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Beneath the Surface

Exploring the Seen and Unseen Forces That Determine Corporate Culture

This is the first in a series of articles that looks at what organizational culture is, why it’s important, and how to change it.

Here’s a pretty good clue that your company is in trouble: you drive into the parking lot one morning and discover a big rig has been set on fire by disgruntled employees.

For Jeremy Andrus, who was the new CEO of what was then the Oregon-based outdoor grill company Traeger, the 2014 blaze was a turning point—and a dramatic example of a larger yet more subtle problem within the company. He’d already noticed that some of his employees were ignoring his requests for meetings and reports, and were pushing back against his decision to outsource the shipping of the company’s wood pellet grills. When he became the eighth CEO in as many years, employees expected there would soon be a ninth; in fact, behind his back they began calling him Ocho.

Before landing at Traeger, Andrus had graduated with a minor in business from BYU in 1996, had earned an MBA from Harvard, and had been the CEO of Skullcandy, growing that business to $300 million in revenue. He knew Traeger’s backyard pellet grill had impressive customer loyalty, and he could see the potential for sales growth—if he could tackle the internal problems.

Andrus eventually concluded he’d have to start over if there was any chance for success. So he bought the company, moved it to Utah, and hired people who were a good fit for his new company vision. “We thought about this in terms of a quarantine,” wrote Andrus in a 2019 article for Harvard Business Review, using a prescient analogy. “We needed to be certain we didn’t bring anyone who could infect the new culture we were trying to create.”

Obvious and Unseen Forces at Play

Companies have always had their own personalities, but it took academics to examine the phenomenon—in the same way outsiders might look with different eyes at the culture of a country—to understand how characteristics shape outcome. In this way, professors such as Edgar Schein and Richard Walton were the Margaret Meade of organizational behavior.

These scholars weren’t the first to study how organizations operate, but both Walton, who teaches business administration at Harvard, and Schein, a former professor at the MIT Sloan School of Management, stood back and saw an even bigger picture: that there are both obvious and unseen forces at play in all organizations, and those forces make some organizations more effective or stodgy or reckless than others. In the 1980s, Schein christened the phenomenon “corporate culture.”

Four decades later, most companies talk about culture, but some think about it more profoundly and more energetically than others. For example, online retailer Zappos positions itself as a customer service company that happens to sell things, a place where its ten core values appear on employee sweatshirts, the employees call themselves Zapponians, and the website takes you to heartwarming Zappos stories. If you call to talk to a service representative, you can even choose to first hear the joke of the day.

The O.C. Tanner company, named one of People magazine’s 50 Companies That Care, has created Culture Cloud apps and podcasts. Hubspot—named No. 1 on Glassdoor’s 2020 Best Places to Work list—provides a free copy of its Company Culture Cookbook: 5 Ingredients of a Great Work Environment. In addition, hundreds of consulting companies exist that promise to repair cultures that have gone wrong.

In the twenty-first century, corporate culture has become not just a buzzword but a mantra and, increasingly, an industry of its own.

Still, the concept of corporate culture can be abstract, so analogies are helpful. Schein looked to nature, coming up initially with the familiar image of an iceberg.

The tip, above the metaphorical water, consists of what you can readily observe about a company—the artifacts such as nap pods and onsite oil changes for employees at Google. Just below the surface are a company’s professed mission statements, rules, and taglines. And the hulking mass of ice way down deep includes the tacit values and unspoken rules, modeled by managers and reinforced by something as simple as who goes to lunch with whom, that lead to “how we do things around here”—which, in fact, may not be like the mission statement at all.

In later years, Schein found another analogy he also liked: a lily pond, with its surface of flowers and its vast root system underneath.

“If you don’t dig down into the reasons for why we do things,” Schein told CultureUniversity.com in 2015, “you’ve only looked at the culture at a very superficial level and you haven’t really understood it.” His worry?

That the term is used too casually these days, encouraging people to think they’re making substantive changes when all they’ve done is add a ping-pong table. On the other hand, a ping-pong table might actually signify that a company strives for a culture that is based on collaboration, one that is relaxed and playful, a culture that believes happy, connected employees are more innovative and productive. Sometimes culture is hard to pin down.

Underlying the whole notion of corporate culture is the need to outshine—to create a better widget or social media platform or to make a trip to Mars—so that customers will keep coming back to you instead of your competitors. To put it simply, says Kristen DeTienne, BYU Marriott professor of organizational behavior and human resources, “culture drives outcomes.”

Or as the late management guru Peter Drucker has endlessly (and perhaps apocryphally) been quoted: “Culture eats strategy for breakfast.” Sometimes the quote continues, “Culture also eats technology for lunch and products for dinner and, soon thereafter, everything else too.”

Beyond the Window Dressing

The saga of two former five-and-dimes is a cautionary tale. In the 1960s, Larry Senn worked with both Walmart and the F. W. Woolworth Company as a consultant in what he then termed “process improvement.” A half century later, Senn, now chair of the culture-shaping consulting firm Senn Delaney, wrote on a Human Synergistics blog that while 1960s Walmart and Woolworth had similar financial and managerial resources, “it was clear that one company would succeed and the other would fail because of the mindset and habits of the firms.”


As he describes it in a 2015 interview with Tim Kuppler for CultureUniversity.com, when Senn visited the Woolworth headquarters, “it was just a bunch of old guys sitting around a table, and their only purpose seemed to be to maintain the status quo.” In 1997, the 118-year-old Woolworth Company closed its doors in the United States, unable to keep up with competitors such as Walmart.

For most of the history of business, company cultures happened more or less by default—and were often hyperhierarchical. But in the decades since people such as Senn began doing case studies, businesses have become much more intentional about the world they are trying to create, says BYU Marriott professor of organizational behavior and human resources Troy Nielson. Companies also now recognize that they need to be accountable to not just stockholders but stakeholders—customers, suppliers, employees, the community, and even the planet at large.

In 2019 the Business Roundtable, representing 181 CEOs from the world’s biggest brands, issued a new “Statement on the Purpose of a Corporation” in which it moved away from thinking of corporations as profit machines beholden to shareholders alone. The sentiment was echoed by the World Economic Forum in its “Davos Manifesto 2020.” According to forum chair and founder Klaus Schwab, “Millennials and Generation Z no longer want to work for, invest in, or buy from companies that lack values beyond maximizing shareholder value.”

Customers are savvier now, with access to information previously available only to analysts and shareholders. As for employees, a 2019 global employee satisfaction survey conducted by Glassdoor found that 56 percent of workers and job seekers said that a company’s culture was more important than salary, and the number was even higher—

65 percent—among people age eighteen to forty-four; 77 percent of all workers surveyed said they would evaluate a company’s culture before applying for a position. (These figures are prepandemic and presumably apply to workers lucky enough not to be desperate for a paycheck.)

“If people who have options in the labor market and can go somewhere else choose to stay and be fully engaged with heart and mind, then your culture is functioning well,” says John Bingham, an associate dean of BYU Marriott. “If people leave, they’re choosing to work somewhere else, and it’s not just about money. It’s about the opportunity to master something, to work with exceptional people, and to make a difference in the world.”

What kind of culture are workers looking for? Not every worker wants the same thing, but they are looking for the right “culture fit.” Some employees want a more structured culture, some thrive on innovation. No matter the preference, “the people who have real talent can see beyond the window dressing” of taco bars and company slogans, says Bingham.

Of course it’s not just corporations that have cultures. Small businesses do too; so do nonprofits, police departments, religious institutions, presidential campaigns, and government entities.

When Vicki Varela took over the helm at the Utah Office of Tourism, Film, and Global Branding in 2013, she knew what kind of culture she wanted to create: one where there was “creativity, curiosity, courage, and candor,” all of it “packaged in kindness,” she says.

She’d been lucky to work in positive cultures in the past, but she says she learned the most by watching the polar opposite during a stint at a company whose leader was threatened by the talent he had hired. Because the leader didn’t model trust or praise, workers competed against each other in unhealthy ways and immersed themselves in heated, meaningless debates, including whether or not to remove the Coke machine. It would have made a great Saturday Night Live skit, Varela says, but it didn’t feel good to work there.

The kind of leader who can create a healthy culture, she says, is a leader with a healthy self-esteem, one “who can embrace being around people who may be bigger and better.”

The Ultimate Team Sport

A company’s culture can be hard to recognize when it’s the water you swim in, so the people who study organizations have simplified by dividing cultures into different types. One common approach categorizes cultures as either clan, hierarchy, market, or adhocracy.

Clan cultures are collaborative, flexible, embrace change, pride themselves on employee engagement, and place a high value on communication, welcoming honest feedback.

Hierarchy cultures have a clear chain of command, with multiple management tiers that separate employees and leadership. They tend to focus on how day-to-day operations are carried out. Innovation is less important than consistency.

Market cultures are all about competition and growth, prioritizing profitability above all else. It’s all about meeting quotas and targets and being the best among competitors.

Adhocracy cultures are the ones where innovation and risk-taking are encouraged, where the aim is to come up with the next big thing before anyone else does.

No one type of culture is inherently better than another. A strong hierarchical structure with a culture focused on efficiency, for example, may work well for a bank but not for a startup. A strong culture of any type can be an asset or a liability, depending on the types of values that are shared. As BYU Marriott associate professor of organizational behavior and human resources Ben Galvin notes, a drug ring may be well run, with a culture that is hierarchical in nature, but it’s still selling drugs.

When two strong, different cultures merge, the results are problematic. According to a 2006 study by the Institute for Mergers and Acquisitions, of 325,000 such deals in the previous thirty-five years, only half were considered successful by the managers in charge.

A company might have a strong culture that places a premium on high performance, notes Jim Collins in his 2001 book Good to Great, “where only results matter and there is no tolerance for missing one’s targets.” That can lead to high profits in the short term but can also lead to customer dissatisfaction. A call center, for example, may pay employees based on the number of calls handled, which means that customers might not get real answers to their problems. Even worse, a reward metric based on sales volume can open the door to cutting corners, unethical behaviors, and even deadly outcomes.

Three more cautionary tales: Wells Fargo, Enron, and Boeing, where mission statements touted integrity, but toxic cultures led to some employees putting profits above all else. At Wells Fargo that meant incentivizing employees to open fake accounts or pressure customers to buy more products than they needed. The bank has had to pay out $3 billion to settle claims.

At Enron, shoddy accounting practices resulted in bankruptcy and prison terms. “Enron had a great set of values on the wall,” notes Senn. “But it didn’t exist in the leaders. Unless you get culture at the gut level, it’s not going to change.”

At Boeing, the culture of safety began to shift after the aircraft company bought rival McDonnell Douglas, leading to a culture where maximizing profits and shareholder value apparently became more important than listening to employee concerns. The result, ultimately, was the deaths of 346 people when two Boeing 737 Max planes fell from the sky.

As Andrus watched the big rig burn in the Traeger parking lot, he knew culture changes had to be made if the business was going to survive. The measures he took were drastic—and successful.

Andrus continues to keep a steady eye on Traeger’s corporate culture, making appropriate adjustments whenever he feels they are necessary. For instance, the company is trying to keep its collaborative culture alive even as everyone meets primarily on Zoom. Every Friday at 4 p.m., employees gather for a virtual happy hour where, sometimes dressed in costumes to match the week’s theme, they tell jokes and stories and raise a Diet Coke to each other.

“Business is the ultimate team sport,” says Andrus. “And a boss needs to protect the culture with his life.”

Culture During COVID-19

If a company’s culture is ultimately based on day-to-day values modeled by leaders and managers, and is buoyed by impromptu conversations in the halls, what happens when a pandemic hits and employees work from home?

In its 2021 Global Culture Report, the O.C. Tanner Institute, the research and education arm of the O.C. Tanner company, surveyed more than 40,000 employees and leaders in twenty countries and found that overall there has been a 13 percent decrease in employees’ sense of appreciation since the pandemic began. More encouraging was employee sense of purpose, which had only declined 3 percent from the year before (with COVID-19 cited as the cause of only a 1 percent drop).

A study conducted in summer by Quartz and Qualtrics found 37 percent of employees surveyed felt their company’s culture had improved in the work-from-home COVID-19 era, compared with 15 percent who felt it had declined. Men were 39 percent more likely to paint a rosy picture, and Millennials were more than twice as likely as Boomers to see an improvement.

Most telling, 70 percent said their company had a good work culture before the pandemic—suggesting that a good culture might provide a kind of immunity of its own.

_

Written by Elaine Jarvik
Illustrations by Red Nose Studio

About the Author

Elaine Jarvik is a Utah playwright and former reporter for the Deseret News. Her most recent play, Four Women Talking About the Man Under the Sheet, is scheduled at the Salt Lake Acting Company for a five-week run (streaming and in person) in spring 2021.

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