Michelle Harner muses on the importance of corporate cultures:
As I was preparing to fly home from a conference yesterday, I was watching msnbc’s Your Business, which was profiling a small business that uses comedy to create a positive corporate culture. ...
I have to admit that I initially thought the msnbc segment was entertaining but not really applicable to the larger business community. I then boarded my Southwest Airlines’ flight and, along with the other passengers, was serenaded by one of the flight attendants who actually got most of the people on the flight to join her in the chorus of “Rolling Down the Runway” (adapted from John Fogerty’s “Proud Mary”). This experience made me reflect further on the importance of corporate culture to the overall productivity of a firm (see here and here) and the tools available to cultivate that culture. ...
Policymakers can impose incentives and perhaps even a process designed to promote a positive, ethical and risk aware culture at any given company, but those regulations only go so far. The people leading the company must be committed to the endeavor and the implementation of that culture—checking the box or adopting an ethical code or employee handbook is not enough.
My own take on corporate culture is somewhat different. In my work on the subject, I came away with two firm conclusions. First, firm cultures are highly path dependent creatures, which can prove quite resistant to change. Hence, I am very skeptical about the ability of regulation, the tone at the top, or comedy skills to change an entrenched culture. Second, firm culture not only forms employee tastes, but it also is formed by them. Firm cultures are at least as much a bottom-up as they are top-down phenomenon, maybe more so. From my article Privately Ordered Participatory Management:
The empirical evidence confirms Gore’s intuition that employee involvement is almost certain to fail if firm culture is not receptive to participation. Irene Goll found, for example, that competitive pressures and other business environment considerations were not positively correlated with adoption of participatory management programs, but that corporate ideology, especially as it relates to corporate social responsibility, was positively correlated to their adoption. Coye and Belohlav found statistically significant relationships between the degree of employee involvement and both the number of participatory management programs offered by the firm and the average participation in those programs. John Cotton reports that most consultants in the quality circle field posit that some firms are not ready for operational participation in terms of corporate culture.
Firm cultures are highly path dependent creatures, which can prove quite resistant to change. As a result, an inhospitable firm culture can prove a potent and long-lasting barrier to successful employee involvement. In particular, I speculate that firms with strongly entrenched hierarchies and/or a long history of adversarial labor relations are poor candidates for successfully involving employees in decision making.
An illustrative anecdote comes from the paper industry: Both International Paper and Otis Specialty Paper asked their respective employees to cooperate in preparing a job handbook. Otis’ culture emphasized labor—management cooperation. International Paper’s culture emphasized adversarial labor relations and included a recent history of prolonged and violent strikes. Otis’ employees cooperated as requested and the handbook became part of the firm’s participatory management program. International Paper’s employees refused to cooperate reportedly because they believed the project was intended not to introduce participatory management but to provide training manuals to be used by replacement workers in the event of a strike.
The paper industry anecdote suggests one way firm culture affects the viability of participatory management: A long history of adversarial relations precludes the “we’re all in this together” attitudes participatory management needs to foster. A tradition of intra-firm competition can have similar effects. Firm culture will also impact management decision making about employee involvement. Firm culture is likely to affect not only the basic decision to adopt employee involvement, but also to influence the choice of which program to adopt. Firms with a strong ideological commitment to participatory democracy are likely to adopt very different programs than those firms doing so for purely instrumental reasons. Finally, firm culture has indirect effects by affecting worker tastes.
Firm culture not only forms employee tastes, but it also is formed by them. Recall the evidence that employee tastes differ. The management-oriented literature on participatory management confirms that not all employees are well-suited for employee involvement. J. Richard Hackman, for example, opines: “Every organization has some members who make their best contributions as solo performers.” Indeed, Hackman further opines that some employees are “team destroyers,” who can prevent employee involvement from succeeding. The prevalence of such workers in a firm will go a long way towards determining whether its culture will prove receptive to participatory management.
It is worth noting that worker resistance to participatory management is neither irrational nor deserving of condemnation. Behavioral patterns that are learned over many years, and reinforced by past rewards, are exceedingly difficult to change. As such, firm culture becomes a shorthand for a path dependent explanation for resistance to participatory management. Introduction of participatory management within a firm typically entails substantial change, which will threaten vested interests in the workforce. Self-directed work teams threaten the seniority—and even the jobs—of foremen and other supervisory employees. Surviving supervisors are thrust into new positions as “team consultants” rather than bosses, with new and demanding responsibilities. Gain-sharing, pay for skills, and team-based compensation all threaten traditional seniority-based compensation. Training may be resisted by some workers: the old dogs who don’t want to learn new tricks. The job rotation and stress on “continuous improvement” characteristic of self-directed work teams in a TQM environment will threaten those workers who prefer a more mundane set of job responsibilities. All of which serves to confirm that cultural conditions may undermine participatory management even if conditions are otherwise appropriate for it.
