Monday, June 24, 2013

The Three Types of Organizational Culture

I believe that the main factor that impacts product and process quality is organizational culture. I want to review the three types of organizational culture and ask you: "which culture does your company have?" and "why do you think so?".

The organization itself has no principles or values, those belong to the management of the organization and the people who work there. The top management of the organization sets the mindset and everything that is created by the organization (e.g. strategy, vision, goals, objectives, projects, products, culture) is a function of that mindset. The difference between mindset and culture is an important one: the mindset comes directly from the top management, explicitly and implicitly, and the culture is a function of the people implementing that mindset on a daily basis. The culture grows from the seed of the mindset. Unless there is a change in top management, and an explicit change in mindset, there is little chance that the culture will change on its own. Even with a change of mindset it can take years for the culture to flower into something else. Now, let's review the three types of organizational culture.

First is the "good" culture. I won't spend much time on this one, you can find and read books and articles about various organizations that have a "good" culture. Typical ones are Google, Apple, Motorola, GE, etc. One hallmark of such an organization is that people identify strongly with it, even after they stop working there. In my working experience both Toyota and BMW have such "good" cultures.

Second, the "bad" culture. These are organizations that highlight unethical and sometimes illegal activities. They focus, laser-like, on specific metrics such as share price and burn through anything else. Or they are led by management with outsized egos who exhibit an "emperor complex" believing that they are the best in the world. The managers in these companies either explicitly or implicitly direct their subordinates to fabricate data, approve falsified test reports, and "pencil whip" checksheets. The end justifies any means, and the end is what they want it to be. One quotation that I've heard from this kind of culture is "you shouldn't lose if you are the one keeping score". Meaning that you should alter data to achieve a winning result. Unfortunately, over the years, I've seen many examples of this mindset in many different companies. Sometimes it was with a supplier who moved their production location without informing my company (or outright lied on their PPAP documents). Other times it was companies who submitted inspection reports with false data, which was detected when the parts were double-checked before use. These kinds of decisions, and the eventual results, stem from a "bad" culture. Managers who order their subordinates to break the rules, and the law, deserve the results that they receive. Unfortunately, these results can involve a lot of collateral damage as those who were not involved or aware of the bad decisions also face bad results. If the managers who promote and drive this "bad" culture actually cared about others then those situations could be avoided. If you work in a company where you cannot tell the truth to upper management, where audit results are routinely ignored, or where you are directed to falsify reports or lie to people (inside or outside the company) then you are probably in this type of culture.

The third type of culture is "no culture". Every organization has a culture. The "no culture" culture could also be named the "mercenary" culture. In this culture it's every person for him/herself. Whereas managers in "bad" culture organizations commit "sins of commission" managers in "no culture" organizations commit "sins of omission". This is based on a management mindset that is conservative in the extreme. Decisions and clear directions mean commitment and the risk of failure, the safest decision and direction is none at all. No decision means no risk of failure. These types of cultures can appear as either of the other two types, particularly in specific sites or divisions with managers who do not share the "no culture" culture, so they can be hard to spot. In fact, you may work in a site or division that has a "bad" or "good" culture and not realize that you work in a "no culture" organization. There are a few signs of a "no culture" organization that you may notice if you are in one. One sign is that the organization culture varies greatly from site-to-site, region-to-region, or division-to-division. You may work in a "bad" culture site and visit another site and be surprised that things are completely different there. They shouldn't be. The site, region, or division manager should not be the one to set the culture for a particular organization. It should come from the top and be consistent from area to area. The second sign is that when a top manager leaves nobody seems to know and/or care. An unusual amount of top management turnover is another sign of this type of culture so the two signs could be seen together. Normally, when a top manager leaves a company there should be some ripples of disconcertion, a little foggy period while a new executive takes the reins. Even in "good" culture organizations there will be some ripples, they will just be very small. A "no culture" organization will have no ripples at all. Same goes for company identity: there will be almost none. Nobody identifies with the company, unless they are in some kind of internal marketing group that is paid to do so (i.e. lean/six sigma guys). The "no culture" organization will also suffer bad results eventually, maybe not as bad as the "bad" culture organization, but making no decision is actually worse than making a bad decision (according to Theodore Roosevelt). This type of organization can also mask extremely incompetent managers since someone who does not make a decision due to avoiding risk looks the same as someone who does not make a decision due to incompetence. The worst part of working in this type of organization is the lack of consistency day-to-day. Some parts of the organization might be very efficient and well-run while others are utter disasters. It will be based almost solely on the particular manager of each area. Since the good and bad parts must work together at some point this kind of culture will drive out the people who want to do good and protect (unintentionally) those who want to do bad or do nothing at all.

Now that I've outlined my thoughts on the three types of organizational culture let me know which kind of culture your company has and how you can tell.