There are companies which are champions or masters of corporate culture management. These include Starbucks, Ritz Carlton, Johnson & Johnson, and Huawei. However, it must be understood that being a corporate culture champion does not mean that the company’s culture is “soft.” Most companies that are corporate culture champions are very demanding of people.

There are also companies whose management of corporate culture is so mangled and or dysfunctional that they are “corporate culture losers”! Some corporate culture losers are just “highly dysfunctional” and just do not manage corporate culture well. Examples included Uber, United and Sears. Other companies have cultures that are toxic or even approach true evil. In this context, a “toxic culture” is one that is highly dysfunctional to customers, employees, and even shareholders, while an evil culture is one that is designed to deceive customers and employees, and/or commits actual crimes. For example, Volkswagen which designed software to deceive regulators as well as customers about mileage, and possibly Theranos, which has been accused of misleading company directors as well as its customers about its laboratory testing practices.[1] Specifically, it has been alleged that Theranos said it could do 98% of the tests it offered using its proprietary technology; when in fact a former lab director said 90% of samples were tested using more conventional methods (that were not proprietary to Theranos).[2] As stated in the Wall Street Journal, “the company closed its medical lab operations in October 2016 after facing regulatory scrutiny.”[3]

We call these companies a “Culture Frankenstein,” because they are creations that are true monsters.

IS YOUR COMPANY A CULTURE CHAMPION OR A CULTURE FRANKENSTEIN?

If your company is a culture Champion like Starbucks or Ritz Carlton, then your culture is a true economic asset. However, if your company’s culture is a culture Frankenstein like Uber, United, Volkswagen and Theranos, then your culture is a true economic liability—not just in an operational sense, but because the culture is an open invitation to lawsuits and investigation by the Department of Justice.

What do Culture Champions do?

Culture Champions do several things well:

They define their core values.
They make sure people understand and embrace their core values.
They translate their core values into behavioral norms.
They monitor behavior to assess consistency vis a vis cultural values and norms.
They set specific measurable goals to improve their culture and culture management.
They measure improvements in their culture[4].
They have cultural improvement initiatives to continuously improve the effectiveness of their culture management and their core values.

In addition to the above, they also they tend to make sure that their core values reflect five key areas that our published empirical research has indicated are drivers of financial performance and critical to organizational success.[5]

What does a “Cultural Frankenstein” do or not do?

In addition to typically not doing the things listed above, a Culture Frankenstein does several other things that differ from culture champions:

They tend to have either stated or implicit dysfunctional values or norms that are contrary to good cultural practice in the treatment of customers and their employees.
They tend to harshly punish those who object or are “whistle blowers” about these dysfunctional values and norms.
They tend to have cultures of “concealment” rather than “transparency”.

CORPORATE CULTURE CHAMPIONS AND CULTURE FRANKENSTEINS ARE CREATED

A corporate culture champion is created by systematic effort. It begins with a corporate leader (typically but not always) a CEO who has a strong belief in the importance of culture as an intangible asset. We have documented the examples of several corporate culture champions in our book, Corporate Culture: The Ultimate Strategic Asset (Stanford University Press, 2011).[6] These examples include well-known companies such as Starbucks, Google, Southwest Airlines, and Walmart. They also include lesser known but true culture champions such as Emergent BioSolutions, Smartmatic, and Infogix.

Similarly, a Culture Frankenstein must be created. It takes effort to create a toxic culture! Examples of companies that have created a culture Frankenstein to one degree or another include not just those listed above but also: Wells Fargo with its problem of a dysfunctional incentive system that led employees to create unauthorized accounts; Toyota which experienced the so-called “sudden acceleration problem” that led to several injuries and deaths; and Uber, whose dysfunctional culture led to: 1) accusations of sexual harassment at corporate, 2) a claim of intellectual property theft, and 3) a culture of ill-treatment of Uber drivers.[7]

HOW TO CREATE A CORPORATE CULTURE CHAMPION

Unfortunately, an in depth discussion of what must be done to create a corporate culture champion is beyond the scope of this article. However, we will identify some of the key steps here. We will also describe an opportunity below for those interested to gain a deeper understanding.

Six Key Steps to Create a Corporate Culture Champion

There are six key steps required to create a corporate culture champion. These were hinted at above in describing what Culture Champions do well. These are:

Define your Company’s core values.
Make sure people understand and embrace your core values.
Translate their core values into behavioral norms.
Monitor behavior to assess consistency vis a vis cultural values and norms.
Set specific measurable goals to improve their culture and culture management
Measure improvements in their culture

Each step is examined in turn below.

Define your Company’s core values.

The first step to manage culture effectively and become a culture champion is to define your company’s core values. “Values” are what are most important to a company. Ideally your values should include the five “key value areas” which our published empirical research has identified as critical to organizational success and drivers of financial performance.[8] These “key value areas” are: 1) treatment of customers, 2) treatment of people (employees) 3) standards of performance and accountability, 4) openness to innovation and change, and 5) company process orientation.[9]

Unfortunately, most companies do not develop core values for each of these key culture areas. Instead, they simply identify what they think are important values to them. As a result, and tend to miss two of three of these key values areas.

Make sure people understand and embrace your core values.

A second step to manage culture effectively and become a culture champion is to ensure that people understand and embrace your core values. People must be trained in what your values are and what they mean in the context of your business. For example, customer orientation means something very different at Starbucks, United Airline, Ritz Carlton and Uber.

Translate their core values into behavioral norms.

The next step is to translate your core values into “behavioral norms.” Specifically, how do you expect people to behave to express your core values? We facilitated this process of translation of values in to norms a few years ago at a large bank in Vietnam. Differences in norms were required not only for different job types of employees, but also in different locations in Vietnam: The South (Ho Chi Min), Central Vietnam, and in the North (Hanoi).

Monitor behavior to assess consistency vis a vis cultural values and norms.

The next step is to monitor behavior to assess the extent to which actual behavior (behavioral norms) is consistent with desired behavior (stated values). This can be done via the performance management system, and by using custom surveys.[10] A discussion of how to design the performance management system to do this is beyond the scope of this article.

Set specific measurable goals to improve their culture and culture management.

After monitoring behavior to assess consistency vis a vis cultural values and norms via the performance management system and by using custom surveys, the next step is to set specific measurable goals for improvement. Virtually all of our client’s do this to provide focus for improvement and as a basis for assessing progress.

Measure improvements in your culture.

The final step is to measure improvements in your culture. Using a custom culture survey, you can obtain periodic measurements of improvement in culture and culture management. This practice has been adopted by several of our clients. For example, Emergent Bio Solutions monitors cultural change and progress approximately every two years, as described in our book Corporate Culture: The Ultimate Strategic Asset.[11]

ACTION STEPS TO BECOME A CULTURE CHAMPION

The first (and perhaps the most important step) to become a culture champion is to take a first step! This means making a commitment to action to manage and improve your corporate culture. This has been done not only by companies that have become culture champions, but also by companies that recognized they had dysfunctional or even toxic cultures requiring change.

Recently Well Fargo, Uber and United have all recognized that their culture requires “more than a tune up.” Each has made a public announcement of its intent to improve its culture and taken some specific steps in towards that objective. For example, Wells Fargo has increased an offer for settlement with account holders hurt by its practices of opening unauthorized accounts. Tim Sloan, CEO of Wells Fargo, has said that this was “an important step to make things right for our customers.”[12] Similarly, the Board of United Continental Holdings Inc. has removed the role of Board Chairman from its CEO, Oscar Munoz, and indicated that it will be revamping executive compensation incentives.[13] Finally, Travis Kalanick resigned as CEO from Uber, the firm he co-founded. All of these actions are positive steps, but the result of a failure to manage culture effectively.

THE BOTTOM LINE

Becoming a corporate culture champion is truly a worthy goal. It also has significant economic value to those who accomplish it. In contrast, those companies who are culture Frankenstein’s will suffer serious economic losses!

[1] Christopher Weaver, “Theranos Investor Suit Offers Detail,’ Wall Street Journal, Business & Finance, Saturday/Sunday, April 22-23, 2017, B1.

[2] Christopher Weaver, “Theranos Settles With Hedge Fund, Wall Street Journal, Business & Finance, Thursday May 2, 2017, B3.

[3] Ibid.

[4] Culture measurement is possible as we have shown in Eric Flamholtz, “Corporate Culture and the Bottom line,” European Management Journal, 2001 and Eric Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2016.

[5] See Eric Flamholtz, “Corporate Culture and the Bottom line,” European Management Journal, 2001; and Eric Flamholtz, and, Rangapriya Narasimhan-Kannan “Differential Impact of Culture upon Financial Performance: An Empirical investigation,” European Management Journal, 2005, 23 (1), pp. 50-64.

[6] See Eric Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2016.

[7] Michael Hiltzik, Los Angeles Times, Business, Thursday March 2, 2017, p. 1, 4.

[8] See Eric Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2016.

[9] For further explanation, see Ibid.

[10] Ibid.

[11] Eric Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2011.

[12] James Rufus Koren, “Wells Boosts offer in account scandal,” Los Angeles Times, Business, Saturday April 22, 2017, C1.

[13] Susan Carey, “United Moves on Executives,” The Wall Street Journal, Saturday-Sunday, April 22-23, 2017, p. 1.