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Managing change across corporate cultures

by Fons Trompenaars and Peter Prud’homme, Capstone, 2004.

(Reviewed by Kevin Barham in April 2005)

(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.

We aim to give enough information to enable readers to decide whether a book fits their particular concerns and, if so, to buy it. There is no substitute for reading the whole book and our reviews are no replacement for this. They can give only a broad indication of the value of a book and inevitably miss much of its richness and depth of argument. Nevertheless, we aim to open a window on to some of the benefits awaiting readers of management literature.)

The ability to shape and change corporate cultures is of vital importance for today’s international managers. Revitalising corporate cultures after restructuring, providing the right glue to hold the company together during a globalisation process and preventing corporate culture clashes in international post-merger, acquisition or joint venture processes are key business issues addressed by this book.

The authors have impressive credentials. Fons Trompenaars is one of the world’s leading authorities on intercultural management and is author of the landmark bestseller Riding the Waves of Change. Peter Prud’homme is a cross-cultural consultant and former Philips manager with experience of major corporate culture change. They discuss what corporate culture is, how it can be assessed, why it has such a powerful influence on every aspect of business performance, and show how to shape high-performing corporate cultures in a complex international environment. To do this, they offer a new conceptual framework for understanding corporate cultures and the impact of national culture patterns on corporate culture.

Resolving dilemmas - the source of culture

The authors say that while cultures are all about shared values and assumptions, they do not believe that companies should have a single, static, identifiable culture nor that strong, cult-like cultures are the ideal corporate model. Cult-like cultures are not open to change and repress internal divergence. Organisations have to survive in a complex, dynamic and ambiguous environment whose threats and opportunities present paradoxical demands - for internal control on the one hand and the need to adapt to the environment on the other. Corporate cultures therefore need to be open for change and diverse views themselves.

Corporate culture must help the organisation spot the opportunities and threats in the external environment and must also facilitate a dynamic response in adapting to them. Rather than suppressing internal divergence, it must provide an answer to how to make use of the diversity. Most companies have many different subcultures and the internal conflicts between different value orientations and the problems of external adaptation often come in the form of dilemmas. Organisational members continuously resolve dilemmas and these become basic assumptions when the solutions work. The art of creating a viable corporate culture is therefore not to choose a fixed set of value orientations but to reconcile the dilemmas.

The ‘reconciling corporate culture’

The authors therefore define corporate culture as the pattern by which a company connects different value orientations (for instance, rules versus exceptions or a people focus versus a focus on goals) in such a way that they work together in a mutually enhancing manner. The corporate culture pattern shapes a shared identity which helps to make corporate life meaningful for the members of the organisation and contributes to their intrinsic motivation for doing the company’s work.

The ‘reconciling corporate culture’, with its inherent capacity for reconciling dilemmas by connecting different value orientations, is very different from the traditional concept of ‘strong’ corporate cultures. The latter describe corporate culture in terms of a set of value polarities militating against another polarity - ‘you’re either with us or against us’. Such cultures may be successful in the short term but will be stressful and will stagnate in the long term. The reconciling corporate culture is more dynamic because reconciliation is a continuous process based on a dialogue between different value orientations.

This definition of corporate culture also acknowledges that corporate cultures are inherently ambiguous and paradoxical. They are not just the sum of tangible manifestations such as symbols, language, behaviours or values. How people interpret the cultural manifestations and how they are linked together is reflected in an underlying pattern of meaning in which value differences are reconciled. In this sense, corporate culture consists of shared networks of meaning, providing coherence and a sense of commitment even though the pattern of meaning is continuously reconstructed in an ongoing process of reconciliation. This acknowledges that corporate culture needs to reinvent itself constantly.

The nine dimensions of corporate culture

The author’s analysis of existing models of corporate culture leads them to propose a nine-dimension model of the reconciling corporate culture. Each of the dimensions represents a key dilemma that very corporate culture has to resolve:

1. Consistency versus pragmatism. This is about valuing consistency by having standardised systems and procedures versus valuing pragmatism by allowing flexibility and adaptation. For example, does the company prefer to establish global or regional shared service centres or does it prefer to ensure local support? Reconciling this dimension involves learning from (local) exceptions to improve global or corporate systems.
2. Individualism versus group orientation. This dimension concerns the degree to which individuals are integrated into groups within the company. Practical issues here concern reward systems and knowledge management. Individualistic cultures believe that people cannot be trusted to do their jobs unless individual performance incentives are an important part of compensation. They see knowledge as something that individuals can make explicit by putting in databases and which can be transferred by education and training. In group-oriented cultures, knowledge is seen as tacit and innate and can be shared by informal group processes. The idea of reconciling this dimension is to reward individuals for what they contribute to groups and to reward groups for how they nurture individual development and initiative.
3. Competing versus partnership orientation. This dimension is about seeing business as a world of competing rivals versus regarding it as a world of co-operation and partnerships. Competing cultures have an aggressive attitude to competitors - it is all about winning. Partnership-oriented companies recognise that they are embedded in a complex ecosystem where success depends on having the right connections. Reconciliation here calls for ‘co-opetition’ i.e. co-operate to compete.
4. People centrality versus result centrality. Here the question is how the organisation sees its members on the broader human versus the specific work issues. Are they people who want to live a meaningful organisational life, or are they just a resource hired to do what the company wants? In a reconciling corporate culture, people will identify the organisation’s needs and goals with their own personal needs and goals.
5. Rational versus inspirational. This dimension distinguishes rational, analytical and detached cultures from those in which there is a place for intuition, emotion and passion. It is about seeing people as rational beings who take decisions based on careful analysis of all available information versus taking decisions based on intuition. The business issue is to what extent emotions may play a role in communication, decision-making and conflict handling. In a reconciling corporate culture, rational goals are pursued through inspirational leadership.
6. Egalitarian versus hierarchical. The distinction here is between cultures based on achievement with relatively flat hierarchies and those with relatively steep hierarchies based on people’s attributed status such as seniority and role. Egalitarian cultures delegate responsibility and involve people in decision-making by a consensus process. Leaders in hierarchical cultures act with authority and decisiveness. The challenge is to create a culture which establishes decisiveness through the consensus process and in which leaders use their status to coach and help people achieve their best.
7. Internal drive versus responsiveness. This is about influencing and controlling the environment as opposed to responding to the environment and the needs of customers. The practical issue is whether firms focus on products and technologies or on realising customers’ specific wishes. Responsive cultures try to align core capabilities with the needs of customers and attempt to discover what the meaning of the company for its customers actually is. Reconciling the dilemma means being responsive to client needs while developing the pull to push your products.
8. Stable continuity versus dynamic change. The business issue behind this dilemma is how fast business models are supposed to change. Although the dynamic, change side of the dilemma has been in favour in recent times, there are risks in taking this too far - many disruptive technologies fail. Reconciliation means realising that, paradoxically, you have to change if you want to remain the same, and have to pursue a stable continuity of core values if you want to experience continuous change.
9. Long-term, stakeholder orientation versus short-term, shareholder orientation. This dilemma is between short-term profit and growth on the one hand and long-term survival on the other. The main reason for the short life expectancy of most companies, according to the authors, is their focus on profits. Long-term survival requires an ability to learn by developing strong bonds with all stakeholders. Reconciliation on this dimension comes through taking corporate responsibility and creating sustainable value for all stakeholders.

Using these nine dimensions, the authors show how to assess your organisational culture by, for example, constructing 2x2 matrices. This produces four different types of culture:

• The Eiffel Tower - task oriented and hierarchical; highly structured, stable, predictable, routine and reliable. Work satisfaction comes from building competence in a well-defined area.
• The Family - person-oriented and hierarchical; power-oriented, paternalistic. Work satisfaction is based on loyalty and the accumulation of power and status.
• The Incubator - person-oriented and egalitarian; fosters creativity and work satisfaction through continuous learning.
• The Guided Missile - egalitarian and task-oriented; work satisfaction derives from the (material) reward attached to the completed task.

The international perspective

The authors note the ongoing debate as to whether corporate culture or national culture have the biggest impact on international co-operation. In their view, it is not a matter of either/or. The reality, they say, is that patterns of national culture in the place where a company has its roots have so much influence on company culture that the national background needs to be understood in order to understand the workings of its corporate culture in an international context.

National cultures vary substantially in their preferences for the four corporate cultures which means that the impact of national culture cannot be neglected. However, it cannot be assumed that the home culture of an international company will work throughout the world. Globalisation imposes conflicting demands on firms in combining global effectiveness in production, distribution and service and adapting to local circumstances. The solution lies not just in finding a balance between global corporate culture and local management practices and culture. A reconciled solution requires learning from local cultures on a continuous basis in order to improve the global effectiveness of the corporate culture.

Corporate culture and success

Strong cultures are often equated with homogeneous or even cult-like cultures. Having one homogeneous culture is a mistake, however; such cultures can become complacent and incompatible with an organisation’s changing environment. In the authors’ view, having a strong corporate culture means reconciling the dilemma between having a homogeneous culture on the one hand and having a differentiated culture with vibrant subcultures on the other.

Taking differentiation to the extreme is also undesirable as the cultures can become fragmented and indecisive because of conflicts with each other. In a reconciling corporate culture there is healthy rivalry between different subcultures. Reconciliation between homogeneous and differentiated culture implies developing shared commitment to aim high which can be reflected in a set of core values across subcultures, business units, and regional/national cultures. It also implies allowing each subculture to be a source of new values and to propose different initiatives for the business. It is a process of integrating diversity through a process of continuing learning.

All too often, attempts to relate corporate culture to success focus on cultures that help to create short-term shareholder value. The authors believe that the focus should be on cultures that enhance long-term value for all stakeholders, including customers and the environment.

Developing a corporate culture which combines extreme value orientations instead of reconciling them can easily lead to failure (which is what, in the authors’ opinion, happened at Enron where a combination of pragmatism and individualism led to greed). Developing meaningful corporate values calls for a process of constructive confrontation between the value orientations.

Creating and changing corporate culture

Change is not a matter of discarding the old culture and implementing a completely new one. Organisational cultures provide consistency and a core of the company that is strong and enduring. They also need to be adaptable to a changing environment. Changing corporate culture is about finding a balance between radical change and organic modifications, between bold moves and incremental adjustment.

The dilemma of change needs to be reconciled by ‘dynamic stability’ or ‘continuity through renewal’. Despite the pressures for change, it is important to ensure the strengths of current corporate culture do not get lost. A meaningful corporate culture is a mix of existing core values and new, aspirational ones. It is therefore necessary to know your existing culture and what you want to retain from it before embarking on a change project.

The authors propose the following schedule for a corporate culture change programme:

1. Assess current culture (through questionnaires, document analysis, interviews, focus groups)
2. Create input for future corporate culture and core values (including obtaining commitment from the top)
3. Discuss in organisation (involving people at different levels, and working on business and organisational dilemmas)
4. Finalise definition of desired culture and target corporate values (including action plan to support implementation)
5. Implementation (embedding the corporate culture in processes and instruments and working on organisational/behaviour change)
6. Monitor (live the corporate culture and learn from day-to-day experiences in the new culture).

Integrating different corporate cultures

As the authors point out, the role of culture in mergers, acquisitions, joint ventures and alliances is often neglected in favour of the financial and legal issues. Yet culture causes many problems in such undertakings. All companies involved in integration processes face the dilemma between the complete integration of corporate cultures versus allowing for differentiation. Integration very often results in the domination of one corporate culture, instead of creating a reconciling culture. Creating a reconciling culture is more likely to ensure successful partnerships. Making mergers and acquisitions successful therefore calls for a three-step approach:

1. Raising awareness - through a ‘cultural gap analysis’ to map the differences between the cultures and assess how the companies and their leaders deal with the differences.
2. Respect - this starts with realising the limitations of your own corporate culture orientation and the positive aspects of the contrasting orientation.
3. Resolving dilemmas - the process of reconciliation to connect the different corporate culture values so they work with each other in a mutually enhancing way.

Deriving strength from tension

The authors argue that it is a prerequisite for successful organisations to reconcile the variety of organisational cultures of which they consist in order to face the challenging world in which they operate. All companies face the nine fundamental dilemmas - the solution is not to choose one of the extremes but to draw strength from the tension between seemingly opposite values in a continuous process of reconciliation. To help managers and organisations manage the tension between seemingly opposing objectives by reconciling the dilemmas, the authors provide ‘reconciliation scorecards’ for each of the nine dilemmas. The scorecards reveal where a corporate culture is now with regard to the dilemmas and where people want to see it move to in order to face the challenges of the business environment.

Replete with recent case studies from leading international companies from the US, Europe and Asia, this book reflects a major advance in thinking about corporate culture. The strength of the reconciling corporate culture model is that it offers more than a tool for mapping and understanding corporate cultures. It offers a dynamic model for changing corporate culture. The book is required reading.

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