Corporate culture of a clan organization
Andrew Chan
Uses a case study to illustrate
DHL International’s corporate
culture, which may be used
as a benchmark for other
companies in the service
industry sector. Suggests that
the business success factors
of this organization lie in its
adoption of the culture and
structural characteristics of a
clan organization. Clan orga-
nizations can create for
themselves a more manage-
able social space that will
provide them with protection
and stability. The clan
metaphor, and its organizing
principles, may provide guide-
lines to be used by companies
to manage strategically within
a turbulent environment.
Argues that when the general
conditions within an environ-
ment are moving towards
turbulent conditions, the
business organizations within
that environment should
prepare for their own struc-
tural consolidation to ward
off uncertainties. Such a
structural consolidation can
be modelled after the forma-
tion of social enclaves, or
clans.
Management Decision
35/2 [1997] 94–99
© MCB University Press
[ISSN 0025-1747]
[ 94 ]
Assistant Professor, City University of Hong Kong, Department of Business and
Management, Kowloon, Hong Kong
Introduction
The notion of clan as applied in business
strategy and general management has been
very well established. A clan organization, as
the term is being used here, is a business-
oriented social enclave consisting of compa-
nies and individuals who are bound by
strong, non-contractual bonds. This article
provides a case study of how the founder of
DHL International nourishes his company’s
corporate culture based on the structural
characteristics of a clan organization.
Now one of the key players in the interna-
tional courier express delivery industry, DHL
International was set up by a Hong Kong
Chinese, Po Chung, in 1972. DHL held, until
the mid-1980s, a near monopoly in the world-
wide courier express delivery service. By the
1990s, changes in business conditions created
new demands on service providers for
quicker and more effective responses, and for
an ability to identify key success factors for
one’s own company. For Po Chung, the key
business success factors, under turbulent and
uncertain conditions, lie in a clan structure
and a clan culture.
It has been suggested that when the general
conditions within a business environment
are moving towards turbulent conditions,
organizations within that environment
should prepare for their own structural con-
solidation to ward off uncertainties[1]. That
consolidation can take the form of alliances
or social enclaves. These social enclaves, or
domains of less turbulent, more manageable
social space which is created and protected by
one or more members, will provide organiza-
tions with the protection not afforded to firms
attempting to survive on their own[2].
Social enclaves can be compared with East
Asian family clans and Japanese keiretsu
whose social structures have common charac-
teristics. These enclaves and groups are
bound by strong, non-contractual bonds. The
glue which holds them together is a shared
vision of their needs, their goals and their
sanctioned ways in which things should be
done. They have a common direction and a
common culture. Of special significance is the
fact that these groups are more supportive of
one another than competitive when they are
faced with external threats and adversaries.
Achievement made by an individual unit in
the enclaves must remain subordinate to the
enclaves’ overall goals, and hence it follows
that any individual unit in the enclaves may
be expendable. However, since each unit is a
member of the group, and the group resources
would be reduced by the elimination of a unit,
units are not dispensed with casually. Unlike
modern western holding companies which
buy and sell single operations for short-term
gain, business-oriented clans and social
enclaves do not easily sever ties of member-
ship with individual units or members, even if
those units become a burden to the bottom
line. It is these communally-oriented values
which maintain the internal stability within
the social enclaves.
It is suggested that companies which have
created social enclaves often are the best
performers in a turbulent market or indus-
trial environment where uncertainty pre-
vails. These social enclaves are seen to nour-
ish a clan-based organizational culture. The
clan metaphor, and its organizing principles
are seen to be able to provide guidelines and
benchmarks for other companies to manage
strategically within a turbulent and uncer-
tain business environment. Ultimately, this
article suggests that a clan organization is an
ideal organization type whose configuration,
as well as social and cultural characteristics,
could be emulated.
Methodology
DHL’s clan structure and culture became
apparent during an in-company study[3]. The
study had investigated the structural relation-
ships among the basic assumptions fundamen-
tal to the common cognitive processes of orga-
nizational members[4]. Key executives were
interviewed and transcripts of their responses
to a standard set of open-ended questions were
analysed to identify the basic assumptions and
values by the researcher. The observations
and propositions in the study were
subsequently presented to the founder, Po
Chung. In an interview with him a year after
the study, we were able to confirm our proposi-
tions. The following section outlines some
those propositions which are translated as the
characteristics of a clan organization. It is
followed by a further section which discusses
Andrew Chan
Corporate culture of a clan
organization: a case study of
DHL International
Management Decision
35/2 [1997] 94–99
the ways in which DHL has configured itself
along the lines of a clan culture to maintain
survival, competitiveness and growth.
The characteristics of a clan
organization
The structural characteristics of a clan orga-
nization, modelled after clan culture, are
derived from the ways they develop and
evolve in a business as that organization
grows. It is argued that organizations can
create for themselves a more manageable
social space which will provide them with
protection and internal stability through
adopting a clan culture. To date, at least eight
characteristics have been identified:
1 a belief in the importance of the individual
clan member;
2 a belief in the importance of maintaining
internal stability;
3 organizational cohesiveness and internal-
ization of a we/they mentality;
4 attempts to differentiate strongly the clan
from its external environment and the
building of a defensive wall against exter-
nal instability in order to attain a level of
self-sufficiency (isolationism);
5 socio-cultural barriers to entry to mini-
mize dilution of the culture, such as a
common set of socio-cultural beliefs and
behaviours used in self-identification and
as a cognitive leash;
6 a belief in the importance of clan identity
and culture as exemplified by its tradi-
tions, rituals, rites and heroes/heroines
which are to be protected at all costs:
(attacking the symbols of the organiza-
tional clan is the same as attacking the
organization itself);
7 a greater latitude of trust and acceptance
of deviancy for clan members than for
outsiders and a defence of organizational
honour and survival before all else
through the use of draconian penalties for
going outside the zone of indifference; and
8 a set of clan elders who interpret the law,
and provide punishment (e.g. suspensions
and termination).
DHL International as a clan
organization
It would appear that DHL International pos-
sesses those eight features. An examination
of the facets of DHL International’s corporate
culture and structure illustrates these clan
features and business success factors.
Importance of individuals and internal
stability
For DHL, its human resource policies are
designed in such a way as to ensure loyalty.
The selection process begins by socializing
members to identify with the image of the
courier, as told in traditional Chinese stories.
Contrary to Hermes, the messenger in ancient
Greek myths, the depiction of the messenger-
courier by DHL has a distinctly Chinese char-
acter, mundane and industrious. In a company
brochure the courier is featured as an ancient
Chinese soldier on a fast horse, bringing the
latest battle reports to the Emperor, by taking
the shortest and fastest route. This representa-
tion essentially reinforces a personification of
the notions of dedication, trustworthiness and
diligence. Such a value transforms psychic
energies, harnessing them into a template for
conscious and purposeful actions. According
to Theresa Lai, DHL’s human resource direc-
tor, a stable membership is considered to be a
core of this company, and these staff are pro-
tected from poaching. In order to cater to
individuals’ needs and aspirations, and to help
members achieve their potential, a full variety
of training and developmental opportunities
are provided to all staff. These training and
development activities are concurrently used
as socialization tools. Staff in DHL are trained
in the company’s five principles of leadership:
1 lead by example;
2 maintain self-confidence and self-esteem of
others;
3 focus on the situation, issue or behaviour,
not the person;
4 maintain constructive relationships with
your staff, peers and managers; and
5 take initiatives to make things better.
Organizational cohesiveness and we/they
mentality
According to Andy Tseng, the general man-
ager of DHL, the next success factor stresses
organizational cohesiveness and minimizes
competition among organizational members.
This is done by upholding the principles of
“Focus on the issue, not on people” and “Main-
tain self-respect of others”. To differentiate
between the clan (we) and its competitors
(they), and to reinforce organizational cohe-
siveness, the company emphasizes a,we/they
mentality. This is achieved by investing heav-
ily in tactics to overwhelm competitors in a
battle, and then upholding the company’s
distinctiveness. For example, whenever a new
competitor arrives, DHL will form an ad hoc
taskforce to address the issue. A standard
operating procedures manual entitled “Crisis
management procedure” provides a set of
approved responses to external threats. It
persuades organizational members to view
competitors as external threats. Such was the
[ 95 ]
Andrew Chan
Corporate culture of a clan
organization: a case study of
DHL International
Management Decision
35/2 [1997] 94–99
[ 96 ]
case in Mexico where UPS attempted to enter
the market. DHL immediately countered this
threat by cutting prices[5].
A culture of consensus and commitment
much like that in a family is formed. George
Pun, quality, R&D manager at DHL for 13
years, says that the backbone of the culture is
“communication, consensus and commit-
ment. New people will be shocked by this
kind of directness. But the attitude is very
important”. Information technology man-
ager, Ho Wai Chiu, adds to that comment by
describing DHL in one sentence: “I can use
family to describe it but it does not include
the formal side. We are like brothers”. The
general manager in Hong Kong supports this
view by encouraging staff to use words like
“we” and”us” instead of “I” and “you”. He
believes that words like “cross- functional co-
ordination” and “taskforce” help to maintain
a cohesive group.
Differentiation from external environment,
building of walls and isolationism
DHL has used a number of proven strategies
to achieve self-sufficiency and protection
from the external environment. A key suc-
cess factor has been to make use of third-
party alliances. This involves linking up with
other transport operators in the areas of air
freight, warehousing and metropolitan and
domestic courier services. By doing so, DHL
offers a total, sole supplier transport service
to the marketplace[6]. Such alliance building
has progressed to the point that JAL,
Lufthansa, and Nissho Iwai have obtained a
57 per cent stake in DHL International[7].
This newest alliance provides the company
with greater stability by guaranteeing its
own supply of flight carriers and enriching
the professional knowledge within DHL.
To integrate with this diverse network of
services fully, the firm uses state-of-the-art
technology such as the Document Manage-
ment System[8] and a worldwide package
trace and track system[9]. These systems
provide links with sophisticated
transport/delivery services using scheduled,
chartered and self-owned aircraft as well as
road-based transport. These systems are net-
worked and rendered distance-controllable
through the “Shipment Process System” (SPS)
and “DHL AutoLink”. The SPS improves
information access and retrieval processes.
The AutoLink, however, is installed to
improve response rate on customer enquiries,
principally in facilitating the physical track-
ing of an en route consignment. These two
systems enable the company to monitor its
own delivery-time commitments. Thus, when
a customer calls to enquire “Where is my
package?” “Who signed for it?” or “What time
did it arrive?”, a customer service agent can
access SPS to describe the package’s entire
history. The result is not only convenience
and quality service, but it equally helps to
build customer loyalty.
Socio-cultural barriers to entry and the
“cognitive leash”
Socio-cultural barriers to entry are built into
the recruitment and selection policies of
DHL. To ensure future success, specific
attempts are made to select those who are
positive, stable and suited to the culture of
DHL. The outcome of this selection process
was confirmed in the interviews conducted
with the management team members at DHL.
The findings also supported a hypothesis that
those who had served for more than four
years held a common set of beliefs, values and
behaviours. Respondents identified a com-
mon understanding of the interlocking rela-
tionships between organizational beliefs,
values and how critical events facing the firm
are to be handled. This structure hinges on
the belief that organizational members are
“Theory Y” people, in the sense that they are
driven towards higher-order needs, such as
responsibility, developmental opportunities,
self-control and self-direction at work. The
relationships culminate in the basic tenet
that DHL is capable of dominating its envi-
ronment as shown in Figure 1.
According to Edgar Schein[10], these events
and decision-making criteria are manifesta-
tions of the management’s basic set of
assumptions regarding their reality. Thus,
enslaved to this common view of their world,
organizational members become bound by
this cognitive leash to the firm’s way of doing
things by their own mental processes. The
cognitive leash is reinforced in existing man-
agers and supervisors through training using
such programmes as those available through
the “Frontline Leadership” package. Virginia
Darley, the customer service manager,
explains that “this is to ensure everyone
learns the same company theory and apply
the same methods or management styles to
solve problems in order to reduce conflicts
within the company…The company also
encourages all managers to use the same
course context in application”. The concept of
total customer satisfaction (TCS) is another
cognitive leash in the sense that it holds in
check people’s baseline behaviour in dealing
with the customers.
Belief in the importance of clan identity
and culture
Every new hire goes through a series of orien-
tation programmes after joining. Within the
first three months of employment, employees
are first exposed to a three-hour programme
called the “Winning orientation”. Within the
Andrew Chan
Corporate culture of a clan
organization: a case study of
DHL International
Management Decision
35/2 [1997] 94–99
Figure 1
The interlocking relationship of basic assumptions in DHL International
following month, new hires are oriented
through the one-day “Know our DHL” pro-
gramme. To ensure that the socialization
begun in the first weeks has taken hold, in the
ninth month of employment, new hires take a
full-day “Back to basics” programme.
In the ritualistic induction programme,
“Winning orientation”, all new hires watch a
12-minute video featuring the history and
structure of the company. During this video,
new hires are first introduced to the founder
and hero figure of DHL International, Po
Chung. The next video programme, “Know
our DHL”, provides inductees with formal
structural knowledge on the organization.
Trainers faultlessly deliver a well-rehearsed
script detailing the company structure, its
products and services. A third video features
a simulated work flow showing how orders
are taken from customers, and the steps that
a parcel must go through to be delivered at
the doorstep of the recipient. To give the audi-
ence a feel of what it is really like to be a
courier, an operations supervisor provides a
realistic job preview to help explain and illus-
trate the daily duties of a DHL operations
supervisor/ courier. In this way, all employ-
ees are given their formal initiation into
DHL. They should now know the theory
behind the courier business. However, they
have yet to get a good feel for culture of the
business nuts and bolts.
As the CEO and his top management
believe that it is important for staff to get a
feel for the nuts and bolts of the operation
team duties, supervisory staff who pass their
probation, especially those serving in non-
operational capacities, are invited to work
hands-on, as a courier for a day. This “Back to
basics” orientation helps supervisors
empathize with staff and realize the pivotal
roles of front-line couriers in the business.
Trust of members and draconian penalties
The clan business configuration provides
allowances for mistakes as well as for
improvement. Victor Wong, the intracity
express manager, when asked if he had made
any mistakes since joining DHL replied: “Yes,
but small events. I can explain to others why I
did it that way. In the process, I learned that I
have to keep others informed...it depends on
the situation. DHL can afford managers to
make mistakes as they don’t know the prob-
lem”. Virginia Darley continued:
Actually I have a quite western mind [I] am
good at project type jobs…but under this
environment I have to care for others’ feel-
ings…Human interface is very important
here. To give a sense of self-respect and
respect to others is important. That is what I
learnt here. It was also my difficulty when I
joined…[I] am a very straight person whodid
not fit with this environment of “guanxis”,
or relationships. I don’t care about
others…[I] am not good at handling human
interface…but I am good at personnel man-
agement and I can say I am successful now.
At the same time, the environment can be
draconian if members fail to abide by the three
Cs — communication, consensus and commit-
ment. Failure to inform and involve others can
result in ouster from the organization. The
worst failure is dishonesty. Because of the
great stock placed on trust in the organization,
dishonest staff are often asked to resign in lieu
of summary dismissal. What is at work here is
a subtle psychological contract, based on a
[ 97 ]
Andrew Chan
Corporate culture of a clan
organization: a case study of
DHL International
Management Decision
35/2 [1997] 94–99
[ 98 ]
tacit understanding of reciprocation that
commensurates with an act, whether right or
wrong. The critical leverage appears to be that
of honour. In a clan context, members are
regarded as trustworthy and intelligent indi-
viduals who can exercise discretion and judge-
ment when executing their duties. Unlike
their counterparts in some conventional orga-
nizations in which this kind of honour is like
something that is tagged on, staff at DHL
derive satisfaction and honour in the sheer act
of performing their roles and duties.
Clan elders to interpret the law and to
hand out punishment
Last, all of the clan structure and success
factors depicted so far have been made possi-
ble through the engineering efforts of Po
Chung, who is seen as a patron and a father-
figure of his organization even outside the
DHL community. Po Chung, like a chief clan
elder, issues commands and judgements from
his office through his team of general man-
agers – the minor clan elders. Like any chief
clan elder, his words are the clan’s law,
revered and unchallenged, and often taken as
essential guides informing thoughts and
actions within the company.
Conclusion
The clan culture of DHL, as Po Chung himself
agrees, is a crucial factor inherent in the
company’s capability to maintain competi-
tiveness and growth under turbulent and
uncertain conditions. Our observations and
propositions derived from the initial in-com-
pany study were confirmed and validated by
Po Chung, in an interview conducted with
him one year after the company cultural
analysis. Po Chung, in that interview, tells us
that the company exemplifies strong manage-
ment values, especially in areas pertaining to
human asset development. This commitment,
which we interpret as an urge to sustain
internal stability, resonates the indigenous
character of clan, and social enclave struc-
ture formation under turbulence and uncer-
tainty. Such a gradual transformation has
been possible through the blessings of those
clan elders who believe their own career
attaintment is the manifestation of the com-
pany’s human resource and career develop-
ment policies. To reciprocate, this core of
loyal clan members helps to build the “strong
wall” which has protected the company from
the turbulence posited by competitors, and
environmental uncertainty.
The company’s philosophy is well docu-
mented in the founder’s speech which he has
given over the last ten years to audiences in
forums including Business Week Interna-
tional, a Pacific-Rim conference, the Annual
Keynote Speech of the Singapore Productivity
Board, and in tertiary education institutions
such as Stanford, IMD, St Gallen, Chinese
University of Hong Kong, and the Hong Kong
University. According to the address, the
company’s philosophy is embodied in three
basic tenets which are:
1 decentralization in terms of giving staff
the authority and trust to carry out neces-
sary decisions, and to push decisions to
the lowest level;
2 strategic thinking whereby staff from
assistant manager level are trained to look
at business using a “helicopter” view, and
to make decisions that can be used as
strategic weapons against competitors; and
3 Asian family attitudes stressing the idea
that loyal and diligent staff must be repaid
with humanistic treatment, reciprocal
commitment, care and respect from the
company.
Flowing from these basic tenets, Po Chung
holds the belief that every member of staff
has six fundamental rights:
1 the right to be involved because manage-
ment has institutionalized genuine, bot-
tom-up involvement;
2 the right to understand his or her career
path, career opportunities and how one
can realize them;
3 the right to be held accountable, to share
in the ownership of the group’s problems,
and to share the inherent risks and
rewards;
4 the right to affect one’s destiny, and the
opportunity to influence one’s own future;
5 the right to make a commitment, and to be
able to affirm one’s obligation to the com-
pany;
6 the right to a covenantal or familial rela-
tionship with the company.
These six fundamental rights enable mem-
bers to fulfil their needs and to realize mean-
ingful and fulfilling work relationships. It
seems a climate of trust is anchored around
these principles. Company policies and rules
are laid down to protect these human assets.
Full membership in the clan engenders full
accountability and a corresponding full co-
optation. Po Chung claims that staff are
empowered to make decisions right to entry-
level positions. Unlike many other CEOs who
only claim to empowerment, Po Chung has
acted on that basis. Everyone is considered in
charge of quality in the company. Almost
anyone can come forward on that count to
deal with quality problems.
The close kinship mechanisms of the
clan’s social enclave protects clan members
from outside temptations and threats at all
costs. By striving to treat all clan members
as equals, the behaviours and attitude of
Andrew Chan
Corporate culture of a clan
organization: a case study of
DHL International
Management Decision
35/2 [1997] 94–99
top management communicate this
possessiveness to all levels. It is seen that this
familial internal climate acts to minimize
internal competition. Hence, politicking is
rendered meaningless. Human relationships
are built on openness in communication, and
all information is freely available through
contributions to the departmental suggestion
box and “cityhall” sessions in which staff
ideas and queries about management’s
actions are explained by the senior staff.
Externally, DHL, consistent with the clan
principles, has also anticipated and prepared
for the age of the “virtual corporation“. This
is in the sense that it “relates partnership
with other companies throughout the sup-
plier chain so that it can marshall more
resources than it has on its own by using both
internal and external collaborations”[11].
Such a collaborative network of independent
companies working in strategic alliances are
able to “share costs, skills and access to
global markets as well as to capitalize on the
power of information”[12]. Companies, like
co-opted clan members, “band together syner-
gistically so that they can dominate the mar-
ket”[13]. Such an example is the 1992 alliance
involving DHL, Lufthansa Airlines, Japan
Airlines and Nissho Iwai Corporation with
each firm performing a separate function of
the core business process. In this way, there is
tremendous improvement in the supply of
flights and hub space. It is a move to antici-
pate the business process re-engineering
which DHL began to embark on in 1996.
This significant move also changes its style
of doing business. Instead of waiting for the
customers to approach, DHL continuously
seeks to provide new products and services.
Customers are actively co-opted into the
social enclave. Customer loyalty is secured as
a redoubt around this larger community. It
explains the success of DHL in maintaining
the dominant market share, in staying the
leader, and in growing at an increasing rate
under the turbulent conditions which organi-
zations face. We postulate an increase in
environmental uncertainty and in social
enclave formation in the run up to the twenty-
first century. There is an imperative for orga-
nizations in this kind of condition to bench-
mark, and to emulate the clan metaphor and
its organizing principles if they are to con-
tinue to grow, stay competitive and survive.
Application questions
1 Can you articulate those uncertainties in
your general environment, as well as those
in your particular business environment?
2 To what extent are your company’s values
understood by your staff ?
The generalizability of the clan metaphor
for organizational operation is as yet
unknown. It is argued that familial clans are
not restricted to the East Asian culture. To a
large extent, familial clans throughout the
world tend to develop under similar condi-
tions. Social enclave formation seems to be
natural for human existence under condi-
tions of uncertainty. As business environ-
ments become increasingly turbulent with
greater interconnectedness among
economies and industries, business clan
formation may become a major movement
throughout the business world.
References
1 Terryberry, S., “The evolution of organiza-
tional environments”, Administrative Science
Quarterly, Vol. 12, 1968, pp. 590-613.
2 McCann, J. and Selsky, J., “Hyperturbulence
and the emergence of type 5 environments”,
Academy of Management Review, Vol. 9 No. 3,
1984, pp. 460-70.
3 Cheung, K., “Corporate culture match: a Hong
Kong case study using an ethnographic
approach”, City University of Hong Kong,
Hong Kong, 1994.
4 Schein, E., Organzational Culture and Leader-
ship, Jossey-Bass, San Francisco, CA, 1985.
5 Delgado, D., “Is my package in yet?”, Business
Mexico, Vol. 4 No. 4, 1994, pp. 10-11.
6 Edstein, G., “Reshaping a logistics group for
the future”, International Journal of Physical
Distribution and Logistics Management, Vol. 22
No. 3, 1992, pp. 30-2.
7 Mecham, M., “DHL International extends
world network”, Aviation Week and Space
Technology, Vol. 137 No. 9, 1992, p. 32.
8 Kingma, J.M., “Imaging system for European
offices of DHL Worldwide Express”, IMC Joun-
ral, Vol. 30 No. 4, 1994, pp. 7, 28.
9 Gaffin, A., “DHL takes advantage of telephone
server tool”, Network World, Vol. 11 No. 26,
1994, p. 39.
10 Schein, E., Organizational Culture and Leader-
ship, Jossey-Bass, San Francisco, CA, 1985.
11 Davidow, W. and Malone, M., The Virtual Cor-
poration: Structuring and Revitalizing the
Corporation for the 21st Century, Harper Busi-
ness, New York, NY, 1992.
12 Byrne, J., Brandt, R. and Port, O., “The virtual
corporation”, Business Week, 8 February 1993,
pp. 36-40.
13 Hastings, C., The New Organization: Growth
the Culture of Organziational Networking,
McGraw-Hill Europe, Maidenhead, Berkshire,
1993.
3 How might you increase the application of
these values among your staff ?
4 To what extent can your organizational
culture cope with those contingent factors
in the environment? How would you
nourish a new culture?
[ 99 ]