Corporate Culture Audits - Pool Summer 2008

Editor's comment: If you want to go somewhere it is useful to know where you are starting from. Management may frequently believe that they have developed a corporate culture but does the actual culture match this?

I believe that a company’s culture is an insufficiently examined ingredient in business success or failure; and the reasons for its neglect as a subject for study are perhaps more obvious than is its probable role in determining why companies with similar business models and apparently similar performances seem to vary greatly in the results they achieve.

As for the tendency of managers to ignore the role corporate culture may play in business results, it’s clear that serious attention paid to a company’s culture necessarily raises questions about the values of company leaders, their management styles and their treatment of employees. Accordingly, the culture of companies is a subject fraught with potential negative consequences for managers; so - not surprisingly - many leaders are reluctant to expose their behavior and values to close scrutiny, particularly by disinterested parties.

It is interesting that so few companies seem willing to address directly the issue of their culture by finding out, for example, what the prevailing culture in the company actually is, and what are its likely effects on employees’ morale and collective mindset and, ultimately, on business results. It’s tempting to conclude that this neglect of company culture may be because officially sanctioned hypocrisy - unfortunately quite common in corporate circles - has a way of wanting to hide itself from full, frontal view.

Companies, like people, do have personalities, living styles, and value systems: the sum total of these, and how they are applied in routine practice, is the essence of a company’s culture. Understood simply as the prevailing system for distributing rewards and punishments - or, less dramatically, the officially sanctioned tolerance profile for behaviors among employees - the ruling culture in companies can be an important determinant of business success and failure and, therefore, ought to be both examined and understood as such.

While obviously limited, the analogy of families with children to companies and their employees is nevertheless illustrative, I believe, in understanding why company culture is so elusive and difficult a topic to investigate and to understand. Like parents emphasizing the primacy of their verbal admonitions to their children as opposed to the behavioral examples they as parents habitually set, corporate managers are inclined to think that their words, official proclamations and other stated intentions constitute actual company policy. Like most children, however, company employees typically know that their daily reality is rooted not in parental (i.e., management) proclamations but in parents’ (i.e., management’s) observed behavior, especially in its predictable consequences for the children (i.e., employees).

Given this typical situation of parental and managerial hypocrisy, both children and corporate employees quickly become masters at sifting through voluminous speeches and policy pronouncements for occasional words and subsequent deeds betraying serious, practical management intent and being internally consistent with employees’ observations of reality; and the workers soon learn that the real policies - the ones that reward and punish in fact, though perhaps not in theory - are often those unwritten, but nonetheless soon codified in the collective memories of those whose livelihoods are at stake, especially those who have been the most prominent beneficiaries or victims of these unstated, but enforced, rules and values.

Thus it is possible, for example, for companies espousing great concern for the status and fate of women employees to be, in daily practice, veritable bastions of male privilege and prejudice. Similarly, the mere presence at places of work of racial and ethnic minorities does not mean that they are nurtured and encouraged to grow there; it may mean that they are merely - and then perhaps even grudgingly - tolerated.

And recent experience illustrates clearly that some public companies which proclaim an unwavering dedication to achieving results for shareholders are sometimes actually more devoted to the ease, convenience, enrichment and perpetuation of current management. And so it goes, that we think our values are made real and safe simply by their insistent and continual verbal and written repetition, sometimes even while even the lowest-ranking employee knows that the values being preached are often not those being taught in practice through consistent, systematic enforcement.

What if, however, we really did want to know the outlines of an organization’s real culture, whether explicitly stated or tacitly assumed? What if we were to think of this knowledge as an important first step to fixing a company’s culture, to eliminating whatever hypocrisy exists, and to aligning professed cultural beliefs with actual behaviors and enforced policies, so that the organization’s culture would not only be sincere (perhaps a laudable quality in itself), but would also be contributing to the quality of life at work, and to better business results?

The first step to fixing a company’s culture is to find out what the company’s culture actually is - that is to say, what are the actual values and behaviors, as seen by those living and working within the system at all levels, that are encouraged in practice and enforced through management decision-making, whether these enforced rules and principles of encouraged and discouraged behavior are formal or actual, are stated or unstated, or are officially sanctioned or not.

We find this out by asking employees at all levels telling questions about what they experience and observe on the job every day, and what these experiences and observations imply about corporate values and management’s views. It is a truism in this regard that what is consistently observed, and what forms the fixed perceptions of reality in employees, is the reality that actually is.

Once that important research exercise is completed, one can then place the tenets of this observed culture next to those of the stated one; and one do an honest audit of what might be called corporate sincerity. This process, if conscientiously done, is likely to produce both a degree of embarrassment and eventually an attitude of humility, especially on the part of those in charge. Finally, this clearing of the rhetorical and moral air by introducing into the rhetorical libation the sobering ingredient of actual practice, should allow organizations in due course to construct a culture of values and behaviors that the business demands, and ones which corporate citizens can espouse and practice with dignity, allegiance and respect.

Now the question is who will have the courage to play the important game of discovering one’s company’s culture, then either celebrating its alignment with stated values, principles, and policies - or else recognizing that management has perhaps been practising a form of self-delusion, cynical deception or simple hypocrisy, all of which may have hurt both employees and business results.

An honest cultural audit is a game that can result both in human growth and better business results; so it’s a serious game that, in publicly-held companies at least, the shareholders may want corporate managers periodically to play.


	*Number 40: Summer 2008*
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About Jerry Welsh Corporate Change Index	The Need for Corporate Culture Audits A Largely-Overlooked Element in Explaining & Determining Business Performance *by Jerry Welsh* Editor's comment: If you want to go somewhere it is useful to know where you are starting from. Management may frequently believe that they have developed a corporate culture but does the actual culture match this? I believe that a company’s culture is an insufficiently examined ingredient in business success or failure; and the reasons for its neglect as a subject for study are perhaps more obvious than is its probable role in determining why companies with similar business models and apparently similar performances seem to vary greatly in the results they achieve. As for the tendency of managers to ignore the role corporate culture may play in business results, it’s clear that serious attention paid to a company’s culture necessarily raises questions about the values of company leaders, their management styles and their treatment of employees. Accordingly, the culture of companies is a subject fraught with potential negative consequences for managers; so - not surprisingly - many leaders are reluctant to expose their behavior and values to close scrutiny, particularly by disinterested parties. It is interesting that so few companies seem willing to address directly the issue of their culture by finding out, for example, what the prevailing culture in the company actually is, and what are its likely effects on employees’ morale and collective mindset and, ultimately, on business results. It’s tempting to conclude that this neglect of company culture may be because officially sanctioned hypocrisy - unfortunately quite common in corporate circles - has a way of wanting to hide itself from full, frontal view. Companies, like people, do have personalities, living styles, and value systems: the sum total of these, and how they are applied in routine practice, is the essence of a company’s culture. Understood simply as the prevailing system for distributing rewards and punishments - or, less dramatically, the officially sanctioned tolerance profile for behaviors among employees - the ruling culture in companies can be an important determinant of business success and failure and, therefore, ought to be both examined and understood as such. While obviously limited, the analogy of families with children to companies and their employees is nevertheless illustrative, I believe, in understanding why company culture is so elusive and difficult a topic to investigate and to understand. Like parents emphasizing the primacy of their verbal admonitions to their children as opposed to the behavioral examples they as parents habitually set, corporate managers are inclined to think that their words, official proclamations and other stated intentions constitute actual company policy. Like most children, however, company employees typically know that their daily reality is rooted not in parental (i.e., management) proclamations but in parents’ (i.e., management’s) observed behavior, especially in its predictable consequences for the children (i.e., employees). Given this typical situation of parental and managerial hypocrisy, both children and corporate employees quickly become masters at sifting through voluminous speeches and policy pronouncements for occasional words and subsequent deeds betraying serious, practical management intent and being internally consistent with employees’ observations of reality; and the workers soon learn that the real policies - the ones that reward and punish in fact, though perhaps not in theory - are often those unwritten, but nonetheless soon codified in the collective memories of those whose livelihoods are at stake, especially those who have been the most prominent beneficiaries or victims of these unstated, but enforced, rules and values. Thus it is possible, for example, for companies espousing great concern for the status and fate of women employees to be, in daily practice, veritable bastions of male privilege and prejudice. Similarly, the mere presence at places of work of racial and ethnic minorities does not mean that they are nurtured and encouraged to grow there; it may mean that they are merely - and then perhaps even grudgingly - tolerated. And recent experience illustrates clearly that some public companies which proclaim an unwavering dedication to achieving results for shareholders are sometimes actually more devoted to the ease, convenience, enrichment and perpetuation of current management. And so it goes, that we think our values are made real and safe simply by their insistent and continual verbal and written repetition, sometimes even while even the lowest-ranking employee knows that the values being preached are often not those being taught in practice through consistent, systematic enforcement. What if, however, we really did want to know the outlines of an organization’s real culture, whether explicitly stated or tacitly assumed? What if we were to think of this knowledge as an important first step to fixing a company’s culture, to eliminating whatever hypocrisy exists, and to aligning professed cultural beliefs with actual behaviors and enforced policies, so that the organization’s culture would not only be sincere (perhaps a laudable quality in itself), but would also be contributing to the quality of life at work, and to better business results? The first step to fixing a company’s culture is to find out what the company’s culture actually is - that is to say, what are the actual values and behaviors, as seen by those living and working within the system at all levels, that are encouraged in practice and enforced through management decision-making, whether these enforced rules and principles of encouraged and discouraged behavior are formal or actual, are stated or unstated, or are officially sanctioned or not. We find this out by asking employees at all levels telling questions about what they experience and observe on the job every day, and what these experiences and observations imply about corporate values and management’s views. It is a truism in this regard that what is consistently observed, and what forms the fixed perceptions of reality in employees, is the reality that actually is. Once that important research exercise is completed, one can then place the tenets of this observed culture next to those of the stated one; and one do an honest audit of what might be called corporate sincerity. This process, if conscientiously done, is likely to produce both a degree of embarrassment and eventually an attitude of humility, especially on the part of those in charge. Finally, this clearing of the rhetorical and moral air by introducing into the rhetorical libation the sobering ingredient of actual practice, should allow organizations in due course to construct a culture of values and behaviors that the business demands, and ones which corporate citizens can espouse and practice with dignity, allegiance and respect. Now the question is who will have the courage to play the important game of discovering one’s company’s culture, then either celebrating its alignment with stated values, principles, and policies - or else recognizing that management has perhaps been practising a form of self-delusion, cynical deception or simple hypocrisy, all of which may have hurt both employees and business results. An honest cultural audit is a game that can result both in human growth and better business results; so it’s a serious game that, in publicly-held companies at least, the shareholders may want corporate managers periodically to play.
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