Assessment & Evaluation

Published June 2007
Measuring Alignment in Corporate Cultures
John Penrose and Dr. Bill Nolen

Culture is everywhere. We listen to culture wars on talk radio. We study foreign cultures in school. We live the cultures of our communities. But few cultures are more complex or poorly understood than the ones we find at work.

Indeed, few companies address their culture in formal ways. (Perhaps they demure because they perceive culture as too soft to matter or too difficult to define. Winning companies understand the power of organizational culture, and they manage it to drive real value.

Doers, Not Thinkers

Recently, a friend and HR executive solicited a pitch for an assessment. Her CEO wanted to know the effectiveness of the company's onboarding process. At the onset of the session, the CEO lamented, "Every time we meet, you ask a lot of questions. I hate that! Around here, we're doers, not thinkers."

Her comment spoke volumes about her organization's culture. As a high-tech firm, populated by engineers, it wasn't that the employees didn't think — far from it. They think in diagrams and snippets of code. Rapidly designing and testing solutions, discarding what didn't work, building on what did. They were doers — and successful ones at that.

Organizational cultures are complex and multifaceted things. Breaking the concept into important elements can help. Here are a few to consider:

• Shared Beliefs: Values that guide the organization.

• Structures: Formal and informal organizing principles.

• Norms of Behaviors: Accepted methods of interacting with others.

• Rituals, Symbols, Lore: Elements that reflect on the organization in a unique way.

• Systems and Networks: Formal and informal reinforcing mechanisms.

A senior HR executive simplified it as: "Culture is the set of behaviors that are tolerated and rewarded by the organization." In layman's terms, organizational culture is the way things get done.

Creating Your Own Short Porch

So, why should we care about organizational culture? Competitive advantage is a good place to start. An organization's culture is not some warm and fuzzy talent management issue (although talent managers have critical roles to play).

Culture provides a company with a playing field and the rules by which the game is played. If you can create an advantage on your playing field, your company can outperform the competition. To take the metaphor a step further, look at Yankee Stadium, which opened in 1923. Dubbed the "House Ruth Built," it was really the house built for Babe Ruth, Lou Gehrig and all the Yankees' left-handed sluggers who profited from its "short porch" in right field — about 295 feet from home plate.

Culture is an ideal source of competitive advantage. Unlike a baseball stadium, a new product or other hard asset, culture is intangible and therefore hard for competitors to copy.

David Packard, the co-founder of Hewlett-Packard, was asked why the company documented its "HP Way" philosophy and shared it so freely. He explained that competitors' efforts to replicate it would be futile. He also understood that documenting and sharing it would reinforce HP's culture and competitive advantage.

The culture that Hewlett and Packard envisioned and nurtured helped deliver true competitive advantage, but what about everyone else? For many organizations, understanding and aligning organizational culture also helps them spot and fix misalignments that hinder performance, and it helps reinforce elements of the culture that support high performance. You need to understand culture before you can leverage it to drive performance.

Approaching the Challenge

So, how do you describe and measure an organization's culture? An informal approach, including observation and reflection, might suffice to describe a culture. For companies early in their life cycle or ones in which the original leaders and team are largely intact, this approach might work well. Indeed, one highly successful boutique investment firm did just that. The result: an elegantly crafted statement of its culture that helped support a significant and successful expansion of its business.

But if the objective is to measure cultural alignment across the organization and act on findings, then a more formal, structured approach is required. First, judge what measurement approach your company's culture will embrace (you've got to understand the culture even before you get started).

Various assessment tools exist that can classify a company according to a set of culture types and judge its receptivity and ability to change. These approaches work well when the organization's culture embraces external labels, prescriptions and change consultants. Other organizations might reject an "imposed" model. People in such organizations argue that their culture is unique (to an extent, they're right) or point out that "to get traction here, we need to figure it out ourselves."

Past, Present or Future — The Lens to Use

At the outset of the process, you might wrestle with an unforeseen challenge: Figuring out what culture you're actually trying to define. Experience strongly argues to assess your culture here and now. Establish a baseline, anchored in the present, to understand and begin managing your culture.

Nostalgia is a powerful force that might pull many of your culture discussions into romanticized yearnings for the culture of the founders and your early success. But an organization's culture isn't frozen in time — it's a dynamic organism whose goal is survival. Cultures constantly are being shaped by myriad forces (new employees, acquisitions, market conditions, leaders and the outside world), adapting new techniques and rejecting others.

Beware of attempts to freeze your company's culture in the past. It almost certainly has changed shape since then and will continue to evolve.

At the same time, beware of attempts to define the culture in terms of how it "should be." Efforts to transform cultures consume CEOs' agendas and reputations. The biggest winners almost certainly will be the consultants.

There can be no doubt that strong leadership from the top and concerted efforts can help shape positive outcomes. That being the case, wholesale culture transformations are akin to squeezing Jell-O (messy and unpredictable) with one big difference: Jell-O is cheap.

Use a present lens to describe the culture and begin targeted interventions now. The results will be more accurate, more immediate and more useful.

Deciphering Culture: From Turkeys to 401(k)s

Growth often influences organizational culture. But don't confuse changing rituals with underlying culture change. For example, consider a mom-and-pop retailer that grew into a highly successful global operation. In the early days, the founders personally handed out turkeys at holiday time. That was a tangible way they signaled employees were family.

Over the years, the company grew and the founders eventually passed away. The turkey tradition eventually ended, as well, yet it remains an important part of the company's lore. Although holiday turkey giveaways are no longer possible with more than 20,000 global employees, a serious commitment to treat employees like family remains.

"We went from providing meat to providing a 401(k), but we work hard to retain that family commitment," an HR executive explained.

Indeed, employees from this company can recall countless stories of the company's caring response to all kinds of personal circumstances. Having a personal touch and caring are still very much a part of this organizational culture, even though the ritual has transformed into lore.

Managing Misalignment

Cultural misalignment happens. Acquisitions introduce cultures. Isolated groups can manifest distinct subcultures. Misguided policies disrupt cultures. Organizations evolve past the start-up phase. An effective assessment tool can provide valuable insight for spotting misalignment and its causes. The question then becomes, "Should you attempt to align the group or accommodate it?"

An entrepreneurial culture that eschews policies and procedures still needs financial control and information security functions that live by such guidelines. Sometimes, it's necessary to learn and accommodate.

Burt's Bees, the natural health and beauty products firm, grew to 200 employees and tens of millions in revenue. The company's core values were well-established, but other elements of its culture were still emerging. When a new CEO was recruited to help take the firm through its next phase of growth, the founder left. She understood why she now had to report to someone — she just had no interest in doing it.

Acquisitions often create misalignment. In its rush to expand, a business services provider considered acquiring a firm that would give it a leading position in a new market overnight. During its due diligence, it noted dirty, poorly maintained facilities and unhappy employees. Despite misgivings about the culture fit, the prize was too good to pass up.

When the facilities didn't come up to company standards, it dug deeper. The newly acquired firm's management practices were badly misaligned, and employees were being disrespected. This form of cultural misalignment was intolerable. Ultimately, aligning the newly acquired business required not only cleaning and updating facilities — it demanded the replacement of the entire management team that simply could not conform to the culture.

An East Coast-based manufacturer looked to expand by offering its customers software services to help them manage their business. It acquired an entrepreneurial software firm on the West Coast. Geography wasn't the only difference — their cultures appeared very different too. A closer look over time revealed this form of cultural misalignment was acceptable. It turned out the software firm's culture was effective for its business. Because the companies actually shared common values, the business strategy didn't require integration, so the manufacturer accommodated the misalignment.

An isolated unit can become misaligned, as well. The isolation might be based on remote geography, a powerful leader or a unique position.

For example, a life sciences company developed a proprietary treatment that had no competitor. Even when substitutes arrived on the market, they were no match technically. Still, the product was losing share very quickly.

A closer investigation revealed a sales team that was misaligned. It had stopped listening to customers, who had stopped liking to work with the team. When competing products finally gave customers an alternative, they walked. Nothing in the company's culture tolerated arrogance, but it had been allowed to evolve in one particularly successful product group. Once aware of the situation, the company introduced a sales process and training that stressed listening for client needs, checking egos at the door and refocusing key elements of the process on the customer.

Reinforcing Cultural Elements

Taking steps to strengthen the culture can help reduce the number and severity of these misalignments. Picking which cultural elements to reinforce is another important output of an effective culture assessment. A few areas to review include shared values, decision making, language, people networks and talent management systems.

Shared values are a core component of organizational culture. Documenting and communicating them broadly is good place to start.

"Everything started from our five core values," said the head of HR for a pharmaceuticals firm. "Our founders established them early on, our CEO starts every meeting with them and they are integrated into everything we do — screening recruits, onboarding, rewarding performance, everything."

Decision making reflects deeply on organizational culture and can be a true mystery for newly hired executives. Some organizations thrive on real-time decision making. Others require substantial consensus building before taking action. Neither approach is inherently better (unless you're in the emergency room). Help your new executives land softly by explaining how things get decided.

Language is an integrating component of culture. At a leading pharmacy chain, everyone knows what "fill time" and "wait time" are and how important these terms are to their customer service ethos.

What is the language that has special meaning in your organization? One way to find out and simultaneously reinforce it is to create a company "pedia" to document and share your company's language. Wikipedia has free software, and you can be up and running in no time.

People networks matter too. A luxury hotel chain got poor marks on its employee dining area and specifically on the "opportunity for camaraderie and sharing." The comments were disappointing, but statistical analysis showed the results to be even more concerning.

Surprisingly, the dining area was one of the strongest value drivers in its organizational assessment, contributing disproportionately to employee commitment. The COO mobilized the organization to fix the facilities, signaling the company's commitment to its people and securing an invaluable information-sharing, culture-reinforcing network.

These networks can exist even after employees leave the company. When employees give notice at some firms, security arrives to escort them out of the building. That's a practice that speaks volumes about their culture. Other firms do it differently — an alumni network reflects the organization's culture and can be a valuable asset.

"We get applicants referred from our alumni network who arrive pre-screened because our alumni know what we're about," an HR executive explained. "We also get some of our alumni back."

Talent management systems provide important integrating mechanisms, as well. Interview questionnaires and performance reviews, reward and recognition all should incorporate core elements of the culture. In this way, systems test for culture fit, review performance against expected behaviors and reward conformance to norms.

Ultimately, the best way to reinforce the culture is to live it. Leaders need to embody behaviors in their daily activities in the ways they get things done.

John Penrose is the vice president of client services at Leading Indicator Systems. Dr. Bill Nolen is the founder and vice president of research at Leading Indicator Systems.

http://www.talentmgt.com/assessment_evaluation/2007/June/340/index.php