Overcoming Corporate Culture Myopia

LOS ANGELES - June 19, 2020 - PRLog -- It is now well recognized that corporate culture is important to organizational success, Organizations such as Starbucks, Google, Johnson & Johnson and Walmart and many others all have formal statements of their culture.  Unfortunately, virtually all of these examples (while well intended) are based upon an overly simplistic approach to developing culture statements.

An Overly Simplistic Approach to Culture Statements

Virtually all culture statements we have seen are attempts based upon ad hoc statements of core values that have "face validity" (intuitively "make sense") to organizations. These statements of corporate core values typically consist of lists of key words or phrases that seem reasonable or meaningful. For example, one company stated that "our core values are 'professionalism,' 'integrity,' 'hard work,'  'teamwork', and 'results.'"

Although on the surface this seems to be a reasonable approach, there are two significant problems with this "method" of deriving a set of core values. First, it is lacking in empirical (predicative) validity. How do we know that these asserted values are meaningful or relevant to performance and organizational success?

Second, how do we know that these are what the key core values ought to be? To answer this question, we have been engaged in empirical research designed to identify the key dements in of culture than companies ought to be managing.

The Key Dimensions of Corporate Culture

Based upon our own original research and experience in working with organizations, we have identified five key dimensions of culture which have a statistically significant relationship to (are shown to affect) financial performance.[2] These areas are:  (1) customer orientation, (2) orientation toward employees, (3) standards of performance and accountability (4), innovation and/or commitment to change and (5) company process orientation. Although we have reviewed the literature of culture management, we have not found any other set of variables that have been identified as empirically related to (drivers of) financial performance. In addition, we have conducted factor analytic studies which have supported the validity of the proposed five factor framework[3].

The Bottom Line

The Bottom Line is that companies ought to be using the five of areas of corporate culture values which we have identified in our empirical research as the categories to develop their core values. Failure to do so implies that one or more of the crucial areas of culture which have been shown to impact financial performance might be neglected. This, in turn, means that the management of corporate culture will be suboptimal.

About the authors

Eric Flamholtz, Ph.D., is Professor Emeritus, Anderson School of Management, UCLA and President and Founder of Management Systems Consulting.

Yvonne Randle, Ph.D. is Executive Vice President, Management Systems Consulting and Lecturer, Anderson School of Management, UCLA.

https://www.mgtsystems.com