Organizational Culture

The concept of culture is introduced in your textbook on p. 65, and then developed in more detail in Chapter 4. Culture can be viewed from the perspective of a society or from the perspective of a single organization in society. Understanding organizational culture is important to managers because culture influences the behaviour of employees (p. 114). Managers who understand the organization's culture gain insights into why people behave the way they do, and they can use that knowledge to be more effective in leading and motivating employees. In the material below, additional information about corporate culture is presented to help you gain a more complete understanding of this important concept.

Consider these examples of corporate culture:

There are two key components of the culture at WestJet: (1) employees have a big stake in the company's success because of profit-sharing, and (2) employees contribute ideas about how to best run the airline. For example, a group has formed that calls itself the WestJesters. They do things like developing the cornball jokes that WestJet flight attendants tell.

• Paul Godfrey, the CEO of the Toronto Blue Jays Baseball Club, says the culture of the club is to make employees feel like they are part of a family. To facilitate the culture, every two weeks Godfrey invites small groups of employees to have "snacks with the president" so they can talk about how the organization is operating. Godfrey encourages questions from employees on virtually any topic. He also asks questions of employees as he tries to determine how to make the organization a better place to work.
• Rick George, the CEO of Suncor, says the company's culture is open and non-bureaucratic, and that it has a clear strategy that employees can relate to. As the company hires many new people, it must take steps to ensure that the new employees understand the "soul" of Suncor, because they have different experiences and different expectations.
• The culture of Magna International, the large Canadian producer of auto parts, has been profoundly influenced by its founder Frank Stronach. His views about the free enterprise system, profit distribution, working conditions, daycare centres, and unions are well-known by employees.
• At Four Seasons Hotels and Resorts, the culture means that managers are judged by deeds, not words, and are expected to act as role models for employees, who take their cues from their managers.
• At Toyota's Cambridge, Ontario plant, the corporate culture stresses values, principles, trust, and continuous improvement.

Large companies with many different divisions and many different types of customers (for example, the Royal Bank of Canada) are likely to have several different subcultures because the various divisions pursue different goals and because different types of people are found in the different divisions. Even in smaller firms, there may be noticeable differences in the culture of, say, the marketing and finance departments. Companies that focus largely on one type of product (for example, Starbucks) may have a fairly homogeneous culture throughout the organization.

Culture Surveys

In 2005, Waterstone Human Capital conducted in-depth interviews with senior managers at 107 Canadian companies and asked them which corporate cultures they admired most. The top three companies named were WestJet, Tim Hortons, and the Royal Bank of Canada. The managers also offered the following interesting views:

• 82 percent said corporate culture impacts corporate financial performance
• 82 percent said corporate culture helped with recruiting
• 72 percent said their culture was not what they wanted it to be in the future
• 55 percent said the culture of their organization was "weak," while 36 percent said it was "strong"
• 62 percent said they don't monitor their organization's culture through surveys

In 2006, Waterstone conducted another culture study and found very similar results (in this survey, the top three firms were WestJet, Royal Bank of Canada, and Canadian Tire). The survey also provided some evidence about the positive effect of culture on financial performance: annual revenue growth in the most highly rated firms was 38.9 percent, which was about three times larger than companies in the S&P/TSX 60 index during the same period.

The consulting firm DDI Canada conducted a study to determine the reasons managers fail in their jobs. The three most commonly cited reasons were (1) poor people skills, (2) personal qualities, and (3) a poor fit with the company culture. The authors of the study noted that in firms with cultures that stress getting ahead, some managers may feel pressure to take promotions even if the new job does not really fit them.

Individual companies also conduct culture surveys (but they are in the minority, as the above results show). Starbucks Coffee is one company that systematically assesses its corporate culture. Once every 18 months, employees fill out a Partner View Survey which contains questions that are designed to help the company determine if it is making progress toward one of its key values—"providing a work environment where people treat one another with respect and dignity. The survey is voluntary, but about 90 percent of employees fill it out (they do so on company time). One reason the participation rate is so high is that the company actually pays attention to what employees say in the survey. For example, when one survey showed that employees were not clear about career progression in the company, Starbucks held career fairs in several Canadian cities where company managers spoke with employees about management opportunities at Starbucks.

Cultural Change

Companies sometimes decide that they need to change their culture. A realization of the need for change usually comes after top management sees that changes in the company's external environment are going to require some sort of response from the company. But just because someone or some group recognizes the need for change does not mean that the change will actually be implemented because changing an organization's culture can be very difficult. Consider what happened at Nortel Networks, which hired a new CEO and a new chief technology officer in an attempt to energize the company's employees and to resolve some of Nortel's other problems. Both of these new individuals had worked at Cisco Systems, and it was thought that they would be very helpful in turning Nortel around. But both executives quit after just three months on the job, citing "divergent management styles and different views of the future of Nortel's business" as the reason. But a more fundamental reason may have been the "culture clash" which occurred. Cisco has a very hard-driving sales culture and is more ruthless in its sales approach than Nortel is. Also, the culture at Cisco emphasized getting new products out in the marketplace, and then dealing with problems as they arose. By contrast, Nortel's culture was much more relaxed and deliberate, and it tried to solve most problems before new products were put on the market. Nortel may have needed what these executives could provide, but apparently the company wasn’t ready to accept their approach.

Nortel is not the only company that has experienced difficulties with culture clashes. In April 2007, several RCMP officers alleged that senior management was covering up mismanagement of the RCMP's pension and insurance plans. As a result of these charges, attorney David Brown was appointed by the government to look into the matter. His report concluded that commissioner Giuliano Zaccardelli had exercised absolute power, that there was no one who could question his management style, and that there was a "tone" at the top of the organization that resulted in little respect for employees and put pressure on them not to challenge authority. The report concluded that the culture and management structure at the RCMP was "horribly broken." Brown also said that whistleblowers within the RCMP were punished when they pointed out that there were problems. These developments are discouraging since a few years earlier the RCMP had completed a "visioning" process that resulted in a new mission statement, a new set of core values, and a commitment to the communities where it worked. At that time, it was reported that the culture of the RCMP was quite different than it was in the days when military tradition dominated the organization, but subsequent events suggested that the culture had not actually changed.

A similar story can be told about the Canadian Imperial Bank of Commerce. In the 1990's, CIBC had an aggressive, deal-making culture that caused it to go head-to-head with large Wall Street companies in the U.S. But after several major failures, CIBC's culture had supposedly become much more conservative. For example, it was alone among Canadian banks in not having a foreign growth strategy. Former president John Hunkin said he was pleased that people thought the CIBC was the most conservative bank in Canada. But as the commercial paper crisis unfolded in 2007, it became clear that CIBC was going to incur billions of dollars of losses because of its exposure to subprime mortgages in the U.S. This somehow happened in spite of its supposed shift to having a low-risk culture.

Questions for Discussion

1. What is corporate culture? How important is this concept to practising managers?
2. What is the difference between "strong" and "weak" cultures? Why do you think the majority of the executives in the Waterstone Human Capital survey said their company's culture was "weak"?
3. Why is changing an organization's culture so difficult? What strategies can managers use to create or change an organization's culture?
4. Consider the following statement: "The notion of corporate culture isn't really very useful in large companies because they are involved in so many diverse activities that they are really just a collection of subcultures." Do you agree or disagree with the statement? Defend your answer.

Sources: Carrie Tait, "CIBC Shuffles the Deck," National Post, January 8, 2008, www.nationalpost.com/story; Meagan Fitzpatrick, "RCMP 'Horribly Broken,' Need Fix Quickly: Report," Winnipeg Free Press, June 16, 2007, p. A9; Roma Luciw, "No. 1 Employee Not Always Your No. 1 Manager," The Globe and Mail, February 17, 2007, p. B10; Calvin Leung, "Culture Club," Canadian Business, October 9-22, 2006, pp. 115-120; Andrew Wahl, "Culture Shock," Canadian Business, October 10-23, 2005, pp. 115-116; Gordon Pitts, "It Boiled Down To A Culture Clash," The Globe and Mail, June 11, 2005, p. B5; Sinclair Stewart and Andrew Willis, "Hunkin Is De-Risking the Place," The Globe and Mail, December 11, 2004, p. B4; Doug Nairne, "Mounties Riding the Vision Thing," Winnipeg Free Press, September 16, 1996, p. A5.