A positive and open corporate culture is becoming increasingly important these days. When choosing an employer, applicants pay more and more attention to values and standards within a company and compare them with their own ideas. In order to fit into this trend, it is necessary in many organizations to adapt the prevailing culture and align it to the new requirements. In this article you will find out exactly what corporate culture is, how to recognize it and how to change it.
Definition: What is Corporate Culture?
The corporate culture (synonym: “organizational culture”) refers to all prevailing values, norms and attitudes that determine decisions, actions and behavior within a company. It influences how a company works, how structures are set up and how the members of the organization communicate and work together.
The corporate culture includes behavior acquired over the years, unwritten rules, attitudes and manners. These influence day-to-day business in part consciously, but for the most part unconsciously.
An organization functions like a small-scale society. The corporate culture includes social rules that are generally accepted and applied on a daily basis. It shapes both how it feels to be part of this society and how the company appears to the outside world.
Reasons, Goals & Importance: Why is Corporate Culture Important?
Every organization has a specific corporate culture. Very few, however, know how important this culture is for the long-term success of the company. A positive organizational culture ensures that employees feel comfortable and have a sense of belonging to the company. The result is a motivated and committed workforce that enjoys working in the company for a long time.
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A suitable corporate culture …
- … optimizes communication channels.
- … connects basic hidden assumptions with what is actually lived.
- … improves the ability to adapt and innovate.
- … simplifies strategic orientation.
- … creates a more pleasant working atmosphere..
- … reduces the potential for conflict.
- … improves reputation.
- … increases productivity.
Describing Corporate Culture: How is It Reflected?
A large part of the corporate culture has an unconscious effect on everyday working life. However, if you take a closer look, the underlying settings become visible. It is most obvious to external viewers. If you want to visualize your organizational culture, the following questions will help.
Behavior and Dealing with each other
- How do you greet/say goodbye?
- Is there a dress code?
- How is the cohesion in the team?
- How well do you know each other (also privately)?
- How are conflicts dealt with?
- How about loyalty?
- How are customers, suppliers and business partners treated?
Power Relations & Leadership
- How much personal responsibility does the individual employee have?
- How restricted are the employees by their superiors?
- How are decisions made?
- What is a permit required for?
- How much trust do managers have in their employees?
- How do you deal with them?
- To what extent is the higher position exploited?
Ways of Communication
- What is the official communication like?
- Is communication in e-mails, via Slack, mainly in meetings or between door and hinge?
- Who knows and how much?
- Is there sufficient communication?
- What does the unofficial communication look like?
- What is the tone of conversation among each other and between the hierarchical levels?
- What do you talk about during the breaks?
Organizational Form & Structure
- Is the company structured strictly hierarchically or flat and with equal rights?
- How are the teams structured?
- Are there teams?
- Is the company holocratic/agile/scrum organized?
- How much self-organization is planned?
- How are the working conditions?
Work Environment & Furnishings
- What is the office like?
- What effects does the type of office have on the atmosphere?
- Are food and drinks provided?
- How open/bright/ergonomic/… are the workplaces designed?
Values & Norms
- What is the attitude towards errors/performance/rules?
- What is your risk tolerance?
- Is it important to create meaning?
- What is particularly important? (speed, performance, innovation, …)
Influencing Factors: Who or What Influences the Corporate Culture?
The organizational culture with its system of values and standards grows over the years and is influenced by various factors. Economic, social and political aspects play just as important role as internal company factors and people. These are not always intended changes, but it is still up to companies to adapt their culture to the new circumstances.
Globalization and Internationalization
The economy is global and international and is becoming more and more intertwined. Changes happen with increasing speed and complexity. Working methods must be increasingly digitized and thus adapted to the digital transformation. Due to the constant adjustments, the organizational culture also changes over time.
Demographic Change & Sociological Influences
A company always has something to do with people – be they employees, customers or partners. These people belong to a society that is also subject to constant change.
Social changes usually also prevail in the company. Examples of this are the generation change (Millennials and Generation Z) as well as increasing equality and the associated quota regulations.
Role of Supervisors
Company founders and managers have a role model function. Their behavior and values are transmitted to the rest of the company or influence the behavior of employees. Founders in particular have a major influence on how people work in their company. Because the culture from the founding years is often carried over for many years until it finally no longer corresponds to the current circumstances.
If work is to be done on the corporate culture, supervisors play an essential role. They are responsible for motivating their employees to cultural change and for setting a good example for the sustainable development of the new culture.
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Role of Employees
When creating and changing a corporate culture, employees play several roles. On the one hand, the culture shapes the behavior of the employees, on the other hand, it arises from their behavior. New employees have to familiarize themselves with the prevailing culture and help determine it as the process progresses.
If there are changes in the organizational culture, it is important that the entire workforce pulls together. Long-serving employees in particular have often internalized the behavior to such an extent that they find it difficult to discard it and thus hinder cultural change.
Role of the HR Department
Corporate culture and everything related to it cannot ignore human resources. The areas of Recruiting and Change Management are particularly affected.
Ideally, recruiting should not only look at the qualifications and “hard skills” of the applicants. The cultural fit should also be taken into account. HR managers take a close and systematic look at whether the basic assumptions and values of the company match those of the applicants.
On the other hand, the HR department can assign and control the roles in the change process. It is their job to ensure that no one is left behind during cultural change. The HR department …
- … appoints change agents.
- … consults with employees.
- … organizes workshops.
- … ensures the exchange of knowledge and team building.
Corporate Culture Examples: Best and Worst Practices
In order for a corporate culture to be successful, it must fit the company and be up-to-date. General requirements, such as treating each other with respect and communicating at eye level, form the basis of a positive organizational culture. However, there is no one ideal corporate culture, because it always depends on the company and its environment.
Best Practices
It is clear from the unprecedented success of some companies that an open and respectful company culture pays off. Two of these organizational culture best practices are Ikea and Google – both undeniably giants in their respective fields. They have managed to optimally adapt their culture to their strategy and environment and thus achieve success.
IKEA
Ikea relies on informality, flat hierarchies and equal rights. There is a first-name culture in the company and titles are not used. At Ikea, the clear focus is on harmony, avoiding conflict and willingness to compromise. The reward system is heavily based on immaterial benefits and working conditions are designed to be compatible with different realities of life.
Hardly in any other company does the corporate culture seem to be as successful as at Google. The online giant offers its employees, at its main location in California, an entire campus with countless offers and benefits. As a result, the boundaries between work and private life are becoming increasingly blurred. A start-up feeling, self-determination, unusual office space, a strong focus on innovation and a tolerant error culture determined the Google culture.
Worst Practices
A certain corporate culture is always unfavorable if the majority of those involved do not feel comfortable in it or if the working methods do not meet the requirements. When an organizational culture is to be viewed as negative varies from organization to organization.
However, there are some aspects that quickly lead to a negative corporate culture:
- Error Culture: z.e.g.; excessive focus on mistakes, blame, punishment even for mistakes with little consequence, aggressive and abusive way of expressing criticism
- Bureaucracy and Compulsion to Control: e.g.; no self-determination, obligation to consult even in matters of little significance, constant control, long and tedious bureaucratic processes
- Competitive Attitude within Staff: e.g.; rewards for individual rather than team performance, focus on one’s own success, resentment, manipulation and sabotage of other colleagues
- Culture of Fear: e.g.; rough treatment of each other, aggressive tone, psychological violence, bullying
Scientific Models of Corporate Culture
Various models help to better understand one’s own corporate culture and to initiate change processes. The models come from different scientific domains – such as sociology, psychology or economics – and offer extensive possibilities to analyze and describe corporate cultures.
Corporate culture according to Edgar Schein
The pioneering model for organizational culture comes from Edgar H. Schein and serves as a basic structure for many other models. His approach is divided into 3 levels, which are as follows:
Basic Assumptions
Values and Norms
Artifacts
invisible, unconscious
partly visible, partly unconscious
visible, in need of interpretation
• Basic orientation or foundation of the company
• unconscious attitudes
• learned basic norms are not normally questioned, but rather perceived as normal
• Standards, maxims and commandments that are derived from the basic assumptions
• (Unwritten) rules and standards of conduct
• are accepted and shared by everyone involved
• Make the two layers below visible
• Symbols in which the underlying manifests itself
Examples: Basic attitude towards things like truth, time and the individual
Examples: treating each other with respect, tolerance, communication strategies
Examples: dress code, tone of voice, corporate structure
✔ According to Schein, what is needed for cultural change??
In order to achieve long-term success, the basic assumptions must change. According to Schein, this is only possible if the values and standards are taken into account. Visible and strong symbols also make the corporate culture tangible for the employees.
Corporate culture according to Hatch
The sociologist Mary Jo Hatch bases her model on appearances, but separates the visible level into artifacts and symbols. It forms a circuit from the levels, the individual parts of which influence each other in turn.
- Basic assumptions are manifested in values.
- Values are realized in artefacts.
- Artifacts become visible in symbols.
- Symbols help to interpret the basic assumptions.
This cycle model describes the process and the connection between the individual levels very precisely. It is Hatch’s concern not only to think in terms of levels, but to understand corporate culture as a process. Based on the four levels, this process is divided into the following four phases.
Manifestation
Realizations
Interpretation
Symbolization
The first cultural characteristics arise through sensory perceptions, cognitions and emotions.
The cultural characteristics are recognized and perceived as patterns.
The cultural characteristics are interpreted so that they later serve as a benchmark for ways of acting and thinking.
Rituals and habits emerge from these values in order to make them universally valid and to stabilize the culture.
✔ According to Hatch, what does it take for cultural change?
According to Hatch, cultural change can begin in any of the four phases because they are mutually dependent. The most important thing is that changes are created that are visible and recognizable as patterns. New symbols and rituals must also be created in such a way that they are perceptible as changes. Only then can they be realized and interpreted.
Corporate culture according to Hofstede
Geert Hofstede sees corporate culture as a collective program. According to Hofstede, it is a collective phenomenon that never stands still, but is constantly (further) developed by those involved. This culture describes the common way of thinking of a group and distinguishes it from other groups.
For Hofstede, the various levels of corporate culture are arranged in four layers according to the onion principle:
- Values form the core and are manifested in the practices of the community.
- Rituals are joint activities of the individual members and integrate them into a common culture.
- Heroes are individuals who hold a special place in the community and serve as a sort of moral compass for the group.
- Symbols are images, objects, words and gestures whose deeper meaning is only understood and lived by members of the community.
Rituals, heroes and symbols surround the core of a community and form the so-called practices. Together, these practices are responsible for shaping the core, i.e. the values.
✔ According to Hofstede, what is needed for cultural change?
For Geert Hofstede, too, cultural change begins with the obvious. He has to start on the outside with rituals, heroes and symbols in order to change the core.
Iceberg Model according to Hall
Edward T. Hall’s iceberg model is based on the idea that a company’s culture consists of both visible and invisible elements. On the surface are the visible characteristics of the culture. However, the essential part lies below the surface and cannot be seen. This invisible part represents the basis and has a significant impact on the visible elements.
Invisible elements (relationship level)
Visible elements (subject level)
• Basic Assumptions
• Fundamental Values
• Feelings and Thoughts
• Basic Needs and Experiences
• Unconscious Rules
• Interpersonal Relationships
• Mission Statement and Vision
• Objectives
• Purpose
• Rules
• Communication
• External impact
✔ According to Hall, what does It Take for Cultural Change?
For culture change, according to Hall, the iceberg is turned on its head. The relationship level must be disclosed and the employees must be aware of it. Only when they know the important characteristics of the corporate culture is it possible to develop it further.
7-S Model According to Peters and Waterman
The 7-S model does not only refer to the corporate culture, but to the entire organization. Peters and Waterman also divide corporate culture into visible and invisible elements, which they call hard and soft factors, respectively.
Hard Factors (visible):
- Strategy: Strategic actions to respond to changes in the environment.
- Structure: Structure of the organization in different departments, areas and positions.
- Systems: Processes for implementing strategy and structure.
Soft Factors (not visible):
- Style: corporate culture consisting of the values and norms of the organization and the leadership of the management culture.
- Staff: processes in human resources, such as the promotion of young talent and personnel development.
- Skills: Capabilities and strengths of the company as a whole.
- Shared Values: A company’s vision and purpose that should be shared by employees.
Peters and Waterman conclude that while all the elements influence each other, the soft factors have a particularly strong influence on the hard factors. In addition, the former are dynamic, i.e., they are in a continuous process of adjustment, for which the actions of those involved are largely responsible.
✔ According to Peters and Waterman, what is needed for cultural change?
In this model, a successful culture is achieved when all 7 factors are in balance and coordinated with one another. It should be noted that the smallest change in one factor has an effect on the entire system. Cultural change can only take place if the individual company members are aware of the soft factors.
Two-Stage Model According to Kotter and Heskett
Kotter and Heskett divide corporate culture into Group Behavior Norms and Shared Values. They posit that behavioral norms are highly visible and highly changeable, while shared values are less visible and difficult to change.
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High changeability
Low Changeability
High Visibility
Norms of Behavior
Low Visibility
Shared Values
For example, behavioral standards can be changed at any time through service instructions or process descriptions. Shared stats, however, have existed for a long time and are almost impossible to change due to their invisibility.
✔ According to Kotter and Heskett, what is Needed for Cultural Change?
The changeability of the two levels means that in the case of cultural change, the behavioral norms must be addressed. If these are changed in favor of a meaningful culture, it is easier to access and adapt the underlying shared values.
Cultural Change in the Company: Step-by-Step through Cultural Change
At the beginning of every change process there is the realization that change is needed. Once it has been recognized that the way we deal with each other, the work ethic, the external image, the communication strategies, etc. are not ideal and must be changed, the course is set for the change process.
6 Principles of Cultural Change according to Levin and Gottlieb
The subsequent change process takes place in several steps and is ideally guided by principles. An example of such principles is provided by Levin and Gottlieb:
- Don’t be afraid to keep things that work.
- Managers and the boardroom must set a good example.
- Include all levels (working methods, perception, communication, attitudes, etc.).
- Involve the entire company in the process.
- Plan precisely and implement the changes in a disciplined and controlled manner.
- Integrate the changes permanently into everyday work.
5 Steps of Culture Change
In order for cultural change to succeed, individual steps and methods are required. However, no general statements can be made here. How the cultural change in your company ultimately takes shape depends on your company situation. The following steps serve as a rough guide and should in any case be adapted to the specific circumstances:
1. Preparation and Planning
Once it is decided that changes are necessary, the resources needed to make them must be discussed. Determine the schedule, budget, effort, people involved, etc. so that the project doesn’t get out of hand. At this point it should be noted that cultural change does not happen from one day to the next. It often takes several years for the new corporate culture to be introduced in the long term.
2. Diagnostic Phase
The diagnosis phase serves to establish the status quo and to bring to light which basic assumptions and values determine the existing culture. This is best achieved using quantitative and qualitative empirical methods such as questionnaires, interviews and discussions. Ask your employees the following questions:
- What does the company stand for?
- What are the beliefs held here?
- What is important to the company, what should be important to it?
- What self-image do you pursue?
- According to what values are you trying to act here?
Ask these questions to as many participants as possible from different departments and hierarchical levels and compare them with your own ideas. This is the only way to create a consistent definition of the current corporate culture.
3. Determine the Target State
Once the status quo has been defined, it is now a matter of determining the goals of the culture change. Ideally, this is done involving different levels in the company. Key questions in goal setting are:
- Which culture is ideal for all stakeholders?
- In which environment does everyone involved feel comfortable?
- What general conditions does the industry require?
- How does the company achieve this target state?
4. Roll-Out
Starting with the executives, the most challenging phase of cultural change starts here. Now it’s time to make the changes. In this phase, it is particularly important that you get as many of those affected as possible on board, work through concerns and work out a new culture together. It is essential that the employees have sufficient say in this.
5. Fortification
Once the actual change process is over, it is now a matter of consolidating the changes in the long term. Here you should measure initial success and check whether the target status has been achieved. Identify those responsible who will take care of compliance with the new culture from now on. Ideally, you have already thought about how to deal with the change when people are unwilling in the conception phase, so that you can now react quickly if necessary.
Conclusion: Need for a Defined, Meaningful Corporate Culture
The culture in a company can be actively controlled only to a certain extent. A large part of this happens unconsciously and is sometimes difficult to change. Nevertheless, there are some reasons that make it necessary to become aware of the corporate culture and to change it in a targeted manner. This includes:
- Changes in the Market: e.g.; globalization, digitization, technological developments in the industry, increasing competition
- Changes in Society: e.g.; society’s demands on a company, change in values, changed customer requirements, demographic change (aging society)
- Changes in the Company Itself: e.g.; change in the executive floor, low employee satisfaction (shown, for example, in a high number of terminations), falling/strongly increasing productivity, falling/strongly increasing profit margin
If you miss these incentives, you may lose an important competitive advantage and, in the worst case, jeopardize the continued success of your company. With a structured and controlled cultural change, you create a positive corporate culture and ensure a successful future with good employer branding.
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