assignments 9-12

What Holds the Modern

Company Together?

The short answer is culture. But which type

is right for your organization?

T ±b<

by Rob Goffee and Gareth Jones

organizational world is awash with talk of corporate culture-and for good reason. Culture has become a powerful way to hold a company together against a tidal wave of pressures for disintegration, such as decentralization, de-layering, and downsi: ing. At the same time, traditional mechanisms for integration-hierar- chies and control systems, among other devices-are proving costly and ineffective.

Culture, then, is what remains to bolster a company's identity as one organization. Witbout culture, a company lacks values, direction, and purpose. Does tbat matter? For the answer, just observe any company with a strong eulture-and then compare it to one without.

But what is corporate culture? Perhaps more important, is there one right culture for every organization? And if the answer is no-which we

Rob Goffee is a professor of organizational behavioral London Business School Gareth fanes, formerly senior vice president for human resources at Polygram International in London, is a professor of oiganizational development at Henley Management College in Oxfordshire, England. Goffee and fanes are the founding partners of Creative Management Associates, an organizational consulting firm in London.

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CORPORATE CULTURE

Two Dimensions, Four Cultures

high

S oc

ia bi

lit y

low

il Networked Communal

Fragmented Mercenary

low high

Solidarity

firmly believe-bow can a manager change an orga- nization's culture? Those three questions are the subject of this article.

Culture, in a word, is community. It is an out- come of how people relate to one another. Commu- nities exist at work just as they do outside the com- mercial arena. Like families, villages, schools, and clubs, businesses rest on patterns of social interac- tion that sustain them over time or are their undo- ing. They are built on shared interests and mutual obligations and thrive on cooperation and friend- ships. It is because of the commonality of all com- munities that we believe a business's culture can be better understood when viewed through the same lens that has illuminated the study of human orga- nizations for nearly 150 years.

That is the lens of sociology, which divides com- munity into two types of distinct human relations: sociability and solidarity. Briefly, sociability is a measure of sincere friendliness among members of a community. Solidarity is a measure of a commu- nity's ability to pursue shared objectives quickly and effectively, regardless of personal ties. These two categories may at first seem not to capture the whole range of human behaviors, but they have stood the test of close scrutiny, in both academia and the field.

What do sociability and solidarity have to do with culture? The answer comes when you plot the dimensions against each other. The result is four types of community: networked, mercenary, frag- mented, and communal. (See the matrix "Two Di- mensions, Four Cultures.") None of these cultures is "the best." In fact, each is appropriate for differ- ent business environments. In other words, man-

agers need not begin the hue and cry for one cul- tural type over another. Instead, they must know how to assess their own culture and whether it fits the competitive situation. Only then can they con- sider the delicate techniques for transforming it.

Sociability and Solidarity in Close Focus

Sociability, like the laughter that is its hallmark, often comes naturally. It is the measure of emotion- al, noninstrumental relations (those in whieh peo- ple do not see others as a means of satisfying their own ends) among individuals who regard one an- other as friends. Friends tend to share certain ideas, attitudes, interests, and values and usually associ- ate on equal terms. In its pure form, sociability rep- resents a type of social interaction that is valued for its own sake. It is frequently sustained through con- tinuing face-to-face relations characterized by bigh levels of unarticulated reciprocity. Under these cir- cumstances, there are no prearranged "deals." We help one another, we talk, we share, we laugh and cry together-with no strings attached.

In business communities, the benefits of high so- ciability are clear and numerous. First, most em- ployees agree that working in such an environment is enjoyable, which helps morale and esprit de corps. Sociability also is often a boon to creativity because it fosters teamwork, sharing of informa- tion, and a spirit of openness to new ideas, and allows the freedom to express and accept out-of- the-box thinking. Sociability aiso creates an envi- ronment in which individuals are more likely to go beyond the formal requirements of their jobs. They work harder than is technically necessary to help their colleagues-that is, their community-look good and succeed.

But there also are drawbacks to high levels of so- ciability. The prevalence of friendships may allow poor performance to be tolerated. No one wants to rebuke or fire a friend. It's more comfortable to ac- cept-and excuse-subpar performance in light of an employee's personal problems. In addition, high- sociability environments are often characterized by an exaggerated concern for consensus. That is to say, friends are often reluctant to disagree with or criticize one another. In business settings, such a tendency can easily lead to diminished debate over goals, strategies, or simply how work gets done. The result: the best compromise gets applied to problems, not the best solution.

In addition, high-sociability communities often develop cliques and informal, behind-the-scenes networks that can circumvent or, worse, under-

134 PHOTO: JOANNE DUGAN/GRAPHISTOCK

What Is Your Organization's Culture?

To assess yuur urf>ani zation's level oi sociability, answer the following questions:

1.1'cuplc hcic try to make friends and to keep their relationships strong

2, People here get along very well

.V People in our group often socialize outside the office

4, People here really like one another

5. When people leave our group, we stay in touch

6, People here do favors for others hecause they like one another

7. People here often confide in une another about personal matters

To assess your organization's level of solidarity, answer the following questions:

1. Our group (organization, division, unit, team) understands and shares the same business ohjectives

2. Work gets done effectively and productively

A. Our group takes strong action to address poor performance

4. Our collective will to win is high

5. When opportunities for competitive advantage arise, we move quickly to capitalize on them

6. We share the same strategic goals

7. We know who the competition is

luw medium high

mine due process in an organization. This is not to say that high-sociability eompanies lack formal or- ganizational structures. Many of them are very hi- erarchical. But friendships and unofficial networks of friendships allow people to pull an end run around the hierarchy. For example, if a manager in sales hates the marketing department's new strate- gic plan, instead of explaining his or her opposition at a staff meeting, the manager might talk it over directly (over drinks, after work) to an old friend, the company's senior vice president. Suddenly the plan might be canceled witbout the marketing de- partment's ever knowing why. In a best-case sce- nario, this kind of circumvention of systems lends a eompany a certain flexibility: maybe the marketing plan was lousy, and canceling it through official

routes might bave taken months. But in the worst case, it can be destructive to loyalty, commitment, and morale. In other words, networks can function well if you are an insider-you know the right peo- ple, hear the right gossip. Those on the outside of- ten feel lost in the organization, mistreated by it, or simply unable to affect processes or products in any real way.

Solidarity, by contrast, is based not so much in the heart as in the mind, although it, too, can come naturally to groups in business settings. Its rela- tionships are based on common tasks, mutual in- terests, or shared goals that will benefit all involved parties. Labor unions are a classic example of high- solidarity communities. Likewise, the solidarity of professionals - doctors and lawyers, for example-

HARVARD BUSINESS REVIEW November-Dccembei 1996 135

CORPORATE CULTURE

may be swiftly and ruthlessly mobilized if there is an outside competitive threat, such as proposed government regulations that eould limit profitabil- ity. But, just as often, solidarity occurs between un- like individuals and groups and is not sustained by continuous social relations.

Consider the case of a Canadian clothing maker that wanted to identify strategies to expand inter- nationally. Although its leaders were aware that the company's design, manufaeturing, and market- ing divisions had a long history of strained rela-

One of the great errors of the recent literature on corporate culture has been to assume that organizations are homogeneous.

tions, they assigned two managers from each to a strategy SWAT team. Despite very little socializ- ing and virtually no extraneous banter, the team worked fast and well together - and for good reason: each manager's bonus was based on the team's per- formance. After the group's report was done-its analysis and recommendations were top-notch- the managers returned to their jobs, never to associ- ate again. In other words, solidarity can be demon- strated discontinuously, as the need arises. In con- trast to sociability, then, it can be expressed both intermittently and contingently. It does not require daily display, nor does it necessarily rest upon a net- work of close friendships.

The organizational benefits of solidarity in a business community are many. Solidarity gener- ates a high degree of strategic focus, swift response to competitive threats, and intolerance of poor per- formance. It also can result in a degree of ruthless- ness. If the organization's strategy is correct, this kind of focused intent and action can be devastat- ingly effective. The ruthlessness, by the way, ean it- self reinforce solidarity: if everyone has to perform to strict standards, an equality-of-suffering effect may occur, building a sense of community in shared experience. Finally, when all employees are held to the same high standards, they often develop a strong sense of trust in the organization. This company treats everyone fairly and equally, the thinking goes; it is a meritocracy that cuts no spe- cial deals for favored or connected employees. In time, this trust can translate into commitment and loyalty to the organization's goals and purpose.

But, Uke sociability, solidarity has its costs as well. As we said above, strategic focus is good as long as it zeroes in on the right strategy. But if the strategy is not the right one, it is the equivalent of corporate suicide. Organizations can charge right over the cliff with great efficiency if they do the wrong things well. In addition, cooperation occurs in high-solidarity organizations only when the ad- vantage to the individual is clear. Before taking on assignments or deciding how hard to work on projects, people ask, "What's in it for me?" If the

answer is not obvious or immediate, neither is the response. '

Finally, in high-solidarity organi- zations, roles (that is, job definitions) tend to be extremely clear. By con- trast, in cultures where people are very friendly, roles and responsibili- ties tend to blur a bit. Someone in sales migbt become deeply involved in a new R&D project-a collabora- tion made possible by social ties.

This kind of overlap usually doesn't happen in bigh- solidarity environments. Indeed, sucb environ- ments are often characterized by turf battles, as in- dividuals police and protect the boundaries of their roles. Someone in sales who tried to beeome in- volved in an R&D effort would be sent packing- and quickly.

Although our discussion separates sociability and solidarity, many observers of organizational life confuse the two, and it is easy to see why. The con- cepts can, and often do, overlap. Social interaction at work may reflect the sociability of friends, the solidarity of colleagues, both, or-sometimes-nei- ther. Equally, when colleagues socialize outside work, their interaetion may represent an extension of workplace solidarity or an expression of intimate or close friendship. Yet to identify a community's culture correctly and to assess its appropriateness for the business environment, it is more than aca- demic to assess sociability and solidarity as distinct measures. Asking the right questions can help in this process. (See the questionnaire "What Is Your Organization's Culture?")

It is critical, before completing the form, to select the parameters of the group you will be evaluating; for instance, you might assess your entire company with all its divisions and subgroups or a unit as small as a team. Either is fine, as long as you do not change horses in midstream. Our unit of analysis here is primarily the corporation, but we recognize tbat executives may use the framework to look in- side their own organizations, comparing units, divi- sions, or other groups with one another.

136 HARVARD BUSINESS REVIEW Novcmbcr-Dctcmbcr 1996

Such an exercise can indeed be instructive. One of the great errors of the recent literature on corpo- rate culture has heen to assume that organizations are homogeneous. Just as one organization differs from another, so do units within them. For exam- ple, the R&D division of a pharmaceutical compa- ny might differ markedly from the manufacturing division in hoth solidarity and sociahility. In addi- tion, there are often hierarchical differences within a single company: senior managers may display an entirely different culture from middle managers, and different still from blue-collar workers.

Is this variation good news or bad news? The an- swer depends on the situation and requires manage- rial judgment. Radically different cultures inside a eompany may very well explain conflict and sug- gest that intervention is necessary. Similarly, one type of culture throughout a corporation may be a signal that some forms need to be adjusted to ac- count for differing husiness environments.

The Networked Organization: High Sociability, Low Solidarity

It is perhaps the rituals of what we call net- worked organizations that are most noticeable to outsiders. People frequently stop to talk in the hall- ways; they wander into one another's offices with no purpose hut to say hello; lunch is an event in whicb groups often go out and dine together; and af- ter-hours socializing is not the exception but the rule. Many of these organizations celehrate birth- days, field softball teams, and hold parties to honor an employee's long service or retirement. There may he nicknames, in-house jokes, or a common language drawn from shared experiences. (At one net- worked company, for instance, em- ployees tease one another with the phrase "Don't pull a Richard," in ref- erence to an employee who once fell asleep during a meeting. Richard himself uses the jest as well.) Em- ployees in networked organizations sometimes act like family, attending one another's weddings, anniversary parties, and children's confirmations and har mitzvahs. They may even live in the same towns.

Inside the office, networked cultures are charac- terized not hy a lack of hierarchy hut hy a profusion of ways to get around it. Friends or cliques of friends make sure that decisions about issues are made he- fore meetings are held to discuss them. People move from one position to another without the "required" training. Employees are hired without

going through official channels in the human re- sources department-they know someone inside the network. As we have said, this informality can lend flexibility to an organization and be a healthy way of cutting through the bureaucracy. But it also means that the people in tbese cultures bave de- veloped two of tbe networked organization's key competencies: the ability to collect and selectively disseminate soft information, and the ahility to acquire sponsors or allies in the company who will speak on their bebalf both formally and informally.

What are the other hallmarks of networked orga- nizations? Their low levels of solidarity mean that managers often have trouble getting functions or operating companies to cooperate. At one large Eu- ropean manufacturer, personal relations among se- nior executives of businesses in France, Italy, the United Kingdom, and Germany were extremely friendly. Several executives had known one another for years; some even took vacations together. But when the time came for corporate headquarters to parcel out resources, those same executives fought acrimoniously. At one point, they individually sub- verted attempts by headquarters to introduce a Europe-wide marketing strategy designed to com- bat the entry of U.S. competition.

Finally, a networked organization is usually so political that individuals and cliques spend much of their time pursuing personal agendas. It becomes bard for colleagues to agree on priorities and for managers to enforce them. It is not uncommon to bear frequent calls for strong leadersbip to over- come the divisions of suhcultures, cliques, or war- ring factions in networked organizations.

Networked organizations are characterized not by a lack of

hierarchy but by a profusion of ways to get around it.

In addition, because there is little commitment to shared business objectives, employees in net- worked organizations often contest performance measures, procedures, rules, and systems. For in- stance, at one international consumer-products company witb wbich we have worked, the strategic planning process, the structural relationship be- tween corporate headquarters and operating com- panies, and the accounting and budgetary control systems were beavily and continually criticized hy

HARVARD BUSINESS REVIEW November-December 1996 137

Unilever: A Networked Organization There is a frequently told story within Unilever, the

Anglo-Dutch consumer-goods group with worldwide sales of roughly $50 billion. Unilever executives, it is said, recognize one another at airports, even when they've never met before. There's something about the way they look and act - something so subtle it's im- possible to pin down in words yet unmistakable to those who have worked for the company for more than a few years.

Obviously, there's a bit of exaggeration in this com- pany legend, hut it underscores Unilever's tradition as a networked company - that is, one with a culture characterized by high levels of sociability. For years, the company has explicitly recruited compatible peo- ple - people with similar backgrounds, values, and in- terests. Unilever's managers believe that this corps of like-minded individuals is tbe reason why its employ- ees work so well togetber despite tbeir national diver- sity, why tbey demonstrate such strong loyalty to their colleagues, and why tbey embrace the company's values of cooperation and consensus.

Unilever takes otber steps to reinforce and increase tbe sociability in its ranks. At Four Acres, tbe compa- ny's international-management-training center out- side London, bundreds of executives a year partake in activities rich in social rituals: multicourse dinners, group photographs, sports on the lawn, and, perhaps above all, a bar that literally never closes. As former chairman Floris Maljers remarks, "Tbis shared experi- ence creates an informal network of equals wbo know one another well and usually continue to meet and exchange experiences."

In addition to the events at Four Acres, Unilever's sociability is bolstered by annual conferences attend- ed by tbe company's top 500 managers. Tbe compa- ny's leaders use tbese meetings to communicate and review strategy, but tbere is much more to them than work. (Tbe intense fraternizing that takes place at these conferences has eamed them the nickname Oh! Be Joyfuls!) Maljers notes, "Over good food and drink, our most senior people meet, exchange views, and re- confirm old friendships."

Finally, Unilever moves its young managers fre- quently - across horders, products, and divisions. Tbis effort is an attempt to start Unilever relationsbips ear- ly, as well as to increase know-how.

Yet these carefully nurtured patterns of sociahility have not always been matched hy bigh levels of com- panywide solidarity. Unilever bas found it hard over the years to achieve cross-company coordination and agreement on objectives. It's not tbat executives fight over strategy as much as "talk it to death" in the search for consensus, says one senior vice president.

Does this networked culture fit Unilever's business environment? In good part, yes. Unilever's managers hail from dozens of countries. This diversity could have been an isolating factor, hindering the flow of in- formation and ideas. But because of the culture's bigh levels of sociability, there is widespread fellowship and goodwill instead. Second, a key success factor in Unilever's business is proximity to local markets. Tbe organization's low solidarity has kept units focused on their home bases with good results, And finally, until recently, Unilever has been a highly decentralized or- ganization. Simply put, tbere has been little need for strategic agreement among units.

But Unilever's environment might very well he changing witb tbe emergence of a single European market, which would make coordination among busi- nesses and functions imperative. Indeed, many recent organizational cbanges - tbe creation of Lever Europe in the detergents business, for example - can he inter- preted as an attempt hy Unilever to create higher lev- els of cor^jorate solidarity, largely through a process of centralization.

In addition, Unilever faces some competitors, sucb as Procter & Gamble and L'Oreal, known for tbeir higb levels of solidarity around corporate goals. Tbis asset bas lent Unilever's competitors the ability to acceler- ate product development processes and exploit market opportunities quickly. Unilever must match those competencies or risk losing clout.

Finally, Unilever's relative lack of solidarity means that management can lose its sense of urgency - a

executives in country husinesses. Indeed, the criti- cism even took on an element of sport, increasing sociability among employees hut doing nothing for the already diminished levels of solidarity.

Generally speaking, few organizations start their life cycle in the networked quadrant. By definition, sociability is huilt up over time. It follows, then, that many organizations migrate there from other quadrants. And despite the political nature of this kind of community, there are many examples of

successful networked corporations. These organi- zations have learned how to overcome the nega- tives of sociahility, such as cliques, gossip, and low productivity, and how to reap its henefits, such as increased creativity and commitment. One method of maximizing the henefits of a networked culture is to move individuals regularly hetween functions, businesses, and countries in order to limit exces- sive local identification and help them develop a wider strategic view of the organization. Later on.

138 HARVARD BUSINESS REVIEW November-December 1996

competitive advantage in any business environment. Tbis challenge is well known to tbe company's lead- ers. As Maljers bimself notes, "Everybody may be so busy with friends elsewhere - witb the interesting training program, the well-organized course, the next major conference - tbat complacency sets in. Unfortu- nately, we have seen this happen in some of our units, especially tbe more successful ones. It may be neces- sary to shake up the system from time to time."

This comment underlines one of tbe higgest risks of the networked organization. Employees may be so busy being friends that they lose sight of the reason tbey are at work in tbe first place.

Interestingly, Unilever's recently announced orga- nizational restructuring is designed in part to address some of the negative consequences of the networked form. The company will be broken into 14 business groups, and, according to tbe plan, eacb will have a clear husiness rationale, stretcb targets, and transpar- ent accountability. In a booklet sent to all managers, the company described the changes as a means to "es- tablish a simple, effective organization dedicated to the needs of the future. Tbis must provide great clarity of roies, responsibilities, and decision making.... Un- der the new structure, business groups will make an- nual contracts on which they must deliver come 'hell or high water.'"

Similarly, in an interview in the September issue of Unilever magazine, company chairman Niall FitzGer- ald identified the values of the new organization in these words: "Simplicity, clarity, and delegation of au- thority are intended to be tbe prime virtues of the new organization. A disciplined approach |is essential] - those who have been given tbe task of delivering re- sults must focus on delivering."

In tbe terms of our model, this reorganization is clearly an effort to move toward the mercenary quad- rant: less politicking (as enjoyable as it migbt he) and a more rutbless focus on results. But can Unilever let go of its ingrained sociahility and take on the behaviors of a bigh-solidarity enterprise? The company's future performance will tell.

these individuals often hecome the primary man- agers of the networked organization's political processes, and they keep them healthy.

High levels of sociability usually go hand in hand with low solidarity hecause close friendships can inhibit the open expression of differences, the criti- cism of ideas, and forceful dissent. Constructive conflict, however, is often a precondition for devel- oping and maintaining a shared sense of purpose- that is, solidarity. It would not be surprising, then.

to find that well-meaning management interven- tions to increase strategic focus often consolidate workplace friendships hut do little for organization- al solidarity. That could account for at least some of the frustrations of those who complain, for exam- ple, that the outdoor team-huilding weekend was great fun but not remotely connected to the daily work of ensuring that the different parts of the husi- ness are integrated.

As we have noted, each type of corporate culture has its most appropriate time and place. We have observed that the networked organization func- tions well under the following business conditions: DWhen corporate strategies have a long time frame. Sociahility maintains allegiance to the orga- nization when short-term calculations of interest do not. Consider the case of a company expanding into Vietnam. It might he years hefore such an ef- fort is profitable, and in the meantime the process of getting operations running may he difficult and frustrating. In a networked culture, employees are often willing to put up with risk and discomfort. They are loyal to their colieagues in an open-ended way. The enjoyment of friendship on a daily basis is its own reward. DWhen knowledge of the peculiarities of local markets is a critical success factor. The reason is that networked organizations are low on solidarity: memhers of one unit don't willingly share ideas or information with members of another. This would certainly he a strategic disadvantage if success came from employees having a broad, big-picture perspective. But when success is driven hy deep and intense familiarity with a unit's home turf, low sol- idarity is no hindrance. n When corporate success is an aggregate of local success. Again, this is a function of low solidarity. If headquarters can do well with low levels of inter- divisional communication, then the networked culture is appropriate.

The Mercenary Organization: Low Sociability, High Solidarity

At the other end of the spectrum from the net- worked organization, the tnercenary community is low on hallway hobnobhing and high on data-laden memos. Indeed, almost all communication in a mercenary organization is focused on husiness mat- ters. The reason: individual interests coincide with corporate objectives, and those ohjectives are often linked to a crystal clear perception of the "enemy" and the steps required to heat it. As a result, merce- nary organizations are characterized hy the ahility to respond quickly and cohesively to a perceived

HARVARD BUS[NESS REVIEW November-December 1996 139

Mastiff Wear: A Mercenary Organization Several years ago, a senior manager at a company

we'll call Mastiff Wear, an international manufacturer of popular children's clothing, invited 15 of tbe com- pany's top executives to dinner at a fancy new restau- rant in London. The men and women had just sat down when the host announced a challenge to be com- pleted over dinner: devise a new advertising slogan. The best solution, tbe host said, would earn a bottle of Dom Perignon. For tbe next three hours, the guests took to their task singlc-mindedly, even tearing up the elegant menus to use as working paper. The restau- rant's delicacies passed before them throughout the night, and the executives ate, but few seemed to take notice of where tbey were. What they were doing was all that mattered.

Not long after, one of the authors of this article met witb a similar group of executives at Mastiff Wear. "If I join Mastiff next Monday," he asked them, "what should I know are the rules of success at tbis organiza- tion?" Rule one, he was told: Arrive on Sunday. Rule two: Call your family and tell them you won't be home until next weekend.

Botb of these stories illustrate a typical mercenary culture in action: members work long hours and often value work over family life. (The executives in the restaurant worked even wben tbey could have been socializing, and no one complained - or even noticed.) In addition, the stories illustrate this form's bigh de- gree of internal competition and strong focus on the achievement of tasks.

Mastiff also embodies several other characteristics of high-solidarity cultures. There are strict standards for performance, and underachievers are dealt with ruthlessly, As one executive remarks, "Once in a wbile, one of us just disappears." Those who survive are well rewarded - so well tbat many are able to retire

early. Indeed, a common strategy for a Mastiff execu- tive is to work hard, even at tbe cost of bis or her per- sonal life, accumulate wealth, and then leave. Rela- tionsbips with the organization exist primarily as a means for employees to promote their own interests - career, personal, or otherwise.

In some ways, tbis mercenary culture bas been an apt fit for Mastiff in recent years. The company has had considerable success in the clearly defined distri- bution channels in which it operates. Internally, a fierce focus on efficiency has ensured that resources are used to the fullest. Little is wasted, and tbe com- pany does only what it can do best, creating centers of corporate excellence to spread its knowledge. Exter- nally, a strategy of targeting clearly defined sectors - primarily department stores and catalogs - and a clearly identified "enemy" has consistently en- abled Mastiff to establish dominant market positions. Most recently, this ability has been illustrated by tbe company's dramatic entry into the European mar- ket - a move that has inflicted considerable damage on a major competitive player there.

But mercenary cultures bave tbeir sbortcomings. When you successfully occupy tbe number one posi- tion in many markets, as Mastiff has for many years, you may run out of enemies. As a result, you may lose the competitive edge that originally brought your company a sense of urgency and the collective will to win. In addition. Mastiff, like many mercenary cul- tures, may have suffered from excessive strategic focus. In this case, a characteristic concern with oper- ational efficiencies proved harely adequate when com- petitors were gaining market share from new-product development. Focusing on one or two issues is a strength, of course. The danger is that you can lose sight of wbat's bappening on the horizon.

opportunity or threat in the marketplace. Priorities are decided swiftly-generally by senior manage- ment-and enforced throughout the organization with little dehate.

Mercenary organizations are also characterized hy a clear separation of work and social life. (Inter- estingly, these cultures often consist of people whose work takes priority over their private life.) Members of this kind of business community rarely fraternize outside the office, and if they do, it is at functions organized around business, such as a party to celebrate the defeat of a competitor or the successful implementation of a strategic plan.

Because of the ahsenee of strong personal ties, mercenary organizations are generally intolerant of

poor performance. Those who are not contributing fully are fired or given explicit instructions on how to improve, with a firm deadline. There is a hard- heartedness to this aspect of mercenary cultures, and yet the high levels of commitment to a com- mon purpose mean it is accepted, and usually sup- ported, in the ranks. If someone has not performed, you rarely hear, for instance, "It was a shame we hadtolet John go-he was so nice." John, the think- ing would he, wasn't doing his part toward clearly stated, shared strategic ohjectives.

Finally, the low level of social ties means that mercenary organizations are rarely bastions of loy- alty. Employees may very well respect and like their organizations,- after all, these institutions are

140 HARVARD BUSINESS REVIEW November-December 1996

CORPORATE CULTURE

usually fair to those who work hard and meet stan- dards. But those feelings are not sentimental or tied to affectionate relationships hetween individuals. People stay with high-solidarity companies for as long as their personal needs are met, and tben they move on.

Without a doubt, tbe advantages of a mercenary organization ean sound seductive in tbe perfor- manec-driven 1990s. What manager would not want his or her company to have a heightened sense of competition and a strong will to win; In addi- tion, because of their focused activity, many merce- nary organizations are very productive. Moreover, unhindered hy friendships, employees are not re- luctant to compete, further enhancing performance as standards get pushed ever higher.

But mercenary communities have disadvantages as well. Employees wbo are busy chasing specific targets are often disinclined to cooperate, share in- formation, or exchange new or creative ideas. To do so would be a distraction. Cooperation between units with different goals is even less likely. Con- sider the example of Warner Brothers, the enter- tainment conglomerate. Tbe music and film divi- sions, each with its own strategic targets, have trouble achieving synergy-for example, witb sound tracks. (Musicians recording on a Warner record label, for instance, might be ealled on to score a Warner movie.) Compare this situation with that at Disney, a major competitor, which relent- lessly and profitably exploits synergies between its movie characters-from Snow White to Simba - and its merchandising divisions.

Tbe mercenary organization works effectively under the following business conditions: LJ When change is fast and rampant. Tbis type of situation calls for a rapid, focused re- sponse, whicb a mereenary organiza- tion is able to mount. DWben economies of scale are acbieved, or competitive advantage is gained, through creating corporate centers of excellence that can im- pose processes and procedures on op- erating companies or divisions. For example, the Ziirieh-based diversi- fied corporation ABB Asea Brown Boveri builds worldwide centers of excellence for product groups. Its Finnish subsidiary Stromberg bas become the world leader in electric drives since its acquisition in 1986, and it now sets the standard for the ABB empire. ( 1 When corporate goals are clear and measurable, and there is therefore little need for input from tbe ranks or for consensus building.

n Wben the nature of the competition is clear. Mer- cenary organizations thrive when the enemy-and the best way to defeat it-are obvious. The merce- nary organization is most appropriate wben one en- emy can be distinguisbed from many. Komatsu, for example, made Marv-C-translated as "Encircle Caterpillar"-its war cry back in 1965 and focused all its strategic efforts during tbe 1970s and early 1980s on doing just that, aided effectively hy a high-solidarity culture. By contrast, IBM zigzagged strategieally for years, unable to identify its compe- tition until tbe game was nearly up. Its cultural type during that time is not known to us, but we ean guess with confidence that it wasn't mercenary.

The Fragmented Organization: Low Sociability, Low Solidarity

Few managers would volunteer to work for or, perhaps harder still, run a fragmented organization. But like strife-ridden countries, unfriendly neigb- borboods, and disharmonious families, sucb com- munities are a fact of life. Wbat are their primary characteristics in a business setting?

Perhaps most notahly, employees of fragmented organizations display a low consciousness of orga- nizational membership. They often believe that they work for themselves or they identify witb oc- cupational groups-usually professional. Asked at a party wbat he does for a living, for instance, a doc- tor at a major teaching bospital tbat happens to bave this kind of eulture might reply, "I'm a sur- geon," leaving out the name of the institution wbere be is employed. Likewise, organizations that have tbis kind of culture rarely field softhall teams-who would want to wear tbe company's

In mercenary organizations, you rarely hear, for instance, ''It was a shame we had to let

John go - he was so nice."

name on a T-shirt? -and employees engage in none of tbe extracurricular rites and rituals that charac- terize high-sociability cultures, considering them a waste of time.

This lack of affective interrelatedness extends to bebavior on the job. People work witb tbeir doors shut or, in many cases, at home, going to the office only to eolleet mail or make long-distance calls.

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They are often secretive about their projects and progress with coworkers, offering information only when asked point-blank. In extreme cases, mem- bers of fragmented organizations have such low lev- els of sociability that they attempt to sabotage the work of their "colleagues" through gossip, rumor, or overt criticism delivered to higher-ups in the or- ganization.

This culture also has low levels of solidarity: its members rarely agree about organizational objec- tives, critical success factors, and performance standards. It's no surprise, then, that high levels of dissent about strategic goals often make these orga- nizations difficult to manage top-down. Leaders of- ten feel isolated and routinely report feeling as if there is no action they can take to effect change. Their calls fall on deaf ears.

Low sociability also means that individuals may give of themselves on a personal level only after careful calculation of what they might get in re- turn. Retirement parties, for example, are often

sparsely attended. Indeed, any social behavior that is discretionary is unlikely to take place.

We realize it must sound as if fragmented organi- zations are wretched places to work - or at least ap- peal only to the hermits or Scrooges of the business world. But situations do exist that invite, or even benefit from, such a culture, and further, this kind of environment is attractive to individuals who pre- fer to work alone or to keep their work and personal lives entirely separate.

In our research, we have seen fragmented organi- zations operate successfully in several forms. First, the culture functions well in manufacturing con- cerns that rely heavily on the outsourcing of piece- work. Second, the culture can succeed in profes- sional organizations, such as consulting and law firms, in which highly trained individuals have idiosyncratic work styles. Third, fragmented cul- tures often accompany organizations that have become virtual: employees work either at home or on the road, reporting in to a central base mainly by

University Business School: A Fragmented Organization Despite how unpleasant it sounds to work where

both sociability and solidarity are lacking, there are indeed environments that invite such cultures and do no harm whatsoever to the organization, its people, or its products in the process. Still, there is the stigma of an "unfriendly" organization to contend with, which is the reason this case study uses a disguised name for its subject.

University Business School is typical of its breed: it offers an M.B.A. program and several shorter execu- tive programs. Its other products are books, reports, and scholarly articles. The school achieves all this smoothly, with remarkably low levels of social inter- action of any kind among members of the community.

Take sociability. At UBS, professors work mainly on their own, researching their specialty, preparing classes, writing articles, and assessing students' papers. Often this work is done at home or in the office, be- hind closed doors displaying Do Not Disturb signs. Many professors have demanding second jobs as con- sultants to industry. Therefore, when social contact does occur, it is with clients, students, or research sponsors rather than with colleagues. In fact, faculty members may actively avoid sociability on campus in order to maximize discretionary time for private consulting work and research for publication.

As for solidarity, UBS professors see themselves foremost as part of an international group of scholars, feeling no particular affinity for the institution that employs them. Their occupational group, they be-

lieve, sets the standards and controls outputs, such as journal articles. In addition, it shapes employment op- portunities and determines career progress. There is no point, the professors' thinking goes, concerning themselves with the goals and strategies of an institu- tion that does not have direct bearing on their day-to- day work or future pursuits.

As we have said, however, none of this diminished sociability or solidarity compromises the competitive position of UBS, a highly renowned institution. The reason is that many professors do indeed do their best work alone or with scholars from other institutions who share similar interests. Moreover, M.B.A. and other academic programs don't necessarily need input from groups of staff memhers; most professors know what to teach and are disinclined in any case to take the advice of others. Indeed, the only reason for meet- ings in this environment is to decide on academic ap- pointments and promotions. This activity involves consideration of scholarship, which requires neither sociability nor solidarity. Finally, UBS need not worry that its employees are losing focus or urgency about their work - one of the biggest risks of low-solidarity organizations. On the contrary. UBS attracts a self- selecting group of highly autonomous, sometimes egocentric individuals who are motivated, not alienat- ed, by the freedoms of the fragmented organization.

In short, the success of UBS underscores our point: there is no generic ideal when it comes to corporate community. If the culture fits, wear it.

142 HARVARD BUSINESS REVIEW November-December

eleetronic means. Of course, fragmented organiza- tions sometimes refleet dysfunctional eommuni- ties in whieh ties of sociability or solidarity have been torn asunder by organizational politics, down- sizing, or otber forms of disruption. In tbese cases, tbe old ties of friendship and loyalty are replaced hy an overriding eon- cern for individual survival, unleash- ing a war of all against all.

The last unhealthy scenario aside, however, a fragmented culture is ap- propriate under tbe following busi- ness conditions: n When there is little interdepen- dence in tbe work itself. This migbt occur, for ex- ample, in a company in which pieces of furniture or clothing are subcontracted to individuals who work out of their homes and then assembled at another site. A second example might be a firm composed of tax lawyers, each working for different clients. D When significant innovation is produced primar- ily hy individuals rather than by teams. (This, it should be noted, is beeoming increasingly rare in husiness, as cross-disciplinary teams demonstrate the power of imJike minds working together.) n When standards are achieved hy input eontrols, not process controls. In these organizations, time has proven that management's foeus should be on recruiting the right people; once tbey have been hired and trained, their work requires little supervi- sion. They are tbeir own hest judges, their own barshest taskmasters. G When tbere are few learning opportunities be- tween individuals or when professional pride pre- vents the transfer of knowledge. In an international oil-trading company we have worked with, for ex- ample, employees who traded Nigerian oil never shared market information with employees trading Saudi crude. For one thing, they weren't given any incentive to take tbe time to do so; for another, each group of traders took pride in knowing more than the other. To give away information was to give away the prestige of being at tbe top of tbe field-a market insider.

The Communal Organization: High Sociability, High Solidarity

A communal eulture can evolve at any stage of a company's life cycle, but when we are asked to il- lustrate this form, we often cite the characteristics of a typical small, fast-growing, entrepreneurial start-up. The founders and early employees of sucb companies are close friends, working endless hours in tight quarters. This kinship usually flows into

close ties outside tbe office. In tbe early days of Apple Computer, for instance, employees lived to- gether, commuted together, and spent weekends together, too. At the same time, tbe sense of solidar- ity at a typical start-up is sky bigh. A tiny company

People in fragmented organizations often work with

their doors shut or at home.

has one or at most two products and just as few goals (tbe first usually being survival). Because founders and early employees often have equity in the start-up, success has clear, collective benefits. In communal organizations, everything feels in syne.

But, as we have said, start-ups don't own this cul- ture. Indeed, communal cultures can be found in mature companies in which employees have worked together for decades to develop both friend- ships and mutually beneficial objectives.

Regardless of their stage of development, eom- munal organizations sbare certain traits. First, tbeir employees possess a high, sometimes exaggerated, consciousness of organizational identity and mem- bership. Individuals may even link their sense of self with the corporate identity. Some employees at Nike, it is said, have tbe company's trademark sym- bol tattooed ahove their ankles. Similarly, in tbe early days of Apple Computer, employees readily identified themselves as "Apple people."

Organizational life in communal companies is punetuated by social events that take on a strong ritual significance. The London office of the inter- national advertising agency J. Walter Thompson, for instance, throws parties for its staff at exciting, even glamorous, locations; recent events were held at the Hurlingham Club and the Natural History Museum in London. The company also offers its employees a master class on creativity tbat features a speeeh by a celebrity. Dave Stewart, former gui- tarist of the rock band the Eurythmies, even played a set during his presentation. And finally, Thomp- son bolds an annual gala awards ceremony for the company's best creative teams. Winners go to lunch in Paris. Other communal companies celebrate en- tranee into tbeir organizations and promotions witb similar fanfare.

The high solidarity of communal cultures is of- ten demonstrated through an equitable sharing of risks and rewards among employees. Communal organizations, after all, place an extremely bigb

HARVARD BUSINESS REVIEW November-December 1996 143

British-Borneo Petroleum Syndicate: A Communol Organi Synergy is a term that gets bandied about quite a bit,

as in "Wouldn't it be terrific if our divisions, operating companies, or functional areas had more synergy? Then they could learn from one anotber and sbare new ideas - even exchange market or technological infor- mation." Tbis bope, while admirable in theory, often remains just tbat in practice-a hope.

Not so at British-Borneo Petroleum Syndicate, where a communal culture - combining bigb sociabil- ity and high solidarity-dovetails effectively with the company's strategic need for cooperation and inter- change among functions and locations. Indeed, tbe synergy among groups at British-Borneo is perbaps its greatest competitive advantage. The London-based company, which has grown more than tenfold in the 1990s to reach a market capitalization of $550 million in 1996, explores for and produces oil and gas in the North Sea and the Gulf of Mexico. Success in this kind of endeavor arises from speed of movement, risk management, and the innovative use of technology- which in this context can come only out of cross-func- tional teams. Success is also linked to well-orcbes- trated, complex interfaces with other players in the market and with governments. And finally, success comes from employees committing to strategies that are rather long-term. The exploration phase for most ventures will take several years, and production- hence casb flow - often lags a few years beyond that.

British-Borneo's higb levels of sociability can be seen in the honest and relaxed way employees inter-

act. They talk about tbeir feelings openly and often belp one anotber out - without making deals. In addi- tion, they are a team that plays together out of the of- fice-at picnics, parties, and ball games. This convivi- ality is, in some part, management's doing. Managers have systematically tried to recruit compatible people with similar interests and backgrounds. And they have improved on tbis foundation witb regular team- building events such as Outward Bound courses for all new bires, frequent social events, and active support of company softball, track, and sailing teams. Every- one in tbe company is invited to participate, from board members to clerks.

British-Borneo's sociability, bowever, has not come at tbe expense of solidarity. The company's employees display a strong sense of urgency and will to win. They are clearly committed to a common purpose. Indeed, in the United Kingdom, the company's strategy is known and understood by people of every rank, in- cluding secretaries and other support personnel. The widespread knowledge and acceptance of British- Borneo's objectives have come about through careful effort. The company devotes considerable time and energy to bammering out - tbrougb workshops and brainstorming sessions - a collective vision that is owned by the staff.

Interestingly, despite tbe company's high levels of sociability, British-Borneo employees are not reluc- tant to speak tbeir mind. (Ordinarily, friendships pre- clude tough criticism or disagreement.) Staff members

value on fairness and justice, which comes into sharp focus particularly in hard times. For example, during the 1970 recession, rather than lay people off, Hewlett-Packard introduced a 10% cut in pay and hours across every rank. It should be noted that the company's management did not become demo- nized or despised in the process. In fact, what hap- pened at Hewlett-Packard is another characteristic of communal companies: their leaders eommand widespread respect, deference, and even affection. Although they invite dissent, and even succeed in receiving it, their authority is rarely challenged.

Solidarity also shows itself clearly v̂ ĥen it comes to company goals and values. The mission state- ment is often given front-and-center display in a communal company's offices, and it evokes enthu- siasm rather than cynicism.

Finally, in communal organizations, employees are very clear about the competition. They know which companies threaten theirs-what they do well, how they are weak-and bow they can he

overcome. And not only is the external competi- tion seen clearly, its defeat is also perceived to he a matter of competing values. The competition has as much to do with an organization's purpose-the reason it exists-as it has with winning market share or increasing operating margins.

Given all these characteristics, it is perhaps not surprising that many managers see the communal organization as the ideal. Solidarity alone may be symptomatic of excessive instrumentaiism. Em- ployees may withdraw their cooperation the mo- ment they become unable to identify shared advan- tage. In some cases, particularly where there are well-established performance-related reward sys- tems, this attitude may be reflected in an exagger- ated concern with those activities that produce measurable outcomes. By contrast, organizations that are characterized primarily by sociability may lose tbeir sense of purpose.

However, where both sociability and solidarity are high, a company gets the best of both worlds - or

144 HARVARD BUSINESS REVIEW November-December 1996

zation arc encouraged to strip things down to reality when they communicate about the cotiipany's business. This frankness creates an atmosphere of challenge and Jcbnte, which is one of the hallmarks of a high-solidar- ity L-nvironmcnt.

Finally, British-Borneo is a classic high-solidarity environment in its adherence to strict performance standards. The culture docs nut tolerate underachicve- nient. Outstanding results arc generously rewarded, hut it is not unusual for someone who docs not mea- sure up to he asked to leave, sooner rather than later.

We've mentioned some of the sources of British- Borneo's culture, but it is critical to note that perhaps tbc most important source is CEO Alan Gaynor, whose charismatic leadership sets an example. Gaynor participates in the company's many social functions, for example, and is open about bis feelings. At the same time, he is intolerant of subpar perfor- mance and is relentlessly focused on strategic goals.

That Gaynor is a major driver of British-Borneo's communal culture, however, is emblematic of one of this form's challenges. While a cotnmunal culture is usually difficult to attain and sustain, a strong leader can tnaiiagc both to powerfully effective ends. But sbould tbe leader ever leave, the community he or she created can easily collapse. Because of its fragility, a communal culture is also difficult to export. That is the challenge Gaynor faces today, in fact, as British- Borneo's embryonic operations in Houston, Texas, go through a dramatic expansion.

does it? The answer is that the eommunal culture may be an inappropriate and unattainable ideal in many business contexts. Our research suggests that it seems to v̂ ôrk best in religious, political, and civic organizations. It is much harder to find com- mercial enterprises in this quadrant. The reason is that many businesses that achieve the communal form find it difficult to sustain. There are a number of possible explanations. First, high levels of socia- hility and solidarity are often formed around partic- ular founders or leaders whose departure may weaken either or both forms of social relationship. Second, the high-sociahility half of the communal culture is often antithetical to what goes on inside an organization during periods of growth, diver- sification, or internationalization. These massive and complex change efforts require focus, urgency, and performance-the stuff of solidarity in its un- diluted form.

More profoundly, though, there may he a built-in tension between relationships of sociability and

solidarity that makes the communal business en- terprise an inherently unstable form. The sincere geniality of sociability doesn't usually coexist-it can't-with solidarity's dispassionate, sometimes ruthless focus on achievement of goals. When the two do coexist, as we have said, it is often in reli- gious or volunteer groups. Perhaps one reason is that people tend to join these groups after they've become familiar with, and agree with, their objec- tives. (A church's policies, procedures, beliefs, and goals, for itistance, are made well known to pro- spective members before they join. Once inside the organization, members find little "strategic" dissension to get in the way of friendship.) By con- trast, when people consider employment at a busi- ness enterprise, they may not know what the orga- nization's beliefs and values are - or they may know them and disagree with them but join the organiza- tion anyway for financial or career reasons. Over time, their objections may manifest themselves in low-solidarity behaviors.

In their attempts to mimic the virtues of commu- nal organizations, many senior managers have failed to think through whether high levels of both sociability and solidarity are, in fact, what they need. Again, from our research, it is clear that the desirable mix varies according to the context. In what situations, then, does a communal culture function well? D When innovation requires elaborate and exten- sive teamwork across functions and perhaps loca- tions. Increasingly, high-impact innovation cannot be aehieved hy isolated specialists. Rather, as the knowledge base of organizations deepens and diver- sifies, many talents need to combine (and combust) for truly creative change. For example, at the phar- maceutical company Glaxo Wellcome, research projects are undertaken by teams from different dis- ciplines-such as geneties, chemistry, and toxicol- ogy-and in different locations. Without such team- work, drug development would be much slower and competitive advantage would he lost. D When there are real synergies among organiza- tional subunits and real opportunities for learning. We emphasize the word real because synergy and learning are often held up as organizational goals without hard scrutiny. Both are good-in theory. In practice, opportunities for synergy and learning among one company's divisions may not actually exist or be worth the effort. However, when they do exist, a communal culture unquestionably helps. • When strategies are more long-term than short- term. That is to say, when corporate goals won't be reached in the foreseeable future, tnanagcrial mech- anisms aie needed to keep commitment and focus

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high. The communal culture provides high socia- bility to holster relationships (and the commitment that accompanies them) and high solidarity to sus- tain focus. Indeed, we have seen communal cul- tures help enormously as organizations have gone global-a long and often tortuous process during

There may be a built-in tension between sociability and solidarity that makes communal cultures inherently unstable.

which strategies have a tendency to be open ended and emergent, as opposed to the sum of measurable milestones. n When the husiness environment is dynamic and complex. Although many organizations claim to be in such an environment, it is perhaps most pro- nounced in sectors like information technology, telecommunications, and Pharmaceuticals. In these industries, organizations interface with their environment through multiple connections involv- ing technology, customers, the government, com- petition, and research institutes. A communal cul- ture is appropriate in this kind of environment because its dynamics aid in the synthesis of infor- mation from all these sources.

Changing the Culture There is clearly an implied argument here that

organizations should strive for a form of communi- ty suited to their environment. Reality is never so neat. In fact, managers continually face the chal- lenge of adjusting their corporate community to a changing environment. Our research suggests that over the last decade, a numher of large, well-estah- lished companies with strong traditions of loyalty and collegiality have been forced, mostly through competitive threat, to move from the networked to the mercenary form. To describe the process as tricky does not do it justice. It is perhaps one of the most complex and risk-laden changes a manager can face.

Consider the example of chairman and president Jan D. Timmer of the Dutch electronics company Philips. Once a monumentally successful compa- ny. Philips lost its competitive edge in the mid- 1980s and even came close to collapse. Timmer fand many observers) attributed much of the com-

pany's troubles to its corporate culture. Sociability was so extreme that highly politicized cliques ruled and healthy information flow stopped, particularly between R&D and marketing. (During this period, many of Philips's new products flopped; critics said the reason was that they provided technology that

consumers didn't particularly want.} Meanwhile, authority was routinely challenged, as were company goals and strategies. Management's lack of control allowed many employees to relax on the job. They had little con- cern with performance standards and no sense of competitive threat. In short. Philips demonstrated many of the negative consequences of a networked organization. However,

given the industry's primary success factors-inno- vation, market focus, and fast product rollout- Philips needed a mereenary or communal culture to stay even, not to mention get ahead.

Timmer attempted just such a transformation, first hy trying to lower managers' comfort level. He implemented measurable, ambitious performance targets and held individuals accountable to them. In the process, many long-serving executives left the company or were sidelined. Timmer also con- ducted frequent management conferences, at which the company's objectives, procedures, and values were clearly communicated. He demanded commitment to these goals, and those employees who did not conform were let go. In this way, soli- darity was increased, and Philips's performance be- gan to show it. '

As performance began to improve markedly, Timmer made efforts to restore some of the compa- ny's sociability, which had been lost during the turnaround - thus moving the company from mer- cenary toward communal. Meetings began to focus on the company's values and on gaining consensus. In short, Timmer was trying to reestablish loyalty to Philips and connections among its memhers. Timmer was scheduled to retire in October, and it remains to be seen in what direction his successor, Cor Boonstra, will take the company.

Boonstra's challenge is formidable. Once organi- zations try to reduce well-established ties of socia- bility, they can inadvertently unleash a process that is difficult to control. Unpicking emotional rela- tionships may make solidarity difficult, too. The result: organizations can devolve toward an inap- propriate fragmented form. From there, recovery can be difficult

This precise phenomenon, in fact, can he seen in the uncomfortable transition now oeeurring in the

146 HARVARD BUSINESS REVIEW November-Dec ember 1996

British Broadcasting Corporation. Its director gen- eral, John Birt, has tried to focus the organization- long known for its quality programming and public service-on efficiency and productivity. In the process, strict performance standards have been set, and colleagues have had to vie against one an- other for scarcer resources. As sociability has di- minished, talented individuals who once saw themselves as part of a communal culture have railed against what they consider target-oriented changes. Some have decided to stay and stubbornly defend their own interests; others have chosen to leave. With its communal culture heading toward a fragmented one, the BBC faces no alternative hut to reinvent itself.

How, then, does an organization change its cul- ture from one type to another without wreaking too much damage? How does a manager tweak levels of sociability or solidarity?

Clearly, the tools required to manipulate each di- mension are different. And using them involves un- derstanding why a culture has taken its current form in the first place-why, that is, a culture pos- sesses its present levels of sociability and solidarity. Neighborhoods, book clubs, and Fortune 100 com- panies can all be friendly for myriad reasons-the example set by a leader, the personalities of certain members, the physical setting of the organization or its history, or simply the amount of cash in the bank. Likewise, solidarity can arise for many rea- sons. Our purpose here has been not to analyze why organizations have different levels of sociability and solidarity but to examine what happens to their culture when they do, and what that means for managers who seek satisfied employees and strong performance. However, before attempting to change levels of sociability or soli- darity, a manager needs to think a hit like a doctor taking on a new patient. The patient's past and current condi- tions are not only relevant but also eritieally important to assessing the hest future treatment.

Our research shows that to in- crease sociability, managers can take the following steps:

Promote the sharing of ideas, in- terests, and emotions by recruiting compatible peo- ple-people who naturally seem likely to become friends. Before hiring a candidate, for instance, a manager might arrange for him or her to have lunch with several current employees in order to get a sense of the chemistry among them. This kind of activity need not be covert. Trying to find employ- ees who share interests and attitudes can even be

stated as an explicit goal. In itself, such an an- nouncement may signal that management seeks to increase sociability.

Increase social interaction among employees by arranging casual gatherings inside and outside tbe office, sucb as parties, excursions-even book clubs. These events might be awkward at first, as em- ployees question their purpose or simply feel odd associating outside a business setting. One way around this prohlem is to schedule such gatherings during work hours so that attendance is essentially mandatory. It is also critical to make these inter- actions enjoyable so that they create their own posi- tive, self-reinforcing dynamic. The hard news for managers is that sometimes this orchestrated so- cializing requires spending money, which can be difficult to rationalize to the finance department. However, if the business environment demands higher levels of sociability, managers can consider the expenditure a good investment in long-term profitability.

Reduce formality between employees. Managers can encourage informal dress codes, arrange offices differently, or designate spaces where employees can mingle on equal terms, such as the lunchroom or gym.

Limit hierarchical differences. There are several means to this end. For one, the organization chart can be redesigned to eliminate layers and ranks. Al- so, hierarchy has a hard time coexisting with shared facilities and open office layouts. Some companies have narrowed hierarchical differences hy ensuring that all employees, regardless of rank, receive the same package of benefits, park in the same lot (with no assigned spaces), and get bonuses based on the same formula.

How does an organization change its culture from one

type to another without wreaking too much damage?

Act like a friend yourself, and set tbe example for geniality and kindness by caring for tbose in trou- ble. At one communal company we know of, man- agement gave a three-month paid leave of absence to an employee whose young son was ill, and then allowed her to work on a flexible schedule until he was completely well. Sociability is increased when this caring extends beyond crisis situations-for

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instance, when management welcomes the families of its employees into the fold by inviting them to company picnics or outings. Indeed, many high- sociahility companies hold Christmas parties for the children of employees or give each family a spe- cial holiday present.

To huild solidarity, managers can take the follow- ing steps:

Develop awareness of competitors through brief- ings, newsletters, videos, memos, or E-mail. For ex- ample, as Timmer worked to move Philips toward the mercenary form, he exhorted his managers to take a new, hard look at the company's Japanese competitors. Breaking a longtime organizational taboo, he praised Japanese quality highly and com- pared Japanese products favorably with those his company made.

Create a sense of urgency. Managers can promote a sense of urgency in their people hy developing a visionary statement or slogan for the organization and communicating it relentlessly. In the late 1980s, for example, Gerard van Schaik, then chair- man of the board of Heineken, took his company global with the internal war cry Paint the World Green. The message was clear, focused, and action oriented. It worked. Today Heineken is the most in- ternational heer company in the world.

Stimulate tbe will to win. Managers can hire and promote individuals with drive or ambition, set high standards for performance, and celebrate suc- cess in high-profile ways. Mary Kay, the Texas- based cosmetics company, is famous for giving its top saleswomen pink Cadillacs. In most other orga- nizations, a large check or public recognition-or both-does the same job. Similarly, an incentive system that rewards corporate performance (rather than or in addition to unit and personal perfor- mance) underscores the importance of the compa- ny's overall achievement.

Encourage commitment to sbared corporate goals. To do so, managers can move people between functions, businesses, and countries to reduce strong subcultures and create a sense of one compa- ny. Disney, for example, identifies highfliers-can- didates that show promise-and then moves them through five divisions in five years. These individu- als then carry the organization's larger strategic

picture and purpose with them throughout their later positions at Disney, pollinating each division in the process.

Building the Right Community So far, we have stressed three primary points.

First, knowing how your organization measures up on the dimensions of sociability and solidarity is an important managerial competence. Second, know- ing whether the company's culture fits the husiness environment is critical to competitive advantage. And third, there is no golden quadrant that guaran- tees success. We must stress, however, that our model for analyzing culture and its fit with the business context is a dynamic one. Business envi- ronments do not stay the same. Similarly, organiza- tions have life cycles. Successful organizations need a sense not just of where they are but of where they are heading. This demands a subtle apprecia- tion of human relations and an awareness that ma- nipulating sociability on the one hand and solidar- ity on the other involves very different challenges.

Finally, we have claimed that patterns of organi- zational life are often conditioned hy factors out- side the organization, such as the competition, the industry structure, and the pace of technological change. But a company's culture is also governed by choices. Senior executives cannot avoid or deny this fact. Managers can increase the amount of so- ciability in their staffs by employing many of the devices listed ahove; similarly, they can manipulate levels of solidarity through the decisions they make. In short, these choices have the ability to af- fect what kinds of experiences memhers of an orga- nization enjoy-and don't-on a day-to-day basis. Executives are therefore left with the job of manag- ing the tension between creating a culture that pro- duces a winning organization and creating one that makes people happy and allows the authentic ex- pression of individual values. This challenge is pro- found and personal, and its potential for impact on performance is enormous. Culture can hold hack the pressures for corporate disintegration if man- agers understand what culture means-and what it means to change it. 9 Reprint 96605 To order reprints, see the last page of this issue.

148 HARVARD BUSINESS REVIEW November December 1996

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