Environment and Culture

A big influence on internal corporate culture is the external environment. Cultures can vary widely across organizations however organizations within the same industry often reveal similar culture characteristics because they are operating in similar environments. The internal culture should embody what it takes to succeed in the environment. If the external environment requires extraordinary customer service, the culture should encourage good service, if it calls for careful technical decision making, cultural values should reinforce managerial decision making.

Adaptive Cultures:

Research at Harvard on 207 US firms illustrated the critical relationships between corporate culture and the external environment. The study found that a strong corporate culture alone did not ensure business success unless the culture encouraged healthy adaptation to the external environment. As illustrated in Exhibit below adaptive corporate cultures have different values and behavior from un-adaptive corporate cultures. In adaptive cultures, managers are concerned about customers and those internal people and processes that bring about useful change. In the un adaptive corporate cultures, managers are concerned about themselves and their values tend to discourage risk taking and change . Thus, a strong culture alone is not enough because an unhealthy culture may encourage the organization to march resolutely in the wrong direction. Healthy cultures help companies adapt to the environment.

Environmentally Adaptive versus Un adaptive Corporate Cultures:

Adaptive Corporate Cultures>>>

Visible behavior >

Managers pay close attention to all their constituencies especially customers, and initiate change when needed to serve their legitimate interests even if it entails taking some risks.

Expressed Values>

Managers care deeply about customers, stockholders and employees. They also strongly value people and processes that can create useful change (e.g. leadership initiatives up and down the management hierarchy).

Un adaptive Corporate Cultures>

Visible behavior>

Managers tend to behave somewhat insularly, politically, and bureaucratically. As a result, they do not change their strategies quickly to adjust to or take advantage of changes in their business environments.

Expressed Values>

Managers care mainly about themselves their immediate work group, or some product (or technology) associated with that work group. They value the orderly and risk reducing management process much more highly than leadership initiatives.

Types of culture:

In considering what cultural values are important for the organization, managers consider the external environment as well as the company’s strategy and goals. Studies have suggested that the right fit between culture, strategy, and the environment is associated with four categories or types of culture, as illustrated in Exhibit. These categories are based on two dimensions; (1) the extent to which a company’s strategic focus in internal or external. The four categories associated with these differences are adaptability achievement involvement and consistency.

Adaptability Culture:

A culture characterized by values that support the company’s ability to interpret and translate signals from the environment into new behavior responses.

The adaptability culture emerges in an environment that requires fast response and high risk decision making. Managers encourage values that support the company’s ability to rapidly detect, interpret and translate signals from the environment into new behavior responses. Employees have autonomy to make decisions and act freely to meet new needs, and responsiveness to customers is highly valued. Managers also activity create change by encouraging and rewarding creativity experimentation and risk taking.

Nokia has been the world’s leading maker of cell phone handsets since 1998. On reason is that innovation and adaptability are built into the corporate culture. Nokia’s top goal is to keep churning out new products because what’s hot in this industry one day is stone cold few months later.

The Nokia mobile phones unit (NMP) launched 15 new products in 2001, doubled it to 30 in 2002 and was on track to meet or exceed that in 2003.

Source: New Era of Management

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