Changing company culture

Available under Creative Commons-ShareAlike 4.0 International License.

To change the culture within an organization, it is first necessary to identify it.

The best way to identify the prevailing culture within a company is through a series of interviews with individuals and small groups, asking employees to describe the rules for survival within the company. In other words, what are the rules of the game? The result is a number of statements about the behavior necessary to succeed in a particular environment. These statements then can be fed back to small groups of managers in order to reach agreement on the cultural norms of the company.

A useful matrix to describe the culture is the way tasks are handled in the context of various relationships. Management tasks can be described as follows:

For each of these tasks, employees are asked the survival rules in terms of the following relationships:

Let us take decision making as an example. Employees would be asked how decision making is typically handled company-wide, between boss and subordinate, between peers, and among departments. They may answer that the key is to gain the consensus of the group, that the right people must be involved, that any action requires many sign-offs, or that department managers are encouraged to show individual initiative and decisions are made unilaterally from the boss down.

Having identified the prevailing culture, it is necessary to compare it with what is required to further the company's future strategy. Earlier we looked at the future shared beliefs deemed important for corporate survival. By looking at where the company is compared to where it wants to go, we can set out priorities. First, management determines in which direction the company should go. Next, it identifies the culture that will take the company there. The components of the culture are given one of three levels of importance: high, medium, or low. Third, the existing culture is overlaid with the desired culture to determine the degree of compatibility: high, medium, or low. The resulting matrix determines the degree of risk in changing the existing culture to one that will help the company reach its new strategy. This process is shown in Exhibit 15.

For example, there is a tremendous change in the culture when a single operation decides to franchise. An individual has built a tight concept with a formula that works in terms of menu items, methods of preparation, level of service, and control of costs. To develop a strategy of expansion will require a different culture. Typically, a concept has been built on personal supervision. Decision making will tend to be autocratic. To expand as a franchise, tight standards are necessary. These standards must be rigidly adhered to by managers and employees not under the direct supervision of the entrepreneur. The key element of strategy, then, is a tightly controlled product, delivered in a decentralized way. Both elements would be rated of high importance in Exhibit 15.

To what extent would these elements be present in an entrepreneurial organization? Certainly the tightly controlled product would be, because the restaurant, for example, would be under the direct supervision of the owner. It is unlikely that any decentralized decision making goes on, however. Decisions would be made by the owner rather quickly, with little or no consultation with others. A scoring system is used to aid in evaluation: 1 indicates that the risk is negligible, 2 that it is manageable, and 3 that it is unmanageable. The first element of culture—a tightly controlled product—would rate a score of 2 while the other element—delivered in a decentralized way—rates a 3. A principal difficulty in franchising, in fact, is the willingness to have the concept managed by others not under the original owner's personal supervision.

Figure 5.4 Exhibit 15: Organizational culture and strategy 

(Source: Adapted from Howard Schwartz and Stanley M. Davis, “Matching Corporate Culture and Business Strategy,” Organizational Dynamics, Summer 1981, 41.) 

This type of analysis allows management to determine the major problems to be faced in moving the existing culture to one that will help the operation achieve its new strategy. Attention should be directed at specific parts of the company's culture that are important to the future success of the operation and are presently nonexistent in the corporate culture.