Understanding and developing corporate culture

How are decisions discussed? What happens in the case of mistakes or contradictory expectations? Which points of view are heard? Such situations make culture observable. Formulated values can provide a point of reference for this. The lived patterns reveal themselves through working together.

According to Niklas Luhmann, corporate culture is a dynamic, emergent phenomenon. It arises through ongoing interaction and communication in the organisation and changes constantly. It is not a fixed set of values or norms. In this understanding, values are normative expectations that arise and are maintained through recurring communication. They provide orientation for behaviour and decisions.

Organisations coordinate their decision-making via framework conditions, the so-called decision premises. Some can be decided directly: the substantive identity of the organisation, communication and reporting, and people. Culture is the complex of premises that cannot be decided. These include basic convictions, values, beliefs that are shared as a matter of course and ritual patterns of communication and behaviour. Such patterns take shape when people repeatedly experience certain standards. Key people have a particularly strong influence on them through their repeatedly displayed behaviour.

In the transformis approach, culture is considered in connection with the corporate strategy. The question is which patterns support the tasks ahead and which make them more difficult. An analysis therefore requires a specific starting situation and an understanding of where the organisation wants to develop.

A culture is never good or bad in itself. It is supportive or inhibiting in implementing the corporate strategy and goals. Its influence is far-reaching: it affects decisions, the motivation and cohesion of the workforce and performance. In innovation, strategic initiatives and major change processes it can be the decisive factor. Applicants are also paying increasing attention to a company's values and norms.

Nevertheless, many companies are not aware of their culture. To talk about it, management needs a common language and valid facts. Culture therefore belongs on the management agenda. Reducing it to a topic for the HR department means losing the link to the business.

The Systemic Culture Compass places the defining character of an organisation in four quadrants. Collaborate stands for a team culture with loyalty, tradition, participation and consensus-building. The motto is: do things that last. Create describes a flexible organisation that wants to do things first and relies on a willingness to experiment, individual initiative and new products. Compete means doing things fast. What counts here is market orientation, performance, market share and competitiveness. Control means doing things right: with clear hierarchies, formal rules, reliable processes and low costs.

Culture is captured in four categories: the dominant characteristic, the way employees are treated, the cohesion of the organisation and the criteria by which success is measured. None of the four orientations is superior to the others. Different requirements call for different styles.

Culture cannot be decided directly. Culture development therefore combines analysis, target picture and interventions. Changes to leadership and decision routines or to forms of cooperation can influence the conditions under which lived patterns develop further.

A survey shows which characteristic dominates in the organisation and how strongly it is pronounced. It makes discrepancies between the actual and the desired culture visible and describes the strengths and weaknesses of the respective characteristic. The result can be presented as a picture of current and target state, for the company and for individual units.

Behind this are specific questions. Which main characteristics promote or hinder the forthcoming change? Does the understanding of leadership fit the desired culture? How do employees experience their dealings with management and with each other? What holds the organisation together, and does this cohesion fit the vision of the future? By what are success and failure measured?

For an assignment it is worth asking how changed cooperation would be recognisable. Which situations should go differently in future, which expectations need clarification and who is involved? This links the topic of culture with comprehensible tasks in everyday work.

Culture is connected with shared expectations and with the behaviour that is actually possible in an organisation. A statement such as “We are open” can be tested against specific situations: what happens when someone criticises a risky assumption? Who is allowed to name a mistake? How are decisions made between units when goals collide?

Different answers from leadership and everyday work are valuable clues. They show which rules of the game officially apply and which are effective in daily action. Culture development therefore also works on structures, mandates and leadership routines. A new mission statement can describe a direction. The change only becomes visible when people have different experiences in such situations. Which intervention fits follows from the strategic task under examination.

In systemic literature, culture is described using the figure of thought of the game. According to Grubendorfer, culture in a social system is the set of rules of the game that are taken for granted and applied and only come to consciousness when they are violated. The figure of thought makes it possible to ask about rules of the game, fellow players, chances of winning and risks of losing, and it emphasises the collective character of culture.

The structure of an organisation consists of two parts: formality, i.e. the decidable premises, and culture, the undecidable ones. The cultural premises have been decided, but are not decidable. They resemble the elephant in the room that everyone sees and nobody mentions. Such a complex of expectations does not have to be free of contradictions in order to have an effect.

A corporate culture is strong when decisions are influenced to a high degree by cultural premises. This applies especially where few formal premises prevail, for example in family businesses. Culture solves problems for the company that cannot be solved through instruction and formal structures, and gives communication a frame of interpretation. It is at the same time a communication event and a communication structure and does not take place in the heads of individual people.

Culture is best observed in comparison with other organisations. Every organisation has a culture. What is revealing is which culture it has and how it differs from others.

Nobody decided which culture a company has. Cultures develop as if by themselves, behind the backs of the actors. Their evolution follows the pattern of variation, selection and retention. The social system finds some solution, which need not be the best. Cultural patterns arise to meet unreflected expectations. They do not pursue a particular goal.

Culture always refers to experiences and thus to the past. That is why it has a preserving effect and can prevent innovation. Added to this is its identity-forming effect. Those who have found an employer that matches their own ideas experience a culture change as an attempt to change their own identity. Changes that are compatible with this identity are accepted. People who like working in the company and want to stay therefore try to preserve the inherited rules. Employees accordingly react sensitively to cultural changes.

This has consequences for change initiatives. Culture cannot be changed by decree; it can be influenced through interventions. The work focuses on decidable premises such as programmes, communication channels or people. The approach remains situational: after each step, the response of the culture is observed before the next one is planned.

There is reason for a culture change when the existing culture limits organisational performance. Studies from the 1990s, including those by Kotter and Heskett, by Caldwell and by Gross, Pascale and Athos, name corporate culture as the most common reason for the failure of strategy and change processes.

Following Edward T. Hall and Edgar Schein, a distinction can be made between what is openly apparent in a culture and what works beneath it. Visible are the vision of the future, strategy, rules, guiding themes, external presentation and premises. Beneath them work the interpretation of the rules, the way people treat each other, power relations, leadership behaviour, status and informal rules. Values, thought patterns, relationships, traditions, attitudes and feelings, fears and needs such as security or recognition also belong here.

The Systemic Culture Compass, which is based on the model by Cameron and Quinn, arranges this diversity along two axes. One ranges from flexible to focused, the other from internal to external. This results in the four quadrants, each with a basic orientation: development in Collaborate, breakthrough in Create, performance in Compete and stability in Control. The values of diagonally opposite quadrants compete with each other. An organisation must therefore decide on a focus.

The differences extend into everyday life. In Collaborate, a pleasant working atmosphere, high commitment and appreciation shape the way people interact; success means sensitivity towards customers and responsibility for people. In Create, interaction is dynamic, creative and entrepreneurial; unique products and product leadership count as success. In Compete, leadership is performance- and goal-oriented; cohesion comes from the will to win and a good reputation. In Control, interaction is formal and polite, with secure jobs and clear responsibilities.

The picture is captured by combining two approaches. A compact online survey records the relevant parameters quantitatively. Interviews and focus groups validate the results, pick up nuances, explain contradictions and specify success and risk factors.