I have been invited to present at the 15th World Knowledge Forum in Seoul, South Korea on the 14-16 October, 2014. This is a real honour for me and I look forward to sharing the stage with close to 200 world business leaders in economics, finance, politics and business.
My topic will be: The Importance of Corporate Culture in Asia’s International Business Expansion and I am keen to share some of the insights I have gained from over 30 years of advising on corporate culture and strategy execution.
As a run up to the Forum I was asked by the sponsors to do an interview about the topic of corporate culture. They supplied the questions and I did my best to answer. I thought it might be of interest to share these questions (and my responses). It seems the topic of corporate culture is on the minds of business people now more than ever.
Questions on Corporate Culture from the Korean Business Perspective
Q1: How would you define ‘corporate culture’?
The most useful approach is to think of corporate culture as the personality of the organization. Each person has a unique personality that determines how we interact with others people and approach challenges. For example, some people are outgoing and risk taking. Others are more introverted and risk averse. Some are more formal, highly analytical and structured, others are easy-going, intuitive and tend to adapt easily. Our personality is the way we habitually respond to other people and situations.
The same is true for organizations. Each organization has a specific set of behaviours that make up its unique “personality” and determines how people in the company habitually respond to situations. Just as no two people have the same exact personality traits, no two companies have the same corporate culture. In the case of an organisation, its history, leadership, industry, national culture, size, geographic footprint and management beliefs all contribute to its specific corporate culture.
Seeking to accurately define corporate culture through analytics, surveys and metrics is both difficult and not very useful. It is more important to understand the principles of how corporate culture is formed, how it is sustained over time, and what are the levers for shifting or reshaping corporate culture.
Q2: Why is corporate culture important? Is corporate culture a critical measure for determining a company’s success or failure?
At its most basic level, corporate culture determines how the company executes its strategic objectives. While senior management sets the strategy, it is only through the collective work behaviours of employees that strategic plans turn into executable results. In many cases, strategic goals often require change and innovation to beat the competition.
Some corporate cultures are fluid and agile and embrace change as an opportunity. Other corporate cultures see change as a threat and are resistant. Those companies with change resistant corporate cultures find it difficult, slow and costly to effectively execute their business objectives. Numerous studies have shown that nearly 70% of all strategies fail, not because of a poor strategy, but because of poor execution, which often comes down to elements of the corporate culture.
For those leadership teams that do not understand their own culture or value the importance of corporate culture, they are open to a significant hidden risk. Consider the fate of the BP Deepwater Horizon Oil Platform explosion, caused by a culture of cost control over safety. The near bankruptcy of Continental Airlines in the mid-1990s, or the failed mega-merger between Daimler-Benz and Chrysler Motors are other striking examples of how corporate culture can be a significant business risk.
Q3: What is the similarity in corporate culture of successful companies?
Successful companies share certain traits of their corporate culture. The first, and perhaps most important, is that the leadership team understands the fundamental principles behind how corporate culture is developed and how it impacts performance. In this regard they are very clear that their behaviour, how they relate with each other and other departments plays a strong role in determining the elements of the culture. In many ways, organizations are shadows of their leaders, and a high performing company understands this important principle.
Secondly, they put culture and culture development as a strategic business objective, not just an HR agenda. They understand that a key aspect of their role is to lead and shape the corporate culture and to help build a culture that supports the ability of the organization to deliver its business strategy.
Thirdly is a combination of openness, transparency and real-time feedback. All employees know the current state of the company, the strategic goals, and the two or three top business priorities. In addition employees are encouraged to give feedback, both appreciative and constructive to each other and importantly, to upper management on how things could be improved. People at all levels feel a deep sense of accountability and ownership for not only the company performance, but also for the culture they work in.
Q4: How do you evaluate Korean corporate culture? What do you think are the limits of Korea corporate culture? What are the strengths?
Although I am far from an expert on Korea and Korean businesses, there are a few elements of business and corporate culture that stand out to me as significant.
Even though the Korean culture shares many similarities with traditional Asian culture patterns, the political history of the Korean Peninsula has resulted in a unique system of business and corporate culture. In the case of Korea, major businesses cannot exist without the support of government and thus much is expected in terms of performance and there exists a unique quid quo pro system.
The demands of the Korean economic miracle over the past several decades have been achieved through the development of a corporate culture that stressed the national importance of hard work, long hours, competitiveness and loyalty. The benefit has been a dramatic improvement in the economic standard of living of workers.
One of the key positive elements of the Korean corporate culture is openness to debate, arguments and new ideas. Large multinational Korean companies are the product of determined entrepreneurs who championed their innovations, and with the support of government, helped improve the economy and drive wealth creation. The Chaebol conglomerate system has driven much of the economic prosperity of Korea resulted in a strong and unique type of corporate culture.
While R&D spending will continue to help drive innovation and the Korean economy, global expansion and the ability to exploit empty niches will be limited by the rigidity of their local labour market and an inherent distrust of diversity.
Q5: What do you think is the gap between Korean and international corporate culture?
First of all, we have yet to see a truly “international corporate culture” that is appropriate for a global company. Corporate culture is most strongly determined by first national culture and secondly, the leadership style and management beliefs of the founders and the leadership team. In this sense, all countries take their culture with them when they expand globally.
However, sensitivity to diversity and openness to feedback and new ideas are probably the most important elements of a corporate culture that can successfully thrive and survive on the global stage. If one thing will hold back Korean companies from becoming truly global and “international” is their formal and somewhat rigid hierarchical organization structure.
Q6: The Korean government is pushing towards a ‘Creative Economy’ as a new economic growth model. What do you think is the most appropriate culture for harnessing creativity and innovation?
Three ingredients of corporate culture are critical for establishing and benefiting from creativity and innovation: transparency, diversity and openness to feedback and new ideas. Transparency means that all levels in the organization know what is expected, what is the current state of goals and milestones and who is accountable for what part of the value chain. With a healthy level of transparency, all levels are able to see where improvements need to be made.
Diversity has been proven time and again to foster creativity and innovation. A corporate culture that supports, encourages and hires for diversity will be better able to reap the benefits of innovation.
Without an openness and respect for feedback and new ideas, innovation will be a slow process inside the company and new ideas from outside will be looked at with suspicion.
Q7: What should leaders keep in mind when forming a corporate culture? In fact, is corporate culture affected by a leader, or is it beyond the influence of leadership?
As I elaborated in my recent book, LEVERAGE: The CEO’s Guide to Corporate Culture, the strongest determinants of corporate culture are firstly the national culture and secondly the human need to “fit in” and belong to the group. Overall, peer pressure is a significant factor in forming and maintaining a corporate culture. Next on the importance scale comes the trio of “Selective Hiring” (for specific behaviours), “Who Gets Promoted” and “Who Gets Fired”. These actions quickly help mold a corporate culture.
The organizational beliefs and management principles established by the founders is a strong determinant of corporate culture in the early years of the company’s growth, as is the leadership style of the senior executives. However, as the organization grows in size and geographic expansion, peer pressure (conforming and fitting in) becomes the dominant factor in maintaining the cohesion of the corporate culture as new people join the company.
Q8: Why did you become interested in researching corporate culture? Was there a specific incident/reason?
In 1968 I left the University of California to attend the American University of Beirut in Lebanon. For the first half of that school year, Beirut was a modern and open city, brimming with diversity, confident about its future as a center of international trade in the Middle East, and tolerant of many cultures and religions.
Then in late December, Israeli commandos attacked the Beirut International Airport late at night and the entire country changed, almost overnight. We now had armed guards inside the university, tanks in the streets and student riots. My student friends, who before were open and tolerant, quickly succumbed to the strong peer pressures from radical students and the entire collective behaviour of the young student generation changed.
This rapid shift both fascinated and frightened me and I became curious as to the ingredients of behaviour change in groups, which ultimately led me to study, not politics, but business organizations and specifically, corporate culture.
See you in Seoul, South Korea in October!
John R. Childress
Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid
+44-7833-493-999 uk mobile
Read John’s blog
Business Books Website
Just published: LEVERAGE: The CEO’s Guide to Corporate Culture
View The Economist review of LEVERAGE
Also on Amazon: FASTBREAK: The CEO’s Guide to Strategy Execution