Systemic Culture Compass: corporate culture development

Organisations can be understood as complex social systems that provide solutions to problems in their environment. To deliver this reliably, they draw a boundary between themselves and their environment. This boundary creates an internal space that makes it possible to ensure stable output despite external influences.

The boundary has a downside. It leads to highly selective information processing, and relevant changes in the environment are often not recognised early enough. Appropriate leadership therefore ensures the right amount of impulses flowing into organisational decision-making processes. In this context, transformis understands consulting as a deliberate decision to counteract the self-referentiality of organisations.

An organisation is surrounded by many environments: customers, suppliers, competitors, banks, employees, the city where it is located or the internet. Organisations select their relevant environments through frameworks of observation and evaluation. This selection reduces complexity and keeps the organisation able to act.

The established routines are geared to confirming the internal ideas about the environments and filtering out divergent impulses. This leads to a principle of the systemic understanding of organisations: an organisation sees what it sees, and as a rule it does not see that it does not see what it does not see.

The basic element of a social system is communication. In organisations, the most important communicative event is the decision. To coordinate decision-making processes, organisations develop specific conditions for deciding. Niklas Luhmann’s organisational theory calls them decision premises.

Some of these premises can be shaped directly. All decision matters that can be directly shaped and changed by decisions are called decidable decision premises. They include, first, the factual and substantive identity of an organisation, second, communication and reporting, that is, the communication structure, and third, people. What an organisation does in substance, how it communicates and reports, and who holds which position can be decided and changed again.

The situation is different for everything that today is assigned to the concept of organisational and corporate culture. It has an enormously strong influence on the coordination of behaviour in organisations, yet eludes direct, explicit influence. Here we speak of undecidable decision premises. They include basic convictions, values, beliefs that are shared as a matter of course, and ritual patterns of communication and behaviour.

According to Luhmann (Organisation und Entscheidung, 2000), this results in four essential decision premises. Three of them are decidable: the identity of the organisation, the communication structure and people. The fourth, culture, is not decidable and nevertheless strongly shapes decision-making.

Several core theses follow from this understanding. Culture is the complex of undecidable decision premises. This means basic convictions, beliefs shared as a matter of course, values, and ritual patterns of communication and behaviour. These premises have a strong influence on the coordination of behaviour in organisations and at the same time elude direct, explicit influence.

Cultural premises take shape and change as collectively reproduced patterns emerge through the repeated experience of very specific standards. Key players in particular influence these patterns through repeatedly displayed behaviour. Changes in culture therefore cannot be set in motion simply by talking about them.

The right organisational culture is a decisive factor for a successful strategy and for a company’s capacity for innovation. Although corporate culture shapes behaviour in organisations, companies are often not aware of their culture.

Several studies cite corporate culture as the most frequently named reason for the failure of strategy and change processes (Caldwell 1994; CSC Index 1994; Gross, Pascale and Athos 1993; Kotter and Heskett 1992). When culture change processes fail, this often leads to cynicism, frustration and a loss of trust in management among the workforce.

For transformis, this results in a simple yardstick: culture change is called for when the existing corporate culture limits organisational performance.

According to Grubendorfer (Einführung in systemische Konzepte der Unternehmenskultur, 2016), culture in a social system, figuratively a game, can be understood as the set of rules of the game that are taken for granted and applied. These rules only enter awareness when they are broken.

The structure of an organisation consists of two parts: formality, that is, the decidable, formal decision premises, and corporate culture, that is, the undecidable, cultural decision premises. In essence: everything that is undecidable manifests itself in corporate culture, and what manifests itself as culture in a company is not decidable.

Undecidable decision premises are like the proverbial elephant in the room. Everyone sees it, but it is not addressed. These premises are decided, but not decidable: they apply without anyone having resolved them or being able to change them by resolution.

According to Grubendorfer, it remains possible to speak of the corporate culture if what is meant is a set or complex of expectations. This complex does not have to be internally consistent in order to take effect.

A corporate culture is strong when decisions are strongly influenced by cultural decision premises. This is particularly the case where fewer formal decision premises prevail, for example in family businesses.

Nobody decided what culture a company has. Corporate cultures develop as if by themselves, behind the backs of the actors. Just as little as corporate culture can be made or decided, actors can change it instructively, that is, by order. It can, however, be influenced through interventions.

Corporate culture always relates to experience and therefore to the past. It has a preserving effect and can prevent innovation. According to Grubendorfer, the evolution of corporate culture follows the pattern of variation, selection, retention. The social system has by no means found the best solution; it has found some solution or other. Cultural patterns therefore emerge to meet unreflected expectations, not to achieve a particular goal.

Corporate culture is decisive for behaviour and communication in companies; it shapes what happens. It can be understood as a frame of interpretation or a special grammar, or as a set of implicit rules of the game that can only be observed and experienced when they are broken. The figure of thought of the game allows an observer to ask about rules, players, chances of winning and risks of losing, and it emphasises the collective character of culture.

Culture is best observed in comparison with other organisations. That an organisation has a culture is beyond question. What matters is which culture it has and what distinguishes it from other organisations. There is no such thing as a good or bad organisational culture: every company has its own “cultural fit”.

Culture is both a communication event and a communication structure. It does not take place in the heads of individuals. It shows itself in what happens and is expected between those involved.

For employees, corporate culture is identity-forming. That is why they react very sensitively to cultural changes. Grubendorfer describes the connection as follows: if a person has found an employer that matches their ideas and suits them, they understandably react sensitively to changes and may question them very critically. From their point of view, it is an attempt at change with regard to their own identity.

Only changes that are compatible with one’s own identity are accepted. It can be assumed that people who like working in a company and want to stay there will try to preserve the traditional cultural rules and thus also their own identity. Cultural rules have a conservative effect.

At the same time, culture fulfils a function that formal structures cannot take on. Corporate cultures solve problems for the company that cannot be solved by instruction, and they provide a frame of interpretation for communication. Anyone who wants to change culture is therefore intervening in something that gives those involved orientation in everyday life, and must expect correspondingly attentive reactions.

A clear principle applies to changing culture: it is always the formal structure that should be worked on, not the culture itself. Anyone who wants to change corporate culture should play it “off the cushion”, indirectly. What is changed are the decidable decision premises, such as programmes, communication channels or people.

The culture then comments on these changes. How it does so cannot be predicted. A situational approach therefore makes sense. The effects of interventions at the cultural level are continuously observed so that they can be taken into account afresh at the next step.

What shapes culture can be represented as layers, following Edward T. Hall and Edgar Schein. On the surface are the vision of the future, strategy, sets of rules, guiding principles, external image and premises. Beneath them lie the interpretation of the rules, how people treat each other, power relations, leadership behaviour, values, informal rules and status, as well as thought patterns, relationships, traditions, needs such as security or recognition, attitudes and feelings, and finally fears.

In summary: culture cannot be decided on; it can only be changed indirectly. Culture must always be observed and assessed in the context of strategy. There is no good or bad culture. There is only a corporate culture that hinders or supports in the context of corporate strategy and goals.

To talk about culture, management needs a common language and valid facts. The Systemic Culture Compass has proven itself in meeting this requirement.

The Systemic Culture Compass is an instrument for surveying corporate culture. It makes culture tangible and workable. It is based on the model by Cameron and Quinn (Diagnosing and Changing Organizational Culture, 2011).

The compass spans two axes. One ranges from flexible to focused, the other from internal to external. This results in four quadrants, each with a cultural characteristic: collaborating (flexible and internal), creating (flexible and external), competing (focused and external) and controlling (focused and internal).

The values of diagonally opposite quadrants compete with each other. Collaborating is opposite competing, creating opposite controlling. An organisation cannot put all four orientations in the foreground at the same time and must therefore decide on a focus.

Measurement takes place in four categories in which an organisation’s culture becomes apparent: the dominant characteristic, the way employees are treated, organisational cohesion and the criteria of success. Each of the four cultural characteristics is described in these four categories.

The results are presented as a profile. Current culture and target culture are laid over the four quadrants in the same diagram. This shows in which quadrants today’s culture has its focus and how the desired culture differs from it.

Collaborating follows the guiding principle of doing things that last. The basic orientation is development, combined with teamwork, participation and consensus-building. The dominant characteristic is the team culture. The way employees are treated is marked by a pleasant working atmosphere, high commitment and appreciation. The organisation is held together by loyalty and tradition. The criteria of success are sensitivity towards customers and a strong sense of responsibility for people.

Creating means doing things first. The basic orientation is breakthrough, driven by individual initiative and freedom. The dominant characteristic is the flexible organisation in the sense of an open system. The way employees are treated is dynamic and entrepreneurial, and working together is creative. Commitment, willingness to experiment and innovation hold the organisation together. Success shows in unique, new products or services and in product leadership.

Competing means doing things fast. The basic orientation is performance, that is, productivity, efficiency and competitiveness. The dominant characteristic is market orientation with rational goals. The way employees are treated is performance- and goal-oriented. Cohesion comes from the will to win, from a good reputation and success. The criteria of success are market share and market penetration.

Controlling means doing things right. The basic orientation is stability: security, predictability, reliability and complete documentation. The dominant characteristics are pronounced hierarchical structures and process orientation. The way employees are treated is formal and polite, the workplace is secure and responsibilities are clear. Formal rules, guidelines and principles secure cohesion. Success is measured by reliable delivery times, smooth processes and low costs.

The Systemic Culture Compass makes it possible to identify the dominant characteristic in the organisation and to determine the degree of dominance in each quadrant. Discrepancies between the actual and the desired organisational characteristic can be identified. Strengths and weaknesses of the respective characteristic can be described. Organisational culture thus becomes something that can be discussed and worked on.

Corporate culture is captured through a combination of quantitative and qualitative analysis. The quantitative part is an online survey. It captures information on the relevant parameters of corporate culture in a compact and specific way. The qualitative part consists of interviews and focus groups. They validate the results of the online survey, pick up nuances, explain contradictions and make success and risk factors concrete.

The process of culture analysis and culture development is divided into three phases: analysis, intervention design and implementation. The analysis begins with clarifying the assignment in a kick-off of the consulting system. There, the initial situation and goals are defined, the project is planned and additional questions for the survey are clarified. One day with the client is planned for this.

The culture survey follows. A tailor-made online platform determines the current and the target culture as well as the organisational DNA. Individual interviews are planned and conducted, and the results are evaluated and brought together in an expert report. The online survey and interviews with employees take four to six weeks.

The analysis concludes with the presentation and sharing of the results with the management board and the operational units involved. The result is a validated picture of the current culture and a representative picture of expectations regarding the elements of the target culture.

The analysis is followed by a meeting with the client that leads into intervention design. In this second phase, project governance is set up: roles and responsibilities as well as communication and decision-making structures for the project. The target groups involved are identified.

Building on this, a suitable intervention architecture is created, including the learning architecture. The programme structure is developed, with all consulting systems and the reflection structure. Suitable organisational and personal measures are designed.

Intervention design also includes time and process planning with regular progress monitoring, an estimate of the internal resources required and a proposal for accompanying internal and external communication. The phase takes two to three weeks. It is carried by a consulting system made up of external consultants and internal key players. Its result is a tailor-made intervention and learning architecture including the programme structure.

After a second meeting with the client, implementation begins. It interlinks organisational development and people development. Organisational development follows a work architecture, people development a qualification architecture. The starting point is the organisational challenge.

Those involved are first qualified for the first work phase. This phase is followed by reflection, combined with qualification for the second work phase. Implementation continues over further phases in this alternation of qualifying, working and reflecting.

Implementation takes one to two years and involves a critical mass of all target groups. Its result is the culture development itself. An internal and external communication process runs alongside all three phases.