal, 13 (1), 39-51. • Flamholtz, E. (2001). Corporate Culture and the Bottom Line. European Management Journal, 19 (3), 268-275. • Flamholtz, E. And Rangapriya Kannan-Narasimhan,(2005). Differential Impact of Corporate Cultural Elements on Financial Performance. European Management Journal, 23 (1), 50-64. • Eric Flamholtz and Stanford Kurland, “Strategic Organizational Development and Financial Performance: An Empirical Investigation, unpublished Working paper to be presented at the UCLA/Oxford University “Empirical Research in Entrepreneurship Conference,” June 23-25, 2005 • Flamholtz, E. and Hua, Wei, (2002). Strategic Organizational Development and the Bottom Line: Further Empirical Evidence, European Management Journal, 20 (1), 72-81. • Eric G. Flamholtz and Yvonne Randle, Growing Pains, Jossey-Bass Publishers, Inc. (2000). • Eric G. Flamholtz and Yvonne Randle, Changing The Game: Transformations of the First, Second and Third Kinds, Oxford University Press (September 1998).
  • 89. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Please note that all of the materials in this slide presentation are the proprietary intellectual property of Eric G. Flamholtz, Ph. d, and Management Systems Consulting Corporation and may not be reproduced or otherwise distributed without written permission. For more about reproduction rights or other information on this presentation, please contact: Management Systems Consulting Corporation 10990 Wilshire Blvd., Ste. 1420 Los Angeles, CA 90024 (310) 477-0444 www.mgtsystems.com
  • 90. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Appendix A: How to See (read) Culture • Language: How we talk about ourselves and our customers. • Symbols: What represents value to people. • Rituals: Events that promote culture. • Rewards: How we recognize people and behavior that is valued by us. • Heroes: The role models for success in our company. • Web Sites: How we present ourselves.
  • 91. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Appendix B: • Steps in Culture Management
  • 92. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 1: Define the Culture Needed to Support Long-Term Success (“Desired Culture”) Key Question: What should our culture be, given our current stage of development and our future goals?
  • 93. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Define the Culture Needed to Support Long-Term Success (“Desired Culture”) • Identify The Elements of Your Organization’s Culture With Respect to: – – – – – Treatment of Employees Treatment of Customers/Clients Performance Standards/Accountability Openness to Change Company Norms
  • 94. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 2: Identify Your Current Culture • Methods to Identify Your Current Culture – Stories – What is life like here? – Interviews. – Analysis of symbols, language, rites/rituals, rewards, heroes, and web sites (“Artifacts”). – Surveys to Measure Culture.
  • 95. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 3: Identify and Analyze Significant Gaps Between Desired and Current Culture Identifying Gaps Using Qualitative Methods • Analyze information collected about the organization’s current culture. • Identify the “key elements” of the current culture, based on this analysis. • Compare current to desired culture and identify gaps.
  • 96. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Step 3: Identify and Analyze Significant Gaps Between Desired and Current Culture Identifying Gaps Using Quantitative Methods • Survey Scores: – Mean Scores – Percent Favorable
  • 97. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Swissco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 19 People have different interpretations of our corporate values, beliefs, and norms. 2.6 45.5 42.5 12.0 26 Corporate values are understood clearly by all employees. 2.7 46.1 40.7 13.2 31 We focus more on sales than on profitability as a measure of performance. 3.2 20.1 47.5 32.4 34 The people who best represent our corporate values get rewarded. 2.7 46.5 36.8 16.8 36 Our leadership spends time communicating the company’s values. 3.4 21.5 27.0 51.5 40 Planning and systematic execution of plans are rewarded more than “crisis management.” 3.0 29.8 36.6 33.6 41 We encourage and reward appropriate innovation and risk-taking among employees. 2.8 39.2 41.2 19.6 46 Employees are encouraged to make suggestions and offer constructive criticism. 3.2 24.3 32.5 43.2 48 We live quality in service, products, and processes at all levels of the company. 3.5 15.3 33.1 51.6 49 We demonstrate fairness and consistency in our supervision of employees. 3.5 14.1 31.9 54.0
  • 98. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Swissco. – Survey Results for Culture Items Item Mean % Unfavorable % Neutral % Favorable 50 We expend too much energy on protecting our turf. 3.4 21.9 23.2 54.8 51 We do an effective job of balancing strategic performance with long-term success. 3.3 15.0 44.2 40.8 52 Planning is a "way of life" in our organization. 3.4 24.7 24.7 50.6 53 People feel free to bring up sensitive issues to corporate/senior management. 2.6 45.8 34.5 19.6 54 All employees understand the informal rules that we operate with around here. 2.8 38.4 39.6 22.0 55 Informal communication channels are more informative than formal communication channels. 3.0 32.5 28.2 39.3 68 The slogan “Proud of the past; Prouder of the future” reflects precisely our mission. 3.9 10.1 22.8 67.1 Culture Totals 3.1 28.9 34.5 36.6
  • 99. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Interpreting Scores – % Favorable Scores equal to or greater than 90% on Desired Culture items or dimensions suggest alignment. – % Favorable Scores equal to or greater than 50% on Current Culture items or dimensions are positive. – % Favorable Scores less than 50% on Current Culture items or dimensions are considered somewhat negative. – A 10 percentage point difference between Current and Desired Culture % Favorable Scores on individual items or dimensions is considered significant.
  • 100. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Steps 4 to 6: Develop, Implement and Monitor a Culture Management Plan • Identify Strengths and Opportunities to Improve • Identify Areas of Focus and Analyze • Develop the Culture Management Plan • Implement the Culture Management Plan • Monitor Results
  • 101. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Appendix C: The pyramid of organizational Development
  • 102. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES Pyramid of Organizational Development Corporate Culture Values Beliefs Norms Management Systems Planning Accounting: • Billing • Payroll Organization Management Development Operational Systems Production: Marketing: •Shipping • Selling Perf. Mgmt. Personnel: • Hiring • Compensation Resources Management Financial Resources Human Resources Technological and Physical Resources Products & Services Develop Products (Services) Markets Define Market Segments and Niche Business Foundation • Business Definition • Strategic Mission • Core Strategy
  • 103. Measuring and Managing Corporate Culture: The Invisible Key to Organizational Success UNIVERISTY OF LUGANO – MSCOM EXCELLENCE-IN-COMMUNICATIONS LECTURE SERIES

Editor's Notes

  1. <number> Lead-in for next slide... To begin the process, let’s start with a little exercise that may help you understand the purpose of strategic planning.