Ultimate Strategic Asset”
By Eric G. Flamholtz and Yvonne Randle
Stanford Business Books, 2011
“You cannot see it, touch it, smell it, taste it, or hear it, but it’s there.”
Is it the wind? Is it an invisible force? Is it the Benign Spirit? Is it an invisible being?
“It pervades all aspects of organizational life, and it has a profound impact on organizational success—or failure,” the authors continue.
Is it philosophy or policy? Is it a corporate slogan, a battle cry, a central theme?
“It is a real economic asset.”
Is it money? Is it a machine? Is it the asset that comes down the elevator at six o’clock in the evening—the individual?
It’s all of the above and more, according to authors of this book—Eric Flamholtz and Yvonne Randle.
“Corporate Culture: The Ultimate Strategic Asset.” The book title immediately telegraphs what it wants to discuss.
“Corporate culture” is a set of beliefs and behaviors, which determine the character and norms of the company’s employees and management—in the way they deal with each other, and in the style by which they transact with customers and other stakeholders outside of itself.
So, how is this different from other books of corporate culture?
In most books, a chapter or two are devoted to discussing cultures and sub-cultures in an organization. IBM has its culture of professionalism; General Electric its culture of effectiveness and efficiency; Starbucks its culture of coffee drinking as a social statement; Pepsi its cultural orientation toward the young generation; Microsoft its pervasive culture of being ahead of the pack, and many more.
In a refreshing and helpful way, this book views culture as manifested in five dimensions of culture: Customer orientation, people orientation, performance standards and accountability, innovation and change, and managing the company process.
This sounds like the Balanced Scorecard—which has for performance indicators customer aspect, financial aspect, people aspect and internal process aspect.
Nonetheless, this book goes further than enhancing corporate performance and achieving profit and growth goals. The book declares that all five dimensions contribute to evolving a culture.
The authors say: “The difference in cultural DNA found in organizations can be attributed to small but significant differences in the culture management process—that is, the process of managing an organization’s culture.”
In other books, culture is a consequence, an evolution of a series of decisions, actions, and ways of doing things. The interplay of such moves and changes through the years result in a “culture.” There is really no intentional move to “create a culture.”
The book, as any good treatise, defines its terms. “Corporate culture consists of values, beliefs, and norms that influence the thoughts and behavior of people in organizations,” the book says.
Such a culture ascribes importance to some values, and assigns less importance to others. “Values identify what an organization defines to be the most important with respect to its operations, employees and customers. They define what an organization holds most dear— the things it strives for and wants to protect at all costs.
Initial examples given by the book are these two: Google holds this value: “Technology matters.” For Ritz Carlton, it is “genuine care and comfort of guests as highest mission.” Walt Disney, expectedly, cites “innovation, quality, community, storytelling, optimism and decency.”
Equipped with many research work and findings, the book moves to discuss the five dimensions of culture—which it also calls “critical criteria.”
The first the dimension is directed at customers or clients. How does the company view its customers, and how does it deal with them?
Put simply and, yes, surprisingly so, companies view their customers in one of two ways: “a valued asset,” or “a nuisance or worse.” What? Companies that consider every customer as “king” are many. Or firms that are geared toward delighting their clients are plentiful.
It is unthinkable that there are firms who simply tolerate or have disdain continuing love affair with their clients.
It is not really hatred of customers. It is really a devil-may-care attitude of company executives toward customers. The book says they have heard these statements from company CEOs in their research work. For example, a manager of a product development group, puts this as a policy: “We don’t care what they say. We know what they need. If we build it, they will enjoy it,” the authors say.
The second dimension of culture is “people orientation.” The way a company views its people speaks volumes of its corporate character. There are companies who view employees as expenses or costs. They are dispensable cogs in a wheel. And yet another set of firms view employees as assets.
The book cites Southwest Airlines as one “where people are valued.” The airline’s culture promotes having fun and was built on “Luv”—a play on the name of the airfield where the company was born.
On the other hand, employees of a hundred million dollar company, according to the authors, expressed fear about their future there, because “anyone below senior management was a ‘second class citizen.’” Hear ye! Hear ye! Local firms!
In the dimension of performance standards and accountability, there are firms who place premium in achieving goals, period. And there are firms who want to achieve their objectives while, at the same time, stick to the values of fairness, chemistry and integrity. It is not a case of “I don’t care how you do it, just do it.”
In Smartmatic, a technology company born in Venezuela and headquartered in London, places equal importance to achieving goals and preserving values. The same is true for Hewlett-Packard. The book calls Smartmatic’s and HP’s performance tracking as classic, since it combines MBO (management by objectives) and cultural values. The book also discusses a firm which uses the Deming Principle, which departs from the classic approach.
As to the companies’ commitment to change and innovation, the authors found in their research that, even if they embrace change, they espouse simply a less unsettling value: Innovation. The book cites Smartmatic as one which “embraces innovation as a core strategy.” The same is of course true for Apple and Microsoft. Toyota views change as the “Toyota Way.”
Some skeptics may say that some companies prefer innovation because they actually use change as a strategy for “planned obsolescence.” One traditional example is the Singer machine in the past can last you a hundred years. This time a sewing machine can last you only a year. Then parts begin to wear down.
So, how do we know that a company’s culture is being successfully managed? The book’s answer:
When the company’s culture is imprinted on the members of the organization; if it is something they live and breathe and “take for granted as a way of life.” The culture is actually in people. And so the truth remains: People are the most valuable asset of the company.
In this book, corporate culture just does not happen. Such cultural DNA is intentionally “managed” for sustained profitability—and long-term success. dmv.communications@gmail.com