strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
 / Third Quarter 2001 / Issue 24(originally published by Booz & Company)


The Cult of Three Cultures

That doesn’t mean that corporations should simply settle for the status quo, letting executives, operations people, and engineers continue in their separate bailiwicks, complacent in their mutual misunderstandings. Companies turn to OD professionals in the first place precisely because there’s always a frustrating fragmentation problem to solve somewhere. (Businesspeople often call it the “stovepipe” or “silo” problem.) Although corporations like to talk about cross-functional cooperation, people don’t work well across professional cultures. They probably never have.

Culture and the CEO
About 10 years ago, a sociologist named Neil Fligstein, currently at the University of California at Berkeley, published a book called The Transformation of Corporate Control (Harvard University Press, 1990). It has some compelling resonances with Professor Schein’s theories. Professor Fligstein posited that the modern corporate world has changed its dominant culture several times during the past century. As political and economic realities changed, cultural trends in CEO thinking changed with them.

Thus, in the 19th century, the most successful CEOs were monopolists, dominating their industries by acquiring or wiping out competitors. Once antitrust laws made that stance unfeasible, corporations passed into what Professor Fligstein calls a “manufacturing conception of control” — his name for the operations culture. At the great vertically integrated companies of the 1920s, like DuPont, International Paper, and U.S. Steel, the CEOs were all operations men.

In the 1930s, when the Great Depression hit, control passed to marketing-oriented CEOs like Alfred Sloan of General Motors. Professor Fligstein also counts Henry Ford as more of a marketer than a production CEO. His greatest innovation, after all, was not the assembly line but the $200 automobile. This cultural shift reached its apotheosis in the golden age of advertising in the 1960s, when an au courant CEO seemed more aware of the television budget than the production schedule.

Then, in the late 1970s, when inflation drove the cost of capital sky-high and new avenues for raising capital emerged, corporate culture changed again. Finance-oriented CEOs took hold. Professor Fligstein’s book doesn’t quite cover this era, but in a recent interview he said the current preoccupation of CEOs with share prices simply didn’t exist before the 1980s. Keeping the share price high was a priority, to be sure, but not the imperative — the cultural imperative, you might say — that dominates executive thinking today.

“When stock prices were looping sideways while corporate assets were inflated in value,” Professor Fligstein said, “it looked on the balance sheets like most companies were in terrible shape. Around 1980, people like Michael Milken figured out that the firms were worth more broken up than whole. Only then did our current phase of shareholder-value rhetoric start to develop.”

It is significant, I think, that Professor Fligstein’s corporate cultures — monopolist, manufacturing, marketing, and finance — don’t quite map on to Edgar Schein’s corporate cultures of operations, engineering, and executive. For in a typical company, there are many significant professional cultures, including one of organizational development, Professor Schein’s profession.

Nor is every CEO a financial creature, even today. Perhaps “only the paranoid survive” in Silicon Valley, as Intel CEO Andrew Grove’s autobiography put it, because there are so many engineering-culture executives around, and their culture fundamentally mistrusts people.

Edgar Schein and Neil Fligstein have never met or spoken, but when you put their ideas together, you get a picture of corporate cultures as not just a factor in corporate change, but perhaps as the most significant force in determining the company’s future. As Robert Stempel discovered, a CEO can’t choose a culture to adopt; the culture chooses the CEO.

But that doesn’t mean the current finance culture will dominate forever. There was a time when it seemed that operations guys would run the company — and, in fact, the world. And there may yet come a time when some new cultural imperative beyond shepherding capital becomes dominant. It’s hard to imagine CEOs getting appointed for their ability as teachers or poets — but stranger things have happened.

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store


Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.