Corporate Culture: The Ultimate Strategic Asset

Corporate Culture: The Ultimate Strategic Asset

Corporate Culture: The Ultimate Strategic Asset

Corporate Culture: The Ultimate Strategic Asset


Organizational culture is a quiet, but driving, influence on our perception of a company, whether as a consumer or as an employee. For instance, we know Southwest Airlines as laid back and friendly. We think of Google as innovative. To almost every well-known company we can assign a character. It is now well recognized that corporate culture has a significant impact on organizational health and performance. Yet, the concept of corporate culture and culture management is too often tantalizingly elusive.

In this book, Flamholtz and Randle define culture, identifying and explaining the five key dimensions that determine it: a customer orientation; a people orientation; a process orientation; strong standards of performance and accountability; innovation and openness to change. They explain why culture is a critical factor in organizational success and failure- a key determinant of financial performance. Then, they provide a theoretically sound, highly practical, and field-tested method for managing corporate culture- presenting a set of international and domestic cases that show how actual companies have leveraged culture as the ultimate source of sustainable competitive advantage. In addition to well-known companies such as Starbucks, Ritz-Carlton, American Express, IBM, and Toyota, the text presents lesser known culture stars, such as Smartmatic and Infogix.

While other titles on culture have focused too heavily on the organization as a psychological being, or on academic studies of culture as a business lever, Corporate Culture draws on empirics to present a go-to, must-read guide for leveraging corporate culture as a source of competitive advantage and as a means of impacting the bottom line.


It is increasingly recognized by researchers, practitioners, and managers alike that corporate culture is of critical importance to organizational success. Even though this is the case, there are many organizations where the corporate culture is not managed, and in some cases the concept is not even understood.

For some companies—such as Google, Southwest Airlines, Johnson & Johnson, and many others described in this book—a strong positive culture is a true asset, if not in the strict accounting sense then in the real economic sense. Flamholtz (one of the authors of this book) has suggested that culture actually is an asset or form of organizational human capital in the accounting sense as well. At the other extreme, are companies—such as GM, Reuters, AIG, and others to be described throughout this book— where corporate culture is a true economic liability, not in the technical accounting sense but in the colloquial sense of this term.

This dichotomy (asset or liability) and the critical importance of corporate culture is shown clearly in the case of two companies: Starbucks Coffee Company and General Motors. The former is a classic entrepreneurial success story with a strong positive culture that is an economic asset; the latter is a classic case of corporate decline attributable at least in part to a dysfunctional culture, lacking in entrepreneurship behavior for decades, even as its decline persisted.

Although its significance is recognized, the concept of corporate culture as well as how to manage it in a practical way in organizations has remained tantalizingly elusive. There is a substantial amount of literature on the concept of corporate culture, but much of it can be described as academic or theoretical. The focus tends to be on the concept of corporate culture as a social-psychological construct or as a dimension of organizational health. The literature does not fully recognize the importance of culture as a driver of financial performance and as a component of corporate strategy. Further, little emphasis is placed on providing a systematic practical method for managing culture as a key dimension of corporate performance. As a result, there is a serious gap in the exiting literature.

This book is intended to build on and complement, while at the same time fill the gap in, the existing literature. It is based on a different perspective from previous, competing books. Specifically, it views culture as a driver or determinant of corporate financial performance (the so-called bottom line) and as a source of sustainable competitive advantage. This book offers a theoretically sound but practical (user-friendly) method for managing corporate culture.In brief, the rationale for this book, its ultimate goals, and its content orientation are different from the existing literature. Accordingly, this book:

1. Explains why corporate culture is a critical factor in organizational success and failure, a key driver or determinant of the bottom line of financial performance of business enterprises, and a critical source (and possibly the ultimate one) of sustainable competitive advantage in organizations (that is, a stealth competitive weapon)
2. Presents methods for measuring corporate culture to facilitate its management
3. Describes the current state-of-the-art in corporate culture management as well as the limitations, challenges and opportunities associated with developing this field
4. Offers a framework for understanding corporate culture

Identifies the five elements of corporate culture determined by empirical research to be the key drivers of organizational performance

6. Introduces a six-step framework (model) for management of corporate culture as an ongoing process
7. Provides a set of tools for managing corporate culture in actual organizations

Throughout this book, we present examples of companies that are dealing with the issues involved with managing corporate culture and identify the lessons that can be learned from their experiences—that is, how they have used or are using the specific tools to identify, communicate, and reinforce their culture

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