BUSINESS: The Ultimate Resource

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MANAGEMENT LIBRARY
The New Corporate Cultures by Terrence Deal and Allan Kennedy
Why Read It?
Deal and Kennedy wrote the first significant book on corporate culture, Corporate Cultures: Rites and Rituals of Corporate Life, in 1982. Their later book, The New Corporate Cultures, re-examines its role in the light of accelerating changes in the business environment. They set out to demonstrate how organizations with a strong culture have survived and succeeded, despite the impact of globalization, information technology, mergers, and downsizing, and how an understanding of corporate cultures, coupled with strong leadership, can prove an effective model for business.

Getting Started
The authors argue that corporate culture is a unifying factor that enables people to cooperate to achieve a common goal. However, a number of factors have militated against the development and maintenance of an effective culturethe demand for short-term results, the impact of downsizing and mergers, the introduction of outsourcing, and the effect of computers on business relationships. Organizations wishing to regain lost ground must now rebuild their cultures from the bottom up through strong leadership and high performance.

Contribution
1. Culture breeds financial success The authors demonstrate the value of corporate culture by analyzing financial performance. The companies they identified as top performers in 1982 outperformed average stock market growth by nearly 50%. 2. The impact of short-term needs They also explain, however, how the rise of shareholder value played a key role in reducing the importance of corporate culture. The emphasis on short-term results, coupled with a growth in institutional ownership, meant that long-term actions proved unattractive to many organizations.

Bloomsbury Publishing Plc 2004

BUSINESS: The Ultimate Resource

September 2004 Upgrade 24

Short-termism, they believe, had a significant impact on employee loyalty and productivity, initiating a vicious circle that produced more and more short-term responses. Cutting costs to achieve short-term results led to a wave of downsizing and re-engineering. This, in turn, ended the concept of lifetime employment and destroyed trust within organizations. 3. Outsourcing, downsizing, mergers, and IT Downsizing, say the authors, damages a corporate culture by destroying trust and breaking the link between leaders and employees. Outsourcing, they claim, has a similarly damaging effect, since when organizations focus on their core activities and outsource everything else, employees may be transferred to other organizations, losing benefits and severing their links with the original employer. The rapid increase in mergers has likewise tested corporate cultures. Mergers create a climate of uncertainty for employees, because there are always winners and losers. Information technology too has, in their view, had a significant adverse effect. Although personal computers empower the people who use them, they can also isolate people from each other and break the informal links that are an important part of corporate culture. 4. The effect of globalization Globalization, according to Deal and Kennedy, has accelerated the outsourcing and downsizing trends by enabling companies to source from around the world. Management is also affected by globalization, as multinational managers struggle to operate in different cultures. 5. The need for cultural leadership The authors believe that cultural leadership is key to overcoming the problems that have emerged. Managers must find out what employees really believe about the company and translate that into a statement that represents the companys position. Finding the common ground and turning it into set of shared belief helps to shape the overall corporate vision. 6. Challenge people It is important, the authors suggest, to measure the progress of cultural revitalization in financial terms. Celebrating victories can bring people together. However, as they explain, performance standards should not necessarily be based on financial targets. Setting people other challenges can help to create a strong culture. Companies must rebuild trust by emphasizing the importance of employees to the business. Transparency is an important part of that process. To ensure a high standard of performance, the authors recommend hiring and rewarding the right people. However, they point out that the organizational structure must be right to get the most from people. A rigid divisional structure tends to isolate people, so transferring them can help to redress the balance.

Bloomsbury Publishing Plc 2004

BUSINESS: The Ultimate Resource

September 2004 Upgrade 24

7. Building teamwork The authors recommend the introduction of cultural revitalization teams with access to senior management. The team should try to identify subcultures; small informal groups who work together and can form the basis of strong teams. Encouraging formal and informal meetings also helps to rebuild the connections inside a company. Rebuilding the social context of work helps give people a sense of belonging. The authors explain how factors such as job security, job satisfaction, and a socially rewarding environment create a more attractive culture.

Context
When Deal and Kennedy introduced the term corporate cultures in 1982, it received a mixed reaction. Supporters believed it gave a valuable insight into the inner workings of an organization. Critics felt that it was a superficial application of the discipline of anthropology to management. The term has now become an accepted part of business language and often forms a key element of corporate strategy. For example, Edgar Schein, writing in Organization, Culture, and Leadership, believes that the only important thing leaders do is create and manage corporate culture. John Kotter and James Hesketh, in Corporate Culture and Performance, analyze the performance of companies with a strong cultures, and in Built to Last (HarperBusiness, 2002) by James Collins and Jerry Porras looks at companies with a long history of success and compares their performance with companies lacking a strong corporate culture. In 1995, Fortune magazine published a survey on corporate reputation and introduced the feature with a comment that robust culture appeared to be the factor that set the top-ranking companies apart.

The Best Sources of Help

Deal, Terrence, and Allan Kennedy. The New Corporate Cultures. London: Texere Publishing, 2000.

Further Reading
Deal, Terrence, and Allan Kennedy. Corporate Cultures: Rites and Rituals of Corporate Life. London: Penguin Books: 1988.

Bloomsbury Publishing Plc 2004