Empowering Subcultures Boosts Cultural Renewal

No organization has just one culture. Every enterprise culture is comprised of any number of smaller individual subcultures.

Each team, department and division has a distinct subculture that exists as a smaller reflection of the way the associates in the enterprise at large work together, communicate, plan, solve problems, make products and provide services, form friendships, measure their progress and reward success.

In fact, inside each subculture are usually more informal groups or cliques of employees who share common interests. These groups can become very influential in the absence of strong, positive leadership from the formal leaders of the organization. These internal influences can account for significant differences in performance between subcultures within the same enterprise. Depending on the strength of the workplace culture, the informal leaders can either positively or negatively impact the attitudes of other members of the subculture, dramatically affecting performance. As an example, one sales team may outperform all the other teams, even when those teams sell the same products at the same prices to the same types of customers.

The differences in performance can be credited in many cases to cultural leadership. Yet, too often the evolution of culture is left up to chance -- or, more likely, to neglect. Managers are seldom given the knowledge to consciously build effective cultures. By training managers to become cultural leaders, you enable them to become more effective and accountable.

Indeed, to sustain a successful workplace culture it is crucial to hold every one of the leaders in the enterprise accountable for building his or her own subculture.

Each separate department and branch, of course, has different people, different personalities and different goals, but with one overarching purpose. So a savvy CEO will institute a model for the overarching culture that, while being sensitive to the differing personalities and functions of each subculture, provides consistency across the organization.

Defining Strong and Adaptive Workplace Cultures

Longtime organizational behavior researcher and business consultant Daniel R. Denison Ph.D., defines workplace culture as:

“The underlying values, beliefs and principles that serve as a foundation for an organization's management system, as well as the practices and behaviors that both exemplify and reinforce those basic principles.” 4

A number of authors and researchers have studied the traits of successful businesses. In their book, Built to Last, James C. Collins and Jerry I. Porras describe companies with consistently strong and adaptive cultures. Called “visionary” because of their ability to sustain success over time, these companies include 3M, General Electric, Hewlett-Packard, Marriott, Merck, Motorola, Nordstrom, Proctor & Gamble, and Sony.

These companies combine strong, well-defined, customer-oriented cultures with excellent products and a passion for staying current with changes in the marketplace. Their conscious decision to do what is necessary to adapt to change has consistently rewarded their balance sheets, their associates and their investors.

It's a given that many of the firms that regularly appear on the Fortune Magazine “ 100 Best Companies to Work For” list perform extraordinarily well financially.

In contrast, witness the phenomenon of the dot-coms. Many of these startups were flush with cash before they even had a culture, much less a viable product. Now, their ability to adapt to a fiercely competitive Internet market is being severely tested.

Certainly, some of the dot-coms are building strong, adaptive cultures and may one day challenge Microsoft and the other high-tech gorillas that influence the Internet and computer markets. But most won't survive, because they were founded on a seemingly saleable idea, greed and ego -- jumping into an undefined market to make a quick buck and then get out -- without a viable business premise.

The Microsofts, Ciscos and the other companies with larger resources and established cultures will buy up many of the dot-coms that have a viable idea or product. More effective competitors will flatten others, as if hit by a speeding truck.

History suggests that a similar fate befell the railroad companies, which failed to adapt to changes in their environment and were knocked aside by the competition. Did you ever wonder why the railroads never made the transition to operate other modern modes of transportation, such as airlines?

When you study the people who ran the railroads, you find that these titans of industry restricted their focus to the railroad businesses. In their opportunistic desire for short-term profits, they failed to place themselves within the larger context of being in the transportation business. As a result, the airlines grew up around them and in short order displaced them as the main choice for long-distance passenger travel.

Though the railroad companies dominated their market, they failed to see where the future of transportation was headed, and they didn't adapt. Had their cultures been different, they could perhaps have remained dominant in the “transportation” industry.

Building Cultures That Thrive on Change

In their book, Corporate Culture and Performance, Harvard Business School professors John P. Kotter and James L. Heskett delineate three types of organizational cultures:

•  Strong Cultures -- These cultures are centered on the powerful leadership of an individual or small group of strong leaders.

•  Strategically Appropriate Cultures -- These cultures are just right for the times, but often falter as competition, markets and technology change.

•  Strong, Adaptive Cultures -- These cultures consistently are highly effective in producing results and are able to attract, motivate and retain top talent.

These labels and their characteristics mesh well with the six cultural elements of the Visionomics Cube. In the following I have adapted and modified them slightly to illustrate my own experience with the various culture types. For instance, I prefer to use the phrase “opportunistic cultures,” rather than “strategically appropriate cultures,” to illustrate my view of organizations that capitalize on the fleeting good times.

Strong Cultures Depend on Personality

Strong cultures can work well as long as they have strong leaders in place to make appropriate short- and long-term decisions. These cultures reflect the personality and inspiration of the dominant leader, and while they are often wildly successful, over time they can falter when these strong, visionary leaders leave or die without a succession plan.

The Zenith Radio Corporation is perhaps one of the best examples of this style of culture.

Zenith was a fabulous company that dominated the radio and television manufacturing industries early in the century. Commander Eugene F. McDonald, its charismatic founder, guided the enterprise for 45 years, during which time Zenith led with innovations that included the first portable radios, the first AC-powered radios and the first subscription TV system.

McDonald not only led his company to greatness, he also helped develop and was the first president of the National Association of Broadcasters.

However, as rigid as he was charismatic, McDonald made almost every major decision in the company himself. The effectiveness of Zenith was all based on McDonald's ability to make proper decisions, issuing orders and having them carried out. Everyone in the organization looked to McDonald for direction. But he left no succession plan. So after his untimely death in 1958, there was no one in the company to fill the huge void he left.

Zenith soon lost its number-one position in television manufacturing, and because of decisions that reflected the tastes and preferences of McDonald, the company had no other product lines to compete in a rapidly changing industry. Since then the company has gone through reorganizations, name changes and mergers as it struggles to survive.

Strong cultures can do well while led by their founders or other strong leaders. But over time, they do not create enviable track records. Often, managers just below the leader never gain the experience necessary to be strong leaders on their own. Or they fail to see the possibility of any movement upward and therefore leave.

Those leaders who are left behind, and who had looked to the strong leader for guidance, can suddenly feel directionless. Subcultures may even head off in different directions, weakening the entire enterprise's identity and collective purpose.

Strategically Appropriate (Opportunistic) Cultures Are Vulnerable

Like strong cultures, strategically appropriate cultures work well for a period, but often falter as conditions -- competition, market shifts and technology -- change.

For a variety of reasons these cultures possess, in one shining window of time, the right people, the right product and the right customers. The enterprise might be shaped around a new technology or an innovative way of doing something better than anyone else. But if it lacks the ability to adapt to the changes brought on by the new needs of customers, new competition or faster technologies, it can end up like yesterday's news.

In its early days, Xerox was a strong example of a culture that valued and learned from its relationships with customers.

In the late 1960s, Xerox as I knew it was a collection of about 80 decentralized branch offices. Despite the company's centralized approach to product innovation, the branches had a great deal of autonomy in terms of sales and marketing.

These branches (subcultures) were focused on the needs of their local customers, allowing them to react quickly to changes in the market. Loyal customers graduated from buying small copiers to larger copiers, as their needs changed. Sales teams tended to be highly motivated. They had a wide range of pricing plans to attract and serve more customers. There were many opportunities for advancement, recognition and reward. And they had autonomy to deploy resources. Thus, much of the company's early success took place in these decentralized markets that catered to local customers.

But the fortunes of Xerox changed when new managers from outside the company sought to centralize control of their products and their sales and marketing strategies. Among other things, the new central control diluted the local identities of the branch offices. Sales and marketing representatives often answered to far-off managers who, unlike the local sales teams, were unable to respond as quickly and as personally to the customers' needs.

Focusing more attention on the short-term bottom line than on the strong culture Xerox had built up, the leadership decided to place the lion's share of its marketing and sales efforts on its large copiers. This allowed the small-copier market, which had been the breeding ground for business for local branch offices, to slip away to emerging Japanese companies.

The Japanese not only became very efficient at building low-cost, high-quality small copiers, they also found that they could make large copiers. So soon they began to siphon away those loyal customers who once depended on Xerox to take care of their entire copier needs -- from small copiers to large ones -- further eating into Xerox's market share.

While Xerox still dominates the high-end of the market, the rest of the market it once presided over has largely been conceded to the Japanese. Here is another textbook case of a tremendous culture decimated because of decisions made around products and services that, in the end, failed to account for the changing needs of its customers and the market.

The leadership of Xerox was so focused on the bottom line that it robbed the energy from its once highly effective sales teams, which were the reason for the company's profitable years to begin with. The company, which has gone through a number of reorganizations in an attempt to recapture its former glory, has also failed to capitalize on the many high-potential products coming from its own research because of its continual focus on the “copier business” rather than on where the marketplace is going.

Strong, Adaptive Cultures Rule

In contrast to strong cultures and opportunistic cultures, strong, adaptive cultures remain customer-focused and learn from customer relationships. They use this knowledge and insight to make changes in their products, services and marketing strategies.

A good example of this type of culture is 3M. This company is constantly renewing itself by developing new products and effectively marketing them to both old and new customers. They have sold Post-it ä notes to their Scotch Tape ä customers and audio and videotape to people who bought projection equipment.

Organizations with a strong sense of adaptability not only demonstrate consistently outstanding performance, they also exhibit the ability to react to turmoil, adjust and speedily take advantage of opportunities their competitors miss.

General Electric is an example of such a culture. This 122-year-old company grew from making light bulbs to become a worldwide conglomerate that makes space-travel components, medical diagnostic equipment, lasers and self-cleaning ovens. It operates a huge loan company, a reinsurance firm and a television network. It has filed nearly 68,000 patents and was the first corporation, outside computer companies, to invest in the Internet revolution, which it remains committed to.

Under its former chairman and CEO, John F. Welch, Jr., GE initiated a work-out process in 1988 to improve productivity, increase efficiency and reduce layers of bureaucracy that inhibited its ability to act swiftly.

Specifically, it shed any operating process that didn't make sense and sought out new business opportunities in untamed global markets. GE made change in one of the bulwarks of its strategy for global expansion as it sought, in the words of Welch, to see the world “the way it is, not the way you wish it to be.'' 5 Along the way, GE was named Fortune magazine's most admired company.

Welch discussed his philosophy of change in a speech to his shareholders in 2000. He described GE as an organization “endlessly searching for new ideas,'' that was “not only comfortable with change but relished it.'' 6 He said an organization today that saw change as an opportunity rather than a threat, “had a distinct advantage where the pace of change was always accelerating.''

It is the same philosophy that Gina and Stephanie Chatman are pursuing in transforming 100-year-old Kenton Brothers from a sleepy locksmith shop that was bleeding workers into a powerful electronic securities firm. To open itself to new ideas, the company has broken down walls between management and associates, flattened bureaucracy and nurtured an environment where people have a say in the direction and vision of the organization.

“I believe in hiring people who are better than I am at certain things, and then allow them to flourish,'' says Gina. “We wanted a place where people were knocking the doors down to be a part of us.'' 7

As the workplace shifts from manufacturing to managing information, placing more emphasis on cognitive abilities, organizations will require cultures that take even greater advantage of the shared knowledge of their workforce to benefit from change.

Associates increasingly will have multiple responsibilities that require cross-training to keep up the demands of changes in the increasingly global economy.

Strong, adaptive cultures do not just happen. They are built block by block by leaders who understand the need to develop cultures where people are proud to work and that broadcast their values to their customers.

Leaders, who develop the strength, speed and adaptability of their cultures will not only increase their ability and mandate to lead but spur a work culture ethic that results in greater sustaining productivity and high performance.

Testing Your Cultural Conscience

Below is a checklist of questions to help you judge the present cultural awareness of your organization. If you answer yes to all the questions, feel assured that you currently have or are well on your way to building a high-performance workplace culture. If you answer no to any question, you may want to focus on that related issue as a priority as you begin your cultural renewal process.