What Holds Companies Together?

Company cultures

“Our greatest struggle is within ourselves. Whatever sense we have of thinking we know something is a barrier to continued learning.” 

[L. David Marquet]

Leadership does not exist in a vacuum. It is participatory — leaders and followers are in a mutually beneficial relationship where each adds to the effectiveness of the other. There needs to be mutual understanding and collaboration to achieve greater results.

There is a reason why the phrase culture eats strategy for breakfast has become so popular — culture, how we work, is as important as what time dependent choices we make, our stategizing.

In Why Should Anyone be Lead by You?  BBC director of HR and internal communications Gareth Jones and Rob Goffee, London Business School organizational behavior professor say that culture is community:

“It is an outcome of how people relate to one another. Businesses rest on patterns of social interaction that sustain them over time or are their undoing. They are built on shared interests and mutual obligations and thrive on cooperation and friendships.”

They say through the lens of sociology, there are generally two types of human relationships: 1./ those governed by sociability, which is led by the heart; 2./ and those bound by solidarity, which is led by the mind. According to the authors, the degree to which these relationships interact leads to four company cultures:

  • Networked –- characterized by highly sociable and low solidarity with many ways to get around hierarchy (e.g., hierarchical, decisions made by talking through networks, very political)

    A networked organization is usually so political that individuals and cliques spend much of their time pursuing personal agendas. It becomes hard for colleagues to agree on priorities and for managers to enforce them. It is not uncommon to hear frequent calls for strong leadership to overcome the divisions of subcultures, cliques, or warring factions in networked organizations.

    In addition, because there is little commitment to shared business objectives, employees in networked organizations often contest performance measures, procedures, rules, and systems.

  • Mercenary –- characterized by high solidarity and low sociability with higher focus on responding to market threats (e.g., high on data-loaded memos, no chats, clear work life separation)

The low level of social ties means that mercenary organizations are rarely bastions of loyalty. […] But those feelings are not sentimental or tied to affectionate relationships between individuals. People stay with high-solidarity companies for as long as their personal needs are met, and then they move on.

The advantages of a mercenary organization can sound seductive in performance-driven times. […] Because of their focused activity, many mercenary organizations are very productive. Unhindered by friendships, employees are not reluctant to compete, enhancing performance as standards get pushed ever higher.

But mercenary communities have disadvantages as well. Employees who are busy chasing specific targets are often disinclined to cooperate, share information, or exchange new or creative ideas. To do so would be a distraction. Cooperation between units with different goals is even less likely.

  • Fragmented –- characterized by low sociability and low solidarity display low consciousness of organizational membership (e.g., partnerships, doctors)

Its members rarely agree about organizational objectives, critical success factors, and performance standards. It’s no surprise, then, that high levels of dissent about strategic goals often make these organizations difficult to manage top-down. Leaders often feel isolated and routinely report feeling as if there is no action they can take to effect change. Their calls fall on deaf ears.

Low sociability also means that individuals may give of themselves on a personal level only after careful calculation of what they might get in return. Retirement parties, for example, are often sparsely attended. Indeed, any social behavior that is discretionary is unlikely to take place.

[…] situations do exist that invite, or even benefit from, such a culture, and further, this kind of environment is attractive to individuals who prefer to work alone or to keep their work and personal lives entirely separate.  

  • Communal –- characterized by high sociability and high solidarity are typically small, fast-growing and entrepreneurial and have a high level of organizational identity (e.g., start-ups or groups of friends)

The communal culture may be an inappropriate and unattainable ideal in many business contexts. Our research suggests that it seems to work best in religious, political, and civic organizations. It is much harder to find commercial enterprises in this quadrant. The reason is that many businesses that achieve the communal form find it difficult to sustain. There are a number of possible explanations.

First, high levels of sociability and solidarity are often formed around particular founders or leaders whose departure may weaken either or both forms of social relationship. Second, the high-sociability half of the communal culture is often antithetical to what goes on inside an organization during periods of growth, diversification, or internationalization. These massive and complex change efforts require focus, urgency, and performance—the stuff of solidarity in its undiluted form.

More profoundly, though, there may be a built-in tension between relationships of sociability and solidarity that makes the communal business enterprise an inherently unstable form.

No culture is good or bad, say Goffee and Jones, just different.

More sociability can develop into cliques and informal, behind-the-scenes networks that may circumvent or, even undermine process. Solidarity also has its costs as companies may ride on a bad strategy with great efficiency right into a cliff.

The riskiest moves are those that attempt to become a better fit for their environment. This is a constant challenge:

Our research suggests that over the last decade, a number of large, well-established companies with strong traditions of loyalty and collegiality have been forced, mostly through competitive threat, to move from the networked to the mercenary form. To describe the process as tricky does not do it justice. It is perhaps one of the most complex and risk-laden changes a manager can face.

Companies culture is also not homogeneous — there may be significant differences between groups and departments as well as management levels. Which presents an additional challenge when the context changes. A two-decade old example is still useful to illustrate the complexity:

Consider the example of chairman and president Jan D. Timmer of the Dutch electronics company Philips. Once a monumentally successful company, Philips lost its competitive edge in the mid-1980s and even came close to collapse. Timmer (and many observers) attributed much of the company’s troubles to its corporate culture.

Sociability was so extreme that highly politicized cliques ruled and healthy information flow stopped, particularly between R&D and marketing. (During this period, many of Philips’s new products flopped; critics said the reason was that they provided technology that consumers didn’t particularly want.)

Meanwhile, authority was routinely challenged, as were company goals and strategies. Management’s lack of control allowed many employees to relax on the job. They had little concern with performance standards and no sense of competitive threat. In short, Philips demonstrated many of the negative consequences of a networked organization.

However, given the industry’s primary success factors—innovation, market focus, and fast product roll-out—Philips needed a mercenary or communal culture to stay even, not to mention get ahead.

Timmer attempted just such a transformation, first by trying to lower managers’ comfort level. He implemented measurable, ambitious performance targets and held individuals accountable to them. In the process, many long-serving executives left the company or were sidelined.

Timmer also conducted frequent management conferences, at which the company’s objectives, procedures, and values were clearly communicated. He demanded commitment to these goals, and those employees who did not conform were let go. In this way, solidarity was increased, and Philips’s performance began to show it.

As performance began to improve markedly, Timmer made efforts to restore some of the company’s sociability, which had been lost during the turnaround—thus moving the company from mercenary toward communal. Meetings began to focus on the company’s values and on gaining consensus. In short, Timmer was trying to reestablish loyalty to Philips and connections among its members.

Timmer has since retired, and Phillip's three CEOs after him likely had to deal with radically different environments, business and talent mix.

The authors have several ideas on how to increase sociability. For example:

  • Promote the sharing of ideas, interests, and emotions by recruiting compatible people
  • Limit hierarchical differences
  • Increase social interaction among employees by arranging casual gatherings inside and outside the office, such as parties, excursions

And to build solidarity. For example:

  • Develop awareness of competitors through briefings, newsletters, videos, memos, or e-mail
  • Create a sense of urgency
  • Encourage commitment to shared corporate goals

It all comes down to choices.

In Turn the Ship Around!: A True Story of Turning Followers into Leaders, L. David Marquet wrote about his experience as captain of the USS Santa Fe, a nuclear-powered submarine. He discovered that the best way to build a great team was to cede decision-making control of their environment to the people who were responsible for it. Along with responsibility, those people should also have authority and the requisite resources.

An anecdote from the book is a useful reminder for those seeking leadership positions. Marquet relates an incident where he was denied the opportunity to sail with a submarine whose command he was to assume within a month:

Even though this 2-day underway period would be greatly useful in sustaining Olympia's quality performance after he departed, he apparently had no interest in helping facilitate that. Could I fault him?

In the navy system, captains are graded on how well their ships perform up to the day they depart, not a day longer. After that it becomes someone else's problem.

I thought about that. On every submarine and ship, and in every squadron and battalion, hundreds of captains were making thousands of decisions to optimize the performance of their commands for their tour and their tour alone. If they did anything for the long run it was because of an enlightened sense of duty, not because there was anything in the system that rewarded them for it.

We didn't associate an officer's leadership effectiveness with how well his unit performed after he left. We didn't associate an officer's leadership effectiveness with how often his people got promoted 2, 3 and 4 years hence. We didn't even track that kind of information. All that mattered was performance in the moment.

We measure what we intend to reward, with its intended and unintended consequences.



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