The Challenge of Managing Culture Virtually: Part 2

Author’s Note to Readers:

This newsletter focuses upon various aspects of the development of “Sustainably Successful Organizations.”? This issue focuses on the role of corporate culture and the changes in culture management required by the transition of work to a semi-virtual(digital) environment.

Abstract

My previous research has shown that corporate culture impact bottom line financial performance. However, the pandemic has resulted in a transition to a semi-virtual workplace for many organizations, which reraises the question of whether it is feasible to manage culture virtually and retain its positive impact on financial results. ?This article deals with the challenges of?managing corporate culture virtually. Specifically, examines some key issues and questions about managing culture in a digital world. Our conclusion is that it is feasible to manage culture virtually, utilizing tools that are currently available;?but that there will need to be some adjustments in perspective and action to ensure that culture remains a valuable intangible asset in sustainably successful organizations.

Key words: corporate culture, semi-virtual workplace,?digital environment, sustainably successful organizations

INTRODUCTION

My previous research has shown that corporate culture impact bottom line financial performance.[1] However, the pandemic has resulted in a transition to?a semi-virtual workplace for many organizations, which reraises the question of whether it is feasible to manage culture virtually and retain its positive impact on financial results.?This article deals with the challenges of?managing corporate culture virtually. Specifically, examines some key issues and questions about managing culture in a digital world. Our conclusion is that it is feasible to manage culture virtually, utilizing tools that are currently available;??but that there will need to be some adjustments in perspective and action to ensure that culture remains a valuable intangible asset in sustainably successful organizations.

In November of 2021, I published an article in this newsletter titled “The Challenge of Managing Culture Virtually.”?This intent of that article was to examine how the increasing amount of virtual work would impact the nature and management of corporate culture.

Subsequently, Tatiana Sendin ?who is a business journalist, focused on people management, and founder of Think Work Lab (@thinkworklab), contacted me to ask certain?follow up questions about the challenges of managing?culture in a digital world. Her objective was to prepare an article for her own newsletter, which is published in Portuguese in Brazil. ?In order to facilitate our discussion, I asked Tatiana to prepare a set of specific questions, which she did. ??As I began answering her questions, I realized that it might make an interesting follow-up article for?readers of this newsletter as well. So,?with Tatiana’s permission I am going to reproduce the questions and my responses in this newsletter. Please note that my responses are inserted after each question.

QUESTIONS ABOUT MANAGING ORGANIZATIONAL CULTURE IN A DIGITAL WORLD

#1: The first level of corporate culture is the artifacts, like the size or location of the manager’s desk. With the home office, those artifacts don’t exist anymore. Does it mean that corporate culture is losing one of its levels? Is it a threat to corporate culture?

Response: It does not mean that corporate culture is losing one of its levels. However,?the nature of some of the artifacts must be different in a digital world. Organizations must learn to use digital messages as artifacts, such as statements of cultural values. Organizations can also send employees?physical artifacts such as posters with cultural values and norms or other cultural symbols.

#2: Will remote or hybrid work undermine corporate culture? What could be the impact of working from home on culture?

Remote or hybrid work can attenuate corporate culture, because there might be fewer opportunities for people to interact directly. However, opportunities for interaction virtually will remain and the formal management of those opportunities will become more important.

#3: Is it possible to create or strengthen corporate culture in a digital world? If so, would it be a new kind of culture, with new and different levels (artifacts, basic presumption, etc.)?

Response:?It is possible to create and/ or strengthen corporate culture in a digital world. It will require different “artifacts,” and different modes of communicating and reinforcing culture. In a sese, it might be even more effective over time because people interact with digital devices almost daily.?The entire culture management process needs to be viewed differently, perhaps as a form of?internal “advertising” to employees. The objective of the internal advertising is to create a bond between the company and the its employees. Accordingly, the company needs to “market” its benefits to it employees.?For example, for decades IBM “advertised” (communicated) that there had never a layoff of employees. It stated that it had a “no layoff practice” rather than a at IBM policy, which implied that it reserved the right to have a layoff if necessary.??The existence of the no layoff practice was intended to “market” the benefit of being an IBM employee, with the implication of employment security. ?It was part of an informally understood core value at IBM that stated essentially: “you take care of IBM, and IBM will take care of you.” ?Similarly, other firms communicate that for the past “x” years employees have always received bonuses. They are marketing or advertising the benefit or expectation of a high probability that bonuses will continue in the future.

#4: Usually, HR does a climate survey, not a culture survey. What is the difference? Organizational climate refers to Organizational climate consists of socially shared perceptions organizational members have of the key characteristics of their organization.

Response: Organizational Climate is essentially a Gestalt description of the “atmosphere” of the organization.[2] It is like habitat in ecology, an overarching construct for a myriad of individual features. It is the socially defined and shared abstract perception of what it is like to be a member of the organization.?

Climate is driven or determined by several variables including culture, leadership, and performance management systems.?Schein (2004) has identified various “culture embedding mechanisms.” These mechanisms include (Schein, 2004):

?????????????What leaders pay attention to, measure, and control

?????????????Leaders’ reaction to critical incidents and crises

?????????????Deliberate role modeling, teaching, and coaching model by leaders

?????????????Criteria for allocation of rewards and status

?????????????Criteria for recruitment, selection, promotion, retirement, “excommunication”

These mechanisms relate to leadership practices, role models (corporate heroes), and reward systems that are a component of performance management systems. As Schein (2004) states:” They (the cultural embedding mechanisms) are visible artifacts of the emerging culture and they directly create what would be called the ‘climate’ of the organization.”

Culture is reflected in various manifestations (behavioral norms, stories, artifacts, and corporate heroes or heroines). Empirical research by Flamholtz et. al. ?has identified five key cultural value areas[3].?These five core values relate to:

(a) the treatment of customers (clients),

(b) treatment of people as members of the organization,

(c) standards of performance and accountability,

(d) innovation and change, and

(e) other company processes such as decision making, communication, planning, and related processes.

These five core values have been empirically derived by Flamholtz and colleagues in contrast to other proposed a priori-based value systems such as Cameron and Quinn (2006). In addition, our empirical research has demonstrated that these five core values impact the financial performance of the enterprise (Flamholtz, 2001; Flamholtz and Narasimhan-Kannan, 2005).

# 5: How to manage culture virtually? Could the five dimensions of culture work both in the face-to-face and online worlds?

The five dimensions of culture work should impact both the face-to-face and online worlds. Currently, in large organizations like IBM, Johnson & Johnson, Nestle, Starbucks and many others that operate globally people are widely separated physically, and yet these companies are able to create and manage cultures coherently and well. The overall process of managing culture will be essential the same in?both the face-to-face and online worlds[4]. However, some of the tools of culture management will need to be different.

I have developed a six-step process of culture management that has proved effective in its application in many organizations. The six steps are:

1)?????Define the desired (or strategic) culture,

2)?????Identify the current culture of the organization,?

3)?????Identify any gaps between the?current and desired cultures of the organization,

4)?????Develop a culture management plan,

5)?????Execute the culture management plan,

6)?????Monitor culture changes, if any, over time.

For a further discussion of the culture management process, see Eric G. Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2011.

#6: An increasing number of employees are onboarding digitally, and many of them have never been physically in the company’s office. How is it possible to transmit them the company’s way in a fully virtual manner?

Some of the same tools that are currently used to transmit culture (such as culture statements, stories, videos, and artifacts)?can also be used to transmit culture in a virtual world. Many firms (like Disney) use a live presentation about its culture. However, some companies (such as Amgen) have used videos to introduce their culture. In a virtual environment, video will be a powerful tool to introduce their culture as well as for culture management.

#7: Leaders, who are an expression of corporate culture, are many times pushing employees to return to the office because of concerns that remote work may hurt results.?What is your opinion about that?

Although I understand the intent,?I am against leaders pushing employees to return to the office. In fact, in?my own firm, we were moving to a semi-virtual organization before the pandemic, and decided during the pandemic to become totally virtual.?All of our people work from home al of the time except when they meet with clients, and we do not require people to meet with clients in person if our people are uncomfortable due to?the situation with Covid.

Our clients have adapted well to these changes, and there are in fact there are significant benefits to clients from this new situation, including reduced travel costs, and the ability to space sessions over time rather than to bunch them in a few full days.?

In addition, we added a new member of our firm during the pandemic and have not yet had worked with him in person. Nevertheless, he is well absorbed in our culture. We were ablet to have him participate in many more client sessions as an observer than would have been feasible with in person service delivery. We also have had many opportunities for electronic communication and discussions for his training and culture orientation.?In addition, he has moved from a nearby city to another city more than 1500 miles away. So, from my perspective?remote work works quite well.

I am sure that for some organizations remote work will involve new difficulties. However, for some either remote or hybrid in-person-remote work will actually be preferable.

#8: In your article, you said that culture impact the bottom line of financial results. Is it possible to get a strong culture and a great result with remote work?

I am convinced that it is feasible to create and sustain a strong culture and?great financial results with remote work under many circumstances. Many organizations have operated effectively with geographically distributed workers for decades, and still have created and sustained strong functional cultures.

There will always be exceptions. But the base case or bias should not be to try to return to what was previously “normal.”?

#9: How to prepare leadership for a new, digital world? What skills should they have to succeed in a digital culture?

This is an interesting question. To answer it,?let me first refer to the game of chess. In chess, the key strategic principle is to control the center of the board. By controlling the center of the board, you increase your own opportunity for mobility and restrict your opponent’s opportunity for mobility. However, there are different ways or tactics to accomplish controlling the center of the board. One method (the direct method) is to move chess pieces (such as pawns) to occupy squares in the center of the board. Another method (the indirect method) is to move pieces so that they do not occupy squares in the center of the board; but rather they observe squares in the center of the board. For example, you move a bishop so that it can potentially move along a diagonal to the center, or move a rook (castle) so it can move alone a file to the center. Either approach (direct or indirect) can accomplish the same thing—control of the center of the board.

The implication for leaders is that success in a digital world might require developing different skills for?managing remotely with less personal interaction. However, my perspective is that most of those skill requirements required already exist. Specifically:

·???????Planning will become even more important to make sure that people understand the strategic mission,?core strategy?objectives and goals of the organization[5]. ??

·???????Performance Management will become even more important to make sure that people are motivated to achieve organizational plans.

·???????Culture Definition and Management will become even more important to make sure that people are motivated to achieve organizational plans and remain as members of an organization.

The Bottom Line?

Welcome to the New Digital World! Opportunities are great, but there are perils as well.

About the Author_________________________

Eric Flamholtz is Professor Emeritus, Anderson School of Management, UCLA. He is the founder and President of Management Systems Consulting Corporation, 10940 Wilshire Boulevard, Suite 600, Los Angeles California, 90024. He has served on the faculties at Columbia University, The University of Michigan, and UCLA, and has lectured at Columbia University Executive Development Program, Cornell University School of Hotel Management, Cheung Kong Graduate School of Business (China), Fudan University (China), Shanghai Advanced Institute of Finance (China),??HEC (France), Almaty University (Kazakhstan), CETYS (Mexico), Orestano University (Sardinia),?Stockholm University (Sweden), and?Moscow School of Management Skolkovo (Russia).??His latest book (co-authored with Yvonne Randle, is The Crisis Leadership Playbook, Vandeplas Publishing.?Portions of this article are drawn from Eric?Flamholtz and Yvonne Randle, ?Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2011. See also: WWW.Mgtsystems.com.

References

Cameron ,?K. S. , &?Quinn ,?R. E. ( 2006 ). Diagnosing and Changing Organizational Culture . San Francisco : Jossey-Bass.

Eric Flamholtz,?Human Resource Accounting: Advances in Concepts, Methods, and Applications, Third Edition, Kluwer Academic Publishers, 1999.

Flamholtz, E. (2001). Corporate Culture and the Bottom Line. European Management Journal, 19 (3), 268-275

Flamholtz, E.G. and Narasimhan-Kannan, Rangapriya (2005). “Differential Impact of Culture upon Financial Performance: An Empirical investigation,” European Management Journal, 23 (1), pp. 50-64.

Eric G. Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2011.

Eric Flamholtz and Yvonne Randle, “Implications of organizational Life Cycles for Corporate Culture and Climate,” Chapter 13 in B. Schneider and K. Barbera, The oxford Handbook of organizational Climate and Culture, Oxford Library of psychology, Oxford University Press, 2014, pp. 235-265.

Eric G. Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful Organizations, Fifth Edition, Wiley, 2016.?

Schein ,?E. H. ( 2004 ). ?Organizational culture and leadership,?3rd ed . San Francisco:?Jossey-Bass.

Further Reading

For further reading on this subject,?see:

Dimitrova1, Antonia,?Ivailo Iliev1 and Eric G Flamholtz,?“Strategic Organizational Development and Corporate Culture: Empirical Evidence from Europe,” International Journal of Human Resource Management and Organizational Behavior,?February, 2017.

Flamholtz, E. (2005). Conceptualizing and measuring the economic value of human capital of the third kind: Corporate culture.?Journal of Human Resource Costing and Accounting, 9 (2), 78-93.

Flamholtz, E.?(2009) “The Management of Corporate Culture in Entrepreneurial Firms,” International Review of Entrepreneurship. Volume 7 , Issue?no. 3, pp. 1-20.

Flamholtz, E.G. and Narasimhan-Kannan, Rangapriya (2005). “Differential Impact of Culture upon Financial Performance: An Empirical investigation,” European Management Journal, 23 (1), pp. 50-64.

Flamholtz, Eric?and Randle, Yvonne, “Implications of organizational Life Cycles for Corporate Culture and Climate,” Chapter 13 in B. Schneider and K. Barbera, The Oxford Handbook of Organizational Climate and Culture, Oxford Library of Psychology, Oxford university press, 2014, pp. 235-265.

Flamholtz, Eric and Randle, Yvonne, “Overcoming Corporate Culture Myopia,”?International Journal of Human Resource Management and Organizational Behavior, August, 2016.

?Footnotes:

[1] Flamholtz, E. (2001). Corporate Culture and the Bottom Line. European Management Journal, 19 (3), 268-275

[2] See Eric Flamholtz and Yvonne Randle, “Implications of organizational Life Cycles for Corporate Culture and Climate,” Chapter 13 in B. Schneider and K. Barbera, The Oxford Handbook of Organizational Climate and Culture, Oxford Library of psychology, Oxford University Press, 2014, pp. 235-265.

[3] See Eric G. Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2011.

[4] For a?discussion of the culture management process, see Eric G. Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford University Press, 2011.

[5] Eric G. Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful Organizations, Fifth Edition, Wiley, 2016.?