“It’s not just in your business model,” Professor Kotter says. “It’s in people’s hearts.”
The notion that corporate culture influences and is a key to understanding business performance is commonly accepted today. However, it was only a bit more than 20 years ago that academics introduced the term corporate culture to the business vocabulary. It is even more recently that practicing executives have started to appreciate its significance.
Corporate culture is still a somewhat squishy way to describe all the things that lie beneath the rational and measurable surface of an organization. But most management theorists agree on some variation of this basic definition: Corporate culture is manifest in distinctive patterns of human behavior based on core values, beliefs, and traditions. Culture is made tangible by corporate lore, ceremonies, celebrations of achievement, and institutional comportment, as well as through a company’s goals, strategies, management processes, structure, and methods of allocating resources.
In the 1980s, seminal writing about culture and business, such as Corporate Cultures: The Rites and Rituals of Corporate Life (Perseus, 1984), by Terrence E. Deal, a professor of education at the University of Southern California, and Allan A. Kennedy, a management consultant based in Boston and London, and Organizational Culture and Leadership (Jossey-Bass, 1985), by Edgar H. Schein, a professor at the MIT Sloan School of Management, posited the then-fresh idea that effective leadership and long-term success were tied to the creation of a healthy corporate culture. Corporate Culture and Performance (Free Press, 1992), by Professor Kotter and his Harvard Business School colleague James L. Heskett, offered the first detailed study of the relationship between a strong, positive corporate culture and superior performance.
More recently, a spate of books have equated overly earnings-driven companies with dysfunctional cultures and declining corporate health, including Professor Deal and Mr. Kennedy’s The New Corporate Cultures: Revitalizing the Workplace after Downsizing, Mergers, and Reengineering (Perseus, 1999); Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance (McGraw-Hill, 2003), by Lynn Sharp Paine, of the Harvard Business School; and A Company of Citizens: What the World’s First Democracy Teaches Leaders about Creating Great Organizations (Harvard Business School Press, 2003), by Brook Manville, chief learning officer of Saba Software, and Josiah Ober, professor of classics at Princeton University.
The authors of A Company of Citizens suggest that corporations examine how the uniquely participative system of democracy of the ancient city-state of Athens helped unleash the creativity of the Athenian people and channel it in ways that produced the greatest good for the whole society. Mr. Manville and Professor Ober say that the Athenian system succeeded in bringing individual initiative and a common cause into harmony, which is precisely the synthesis that modern companies need to realize the full power of their people and thrive in the knowledge economy.
Yet even as management scholars draw attention to the linkages between company culture and business performance, they also argue that deliberate culture change — if it is even possible — does not occur because top management commands it to happen through a written statement of values, a high-profile change program, or a combination of initiatives. In The New Corporate Cultures, Professor Deal and Mr. Kennedy absolutely reject the argument that one can successfully modify culture just because top leaders say it must be done. And even when cultures do begin to change, these scholars emphasize that it usually happens in a trying and disorderly way.
“Cultures change only when they need to and are damned well ready to change,” they write. “They change when their collective intelligence recognizes that the world has changed and that the culture better adapt in order for the business to survive.”