What Holdsthe Modern

Company Together?

The short answer is culture.But which type

is right for your organization?

T±h<

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 ofpressures 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 costlyand ineffective.

Culture, then, is what remains to holster a company's identity as oneorganization. Without culture, a company lacks values, direction, andpurpose. Does that matter? For the answer, just observe any company witha strong culture-and then compare it to one without.

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

Rob Goffee is a professor of organizational behavior at London Business SchoolGareth Jones, formerly senior vice president for human resources at PolygramInternational in London, is a professor of organizational development atHenley Management College in Oxfordshire, England. Goffee and fanes arethe founding partners of Creative Management Associates, an organizationalconsulting firm in London.

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CORPORATE CULTURE

Two Dimensions, Four Cultures

high

Soc

iabi

lity

low

11Networked Communal

Fragmented Mercenary

low high

Solidarity

firmly believe-how can a manager change an orga-nization's culture? Those three questions are thesubject 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, andclubs, 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 mutualobligations 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 bebetter understood when viewed through the samelens that has illuminated the study of human orga-nizations fornearly 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 ameasure of sincere friendliness among members ofa community. Solidarity is a measure of a eommu-nity's ability to pursue shared objectives quicklyand effectively, regardless of personal ties. Thesetwo categories may at first seem not to capture thewhole range of human behaviors, but they havestood the test of close scrutiny, in both academiaand the field.

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

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

Sociability and Solidarityin Close Focus

Soeiahility, like the laughter that is its hallmark,often comes naturally. It is the measure of emotion-al, noninstrumcntal relations (those in which peo-ple do not see others as a means of satisfying theirown 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 forits own sake. It is frequently sustained through con-tinuing face-to-face relations characterized by highlevels of unarticulated reciprocity. Under these cir-cumstances, there are no prearranged "deals." Wehelp one another, we talk, we share, we laugh andcry 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 environmentis enjoyable, whicb helps morale and esprit decorps. Sociability also is often a boon to creativitybecause it fosters teamwork, sharing of informa-tion, and a spirit of openness to new ideas, andallows the freedom to express and accept out-of-the-box thinking. Soeiability also creates an envi-ronment in which individuals are more likely to gobeyond the formal requirements of their jobs. Theywork harder than is technically necessary to helptheir colleagues-that is, their community-lookgood and succeed.

But there also are drawbacks to high levels of so-ciability. The prevalence of friendships may allowpoor performance to he tolerated. No one wants torebuke or fire a friend. It's more comfortable to ac-cept-and excuse-subpar performance in light ofan employee's personal problems. In addition, high-sociahility environments are often characterized byan exaggerated concern for consensus. That is tosay, friends are often reluctant to disagree with orcriticize one another. In business settings, such atendency can easily lead to diminished debate overgoals, strategies, or simply how work gets done.The result: the best compromise gets applied toproblems, not the best solution.

In addition, high-sociability communities oftendevelop cliques and informal, behind-the-scenesnetworks that can circumvent or, worse, under-

134 PHOTO: JOANNE DUGAN/GRAPHISTOCK

What Is Your Organization's Culture?

To assess yuur organization's level oi sociability,answer the following questions:

1.1'coplc here try to make friends and to keep theirrelationships strong

1. People here get along very well

3. 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 because they like one anotber

7. People here often confide in one another aboutpersonal matters

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

1. Our group (organization, division, unit, team) understandsand shares the same business objectives

2. Work gets done effectively and productively

A. Our group takes strong action to address poor performance

4. Our collective will to win is higb

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

6. We share the same strategic goals

7. We know wbo tbe competition is

luw medium high

mine due process in an organization. This is not tosay that high-sociability companies lack formal or-ganizational structures. Many of them are very hi-erarchical. But friendships and unofficial networksof friendships allow people to pull an end runaround the hierarchy. For example, if a manager insales hates the marketing department's new strate-gic plan, instead of explaining his or her oppositionat a staff meeting, the manager might talk it overdirectly (over drinks, after work) to an old friend,the company's senior vice president. Suddenly theplan might he canceled without the marketing de-partment's ever knowing why. In a hest-ease sce-nario, this kind of circumvention of systems lends acompany a certain flexihility: maybe the marketingplan was lousy, and canceling it through official

routes might have taken months. But in the worstcase, it can he destructive to loyalty, commitment,and morale. In other words, networks ean functionwell 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 hy it, orsimply unable to affect processes or products in anyreal way.

Solidarity, hy eontrast, is hased not so much inthe heart as in the mind, although it, too, can comenaturally to groups in business settings. Its rela-tionships are hased on common tasks, mutual in-terests, or shared goals that will benefit all involvedparties. Labor unions are a classic example of high-solidarity communities. Likewise, the solidarity ofprofessionals - doctors and lawyers, for example-

HARVARD BUSINESS REVIEW November-December 1996 135

CORPORATE CULTURE

may be swiftly and ruthlessly mobilized if there isan outside competitive threat, such as proposedgovernment regulations that could limit profitabil-ity. But, just as often, solidarity occurs between un-like individuals and groups and is not sustained bycontinuous social relations.

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

One of the great errors of therecent literature on corporateculture has been to assume thatorganizations are homogeneous.

tions, they assigned two managers from each toa strategy SWAT team. Despite very little socializ-ing and virtually no extraneous banter, the teamworked 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-itsanalysis 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, tben, it can be expressed bothintermittently and contingently. It does not requiredaily display, nor does it necessarily rest upon a net-work of close fricndsbips.

The organizational benefits of solidarity in abusiness community are many. Solidarity gener-ates a high degree of strategic focus, swift responseto 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, thiskind of focused intent and action can be devastat-ingly effective. The ruthlessness, by the way, can it-self reinforce solidarity; if everyone has to performto strict standards, an equality-of-suffering effectmay occur, building a sense of community inshared experience. Finally, when all employees areheld to the same high standards, they often developa strong sense of trust in the organization. Thiscompany treats everyone fairly and equally, thethinking goes; it is a meritocracy that cuts no spe-cial deals for favored or connected employees. Intime, this trust can translate into commitment andloyalty to the organization's goals and purpose.

But, like sociability, solidarity has its costs aswell. As we said above, strategic focus is good aslong as it zeroes in on tbe rigbt strategy. But if thestrategy is not tbe right one, it is the equivalent ofcorporate suicide. Organizations can charge rightover the cliff with great efficiency if they do thewrong things well. In addition, cooperation occursin high-solidarity organizations only when the ad-vantage to the individual is clear. Before takingon assignments or deciding how hard to work onprojects, 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 arcvery friendly, roles and responsibili-ties tend to blur a bit. Someone insales might become deeply involvedin a new R&D project-a collabora-tion made possible hy social ties.

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

Although our discussion separates sociabilityand solidarity, many observers of organizational lifeconfuse the two, and it is easy to see why. The eon-cepts can, and often do, overlap. Social interactionat work may reflect the sociability of friends, tbesolidarity of colleagues, both, or-sometimes-nei-ther. Equally, when colleagues socialize outsidework, their interaction may represent an extensionof workplace solidarity or an expression of intimateor close friendship. Yet to identify a community'sculture correctly and to assess its appropriatenessfor the business environment, it is more tban aca-demic to assess sociability and solidarity as distinctmeasures. Asking the right questions can help inthis process. (See the questionnaire "What Is YourOrganization's Culture?")

It is critical, before completing tbe form, to selectthe parameters of the group you will be evaluating;for instance, you might assess your entire companywith all its divisions and subgroups or a unit assmall as a team. Eitber is fine, as long as you do notchange borses in midstream. Our unit of analysishere is primarily tbe corporation, but we recognizethat executives may use the framework to look in-side tbeir own organizations, comparing units, divi-sions, or other groups with one another.

136 HARVARD BUSINESS REVIEW November December 1996

Such an exercise can indeed be instructive. Oneof the great errors of the recent literature on corpo-rate culture has heen to assume that organizationsare homogeneous. Just as one organization differsfrom another, so do units within them. For exam-ple, the R&D division of a pharmaceutical compa-ny might differ markedly from the manufacturingdivision in hoth solidarity and sociability. In addi-tion, there are often hierarchical differences withina single company: senior managers may display anentirely 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 acompany may very well explain conflict and sug-gest that intervention is necessary. Similarly, onetype of culture throughout a corporation may be asignal that some forms need to be adjusted to ac-count for differing business environments.

The Networked Organization:High Sociability, Low Solidarity

It is perhaps the rituals of what we call net-worked organizations that are most noticeable tooutsiders. People frequently stop to talk in the hall-ways; they wander into one another's offices withno purpose hut to say hello; lunch is an event inwhich groups often go out and dine together; and af-ter-hours socializing is not the exception but therule. Many of these organizations celehrate birth-days, field softball teams, and hold parties to honoran employee's long service or retirement. Theremay he nicknames, in-house jokes,or a common language drawn fromshared experiences. (At one net-worked company, for instance, em-ployees tease one another with thephrase "Don't pull a Riehard," in ref-erence to an employee who once fellasleep during a meeting. Ricbardhimself uses the jest as well.) Em-ployees in networked organizationssometimes act like family, attendingone another's weddings, anniversary parties, andchildren's confirmations and har mitzvahs. Theymay even live in the same towns.

Inside the office, networked cultures are charac-terized not hy a lack of hierarchy hut by a profusionof ways to get around it. Friends or cliques of friendsmake sure that decisions about issues are made be-fore meetings are held to discuss them. Peoplemove 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 insidethe network. As we have said, this informality canlend flexibility to an organization and be a healthyway of eutting through the hureaucracy. But it alsomeans that the people in these cultures have de-veloped two of the networked organization's keycompetencies: the ability to collect and selectivelydisseminate soft information, and the ahility toacquire sponsors or allies in the company who willspeak on their behalf both formally and informally.

What are the other hallmarks of networked orga-nizations? Their low levels of solidarity mean thatmanagers often have trouble getting funetions oroperating companies to cooperate. At one large Eu-ropean manufacturer, personal relations among se-nior executives of businesses in Franee, Italy, theUnited Kingdom, and Germany were extremelyfriendly. Several executives had known one anotherfor years; some even took vacations together. Butwhen the time came for corporate headquarters toparcel out resources, those same executives foughtacrimoniously. At one point, they individually sub-verted attempts by headquarters to introduce aEurope-wide marketing strategy designed to com-bat the entry of U.S. competition.

Finally, a networked organization is usually sopolitical that individuals and cliques spend muchof their time pursuing personal agendas. It beeomeshard for colleagues to agree on priorities and formanagers to enforce them. It is not uncommon tohear frequent calls for strong leadership to over-come the divisions of suhcultures, cliques, or war-ring factions in networked organizations.

Networked organizations arecharacterized not by a lack of

hierarchy but by a profusion ofways to get around it.

In addition, because there is Uttle commitmentto shared husiness objectives, employees in net-worked organizations often contest performancemeasures, procedures, rules, and systems. For in-stance, at one international consumer-productscompany witb which we have worked, the strategicplanning process, the structural relationship be-tween corporate headquarters and operating com-panies, and the accounting and budgetary controlsystems were heavily and continually criticized hy

HARVARD BUSINESS REVIEW November-December 1996 137

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

Anglo-Dutch consumer-goods group with worldwidesales of roughly $50 billion. Unilever executives, it issaid, recognize one another at airports, even whenthey've never met before. There's something about theway they look and act - something so subtle it's im-possible to pin down in words yet unmistakable tothose who have worked for the company for more thana few years.

Obviously, there's a bit of exaggeration in this com-pany legend, hut it underscores Unilever's tradition asa networked company - that is, one with a culturecharacterized 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 oflike-minded individuals is the reason why its employ-ees work so well together despite their national diver-sity, why they demonstrate such strong loyalty totheir colleagues, and why they embrace the company'svalues of cooperation and consensus.

Unilever takes other steps to reinforce and increasethe sociability in its ranks. At Four Acres, the compa-ny's international-management-training center out-side London, hundreds of executives a year partake inactivities rich in social rituals: multicourse dinners,group photographs, sports on the lawn, and, perhapsabove all, a bar that literally never closes. As formerchairman Floris Maljers remarks, "This shared experi-ence creates an informal network of equals who knowone another well and usually continue to meet andexchange experiences."

In addition to the events at Four Acres, Unilever'ssociability is bolstered by annual conferences attend-ed by the company's top 500 managers. The compa-ny's leaders use these meetings to communicate andreview strategy, but there is much more to them thanwork. (The intense fraternizing that takes place atthese conferences has earned 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. Thiseffort is an attempt to start Unilever relationships ear-ly, as well as to increase know-how.

Yet these carefully nurtured patterns of sociabilityhave not always been matched hy high levels of com-panywide solidarity. Unilever has found it hard overthe years to achieve cross-company coordination andagreement on objectives. It's not that executives fighlover strategy as much as "talk it to death" in thesearch for consensus, says one senior vice president.

Does this networked culture fit Unilever's businessenvironment? In good part, yes. Unilever's managershail from dozens of countries. This diversity couldhave been an isolating factor, hindering the flow of in-formation and ideas. But because of the culture's bighlevels of sociability, there is widespread fellowshipand goodwill instead. Second, a key success factor inUnilever's business is proximity to local markets. Theorganization's low solidarity has kept units focused ontheir home bases with good results, And finally, untilrecently, Unilever has been a highly decentralized or-ganization. Simply put, there has been little need forstrategic agreement among units.

But Unilever's environment might very well bechanging witb the emergence of a single Europeanmarket, which would make coordination among busi-nesses and functions imperative. Indeed, many recentorganizational changes - the creation of Lever Europein the detergents business, for example - can be inter-preted as an attempt by Unilever to create higher lev-els of cor^jorate solidarity, largely through a process ofcentralization.

In addition, Unilever faces some competitors, suchas Procter & Gamble and L'Oreal, known for their highlevels of solidarity around corporate goals. This assethas lent Unilever's competitors the ability to acceler-ate product development processes and exploit marketopportunities quickly. Unilever must match thosecompetencies or risk losing clout.

Finally, Unilever's relative lack of solidarity meansthat management ean lose its sense of urgency - a

executives in country businesses. Indeed, the criti-cism even took on an element of sport, increasingsociability among employees but doing nothing forthe already diminished levels of solidarity.

Generally speaking, few organizations start theirlife cycle in the networked quadrant. By definition,sociability is built up over time. It follows, then,that many organizations migrate there from otherquadrants. And despite the political nature of thiskind 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 lowproductivity, and how to reap its benefits, such asincreased creativity and commitment. One methodof maximizing the benefits of a networked cultureis to move individuals regularly hetween functions,businesses, and countries in order to limit exces-sive local identification and help them develop awider strategic view of the organization. Later on.

138 HARVARD BUSINESS REVIEW November-December 1996

competitive advantage in any business environment.This challenge is well known to the company's lead-ers. As Maljers himself notes, "Everybody may be sobusy with friends elsewhere - with the interestingtraininj; proj^ram, the well-organized course, the nextmajor conference - that complacency sets in. Unfortu-nately, we have seen this happen in some of our units,especially the more successful ones. It may be neces-sary to shake up the system from time to time."

This comment underlines one of the biggest risks ofthe networked organization. Employees may be sohusy being friends that they lose sight of the reasonthey are at work in the first place.

Interestingly, Unilever's recently announced orga-nizational restructuring is designed in part to addresssome of the negative consequences of the networkedform. The company will he hrokcn into 14 husinessgroups, and, according to the plan, each will have aclear husiness rationale, stretch 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 tothe needs of the future. This must provide great clarityof roles, responsibilities, and decision making.... Un-der the new structure, business groups will make an-nual contracts on which they must deliver come 'hellor high water.'"

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

In the terms of our model, this reorganization isclearly an effort to move toward the mercenary quad-rant: less politicking (as enjoyable as it might be) anda more ruthless focus on results. But ean Unilever letgo of its ingrained sociability and take on the behaviorsof a high-solidarity enterprise? The company's futureperformance will tell.

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

High levels of sociability usually go hand in handwith low solidarity because close friendships caninhibit the open expression of differences, the criti-cism of ideas, and forceful dissent. Constructiveconflict, however, is often a precondition for devel-oping and maintaining a shared sense of purpose-that is, solidarity. It would not he surprising, then.

to find that well-meaning management interven-tions to increase strategic foeus often consolidateworkplace friendships but do little for organization-al solidarity. That could account for at least some ofthe frustrations of those who complain, for exam-ple, that the outdoor team-huilding weekend wasgreat fun but not remotely connected to the dailywork of ensuring that the different parts of the busi-ness arc integrated.

As we have noted, eaeh type of corporate culturehas its most appropriate time and place. We haveobserved that the networked organization func-tions well under the following business conditions:DWhen corporate strategics have a long timeframe. Soeiahility maintains allegiance to the orga-nization when short-term calculations of interestdo not. Consider the case of a company expandinginto Vietnam. It might he years before such an ef-fort is profitable, and in the meantime the processof getting operations running may be difficult andfrustrating. In a networked culture, employees areoften willing to put up with risk and discomfort.They are loyal to their eolieagucs in an open-endedway. The enjoyment of friendship on a daily basis isits own reward.DWhen knowledge of the peculiarities of localmarkets is a critical success factor. The reason isthat networked organizations are low on solidarity:memhers of one unit don't willingly share ideas orinformation with members of another. This wouldcertainly he a strategic disadvantage if successcame from employees having a broad, big-pictureperspective. But when success is driven by deep andintense familiarity with a unit's home turf, low sol-idarity is no hindrance.n When corporate success is an aggregate of localsuccess. Again, this is a function of low solidarity. Ifheadquarters can do well with low levels of inter-divisional communication, then the networkedculture is appropriate.

The Mercenary Organization:Low Sociability, High Solidarity

At the other end of the spectrum from the net-worked organization, the mercenary community islow on hallway hobnobbing and high on data-ladenmemos. Indeed, almost all communication in amercenary organization is focused on business mat-ters. Tbe reason: individual interests coincide withcorporate objectives, and those objectives are oftenlinked to a erystal clear perception of the "enemy"and the steps required to beat it. As a result, merce-nary organizations are characterized by the ahilityto respond quickly and cohesively to a perceived

HARVARD BUS[NESS REVIEW November-December 1996 139

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

we'll call Mastiff Wear, an international manufacturerof popular children's clothing, invited 15 of the com-pany's top executives to dinner at a fancy new restau-rant in London. The men and women had just satdown when the host announced a challenge to be com-pleted over dinner: devise a new advertising slogan.The best solution, the host said, would earn a bottle ofDom Perignon. For the next three hours, tbe gueststook to tbeir task single-mindedly, even tearing up tbeelegant menus to use as working paper. Tbe restau-rant's delicacies passed before tbem tbrougbout tbenigbt, and the executives ate, but few seemed to takenotice of wbere tbey were. Wbat tbey were doing wasall tbat mattered.

Not long after, one of tbe authors of tbis article metwitb a similar group of executives at Mastiff Wear. "IfI join Mastiff next Monday," be asked them, "wbatsbould I know are tbe rules of success at tbis organiza-tion?" Rule one, he was told: Arrive on Sunday. Ruletwo: Call your family and tell tbem you won't bebome until next weekend.

Botb of tbese stories illustrate a typical mercenaryculture in action: members work long hours and oftenvalue work over family life. (The executives in tberestaurant worked even wben tbey could bave beensocializing, and no one complained - or even noticed.)In addition, the stories illustrate tbis form's bigb de-gree of internal competition and strong focus on tbeacbievement of tasks.

Mastiff also embodies several otber characteristicsof bigb-solidarity cultures. Tbere are strict standardsfor performance, and underacbievers are dealt witbrutblessly, As one executive remarks, "Once in awbile, one of us just disappears." Tbose who surviveare well rewarded - so well tbat many are able to retire

early. Indeed, a common strategy for a Mastiff execu-tive is to work bard, even at tbe cost of his or ber per-sonal life, accumulate wealth, and then leave. Rela-tionships witb tbe organization exist primarily as ameans for employees to promote tbeir own interests -career, personal, or otherwise.

In some ways, tbis mercenary culture has been anapt fit for Mastiff in recent years. Tbe company hashad considerable success in the clearly defined distri-bution cbannels in wbicb it operates. Internally, afierce focus on efficiency bas ensured tbat resourcesare used to tbe fullest. Little is wasted, and tbe com-pany does only what it can do best, creating centers ofcorporate excellence to spread its knowledge. Exter-nally, a strategy of targeting clearly defined sectors -primarily department stores and catalogs - and aclearly identified "enemy" bas consistently en-abled Mastiff to establisb dominant market positions.Most recently, tbis ability bas been illustrated by thecompany's dramatic entry into tbe European mar-ket - a move that bas inflicted considerable damageon a major competitive player there.

But mercenary cultures bave tbeir shortcomings.Wben you successfully occupy tbe number one posi-tion in many markets, as Mastiff bas for many years,you may run out of enemies. As a result, you may losetbe competitive edge that originally brougbt yourcompany a sense of urgency and tbe collective will towin. In addition, Mastiff, like many mercenary cul-tures, may have suffered from excessive strategicfocus. In this case, a characteristic concern witb oper-ational efficiencies proved barely adequate when com-petitors were gaining market share from new-productdevelopment. Focusing on one or two issues is astrength, of course. The danger is that you can losesigbt of what's happening on tbe borizon.

opportunity or threat in the marketplace. Prioritiesare decided swiftly-generally by senior manage-ment-and enforced throughout tbe organizationwith little dehate.

Mercenary organizations are also characterizedby a clear separation of work and social life. (Inter-estingly, these cultures often consist of peoplewhose work takes priority over their private life.)Members of this kind of business communityrarely fraternize outside the office, and if they do, itis at functions organized around business, such as aparty to celebrate tbe defeat of a competitor or thesuccessful implementation of a strategic plan.

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

poor performance. Those who arc not contrihutingfully are fired or given explicit instructions on bowto improve, witb a firm deadline. Tbere 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 tbe ranks. If someone has not performed,you rarely hear, for instance, "It was a shame wehadtolet John go-he was so nice." John, the think-ing would he, wasn't doing his part toward clearlystated, shared strategic objectives.

Finally, tbe low level of social ties means thatmercenary organizations are rarely bastions of loy-alty. Employees may very well respect and liketheir 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 tiedto affectionate relationships between individuals.People stay with high-solidarity companies for aslong as their personal needs are met, and then theymove on.

Witbout a doubt, tbe advantages of a mercenaryorganization can sound seductive in tbe perfor-mance-driven 1990s. What manager would notwant his or her company to have a heightened senseof competition and a strong will to win; In addi-tion, because of their focused activity, many merce-nary organizations are very productive. Moreover,unhindered by friendships, employees are not re-luctant to compete, further enhancing performanceas standards get pushed ever higber.

But mercenary communities have disadvantagesas well. Employees who are busy chasing specifictargets are often disinclined to cooperate, share in-formation, or exchange new or creative ideas. To doso would be a distraction. Cooperation betweenunits witb different goals is even less likely. Con-sider tbe example of Warner Brotbers, tbe enter-tainment conglomerate. The music and film divi-sions, each with its own strategic targets, havetrouble achieving synergy-for example, withsound tracks. (Musicians recording on a Warnerrecord label, for instance, might he called on toscore a Warner movie.) Compare this situation withthat at Disney, a major competitor, which relent-lessly and profitably exploits synergies between itsmovie characters-from Snow White to Simba -and its merchandising divisions.

Tbe mercenary organization works effectivelyunder the following business conditions:LJ Wben cbange is fast and rampant. This type ofsituation calls for a rapid, focused re-sponse, which a mercenary organiza-tion is able to mount.DWben economies of scale areacbicved, or competitive advantageis gained, tbrougb creating corporatecenters of excellence tbat can im-pose processes and procedures on op-erating companies or divisions. Forexample, tbe Zurich-based diversi-fied corporation ABB Asea BrownBoveri builds worldwide centers of excellence forproduct groups. Its Finnish subsidiary Strombcrgbas become the world leader in electric drives sinceits acquisition in 1986, and it now sets the standardfor the ABB empire.( 1 When corporate goals are clear and measurable,and there is therefore little need for input from theranks or for consensus building.

n Wben the nature of the competition is clear. Mer-cenary organizations thrive when the enemy-andthe best way to defeat it-are obvious. Tbe merce-nary organization is most appropriate when one en-emy can be distinguished from many. Komatsu, forexample, made Mdni-C-translated as "EncircleCaterpillar"-its war cry back in 1965 and focusedall its strategic efforts during tbe 1970s and early1980s on doing just tbat, aided effectively by ahigh-solidarity culture. By contrast, IBM zigzaggedstrategically for years, unable to identify its compe-tition until tbe game was nearly up. Its culturaltype during that time is not known to us, but wecan guess witb 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 neigh-borboods, and disharmonious families, such com-munities arc a fact of life. What are their primarycharacteristics in a business setting?

Perhaps most notably, employees of fragmentedorganizations display a low consciousness of orga-nizational membersbip. They often believe thatthey work for themselves or they identify with oc-cupational groups-usually professional. Asked at aparty what he does for a living, for instance, a doc-tor at a major teaching hospital that happens tohave this kind of culture might reply, "I'm a sur-geon," leaving out tbe name of the institutionwhere he is employed. Likewise, organizationsthat have this kind of culture rarely field softballteams-who would want to wear the 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 noneof the extracurricular rites and rituals that charac-terize high-sociability cultures, considering them awaste of time.

This lack of affective interrelatedness extends tobebavior on the job. People work witb tbeir doorsshut or, in many cases, at home, going to the officeonly to collect mail or make long-distance calls.

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

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

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

sparsely attended. Indeed, any social behavior thatis 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 businessworld. But situations do exist that invite, or evenbenefit from, such a culture, and further, this kindof environment is attractive to individuals who pre-fer to work alone or to keep their work and personallives 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 tbat rely heavily on the outsourcing of piece-work. Second, the culture can succeed in profes-sional organizations, such as consulting and lawfirms, in which highly trained individuals haveidiosyncratie work styles. Third, fragmented cul-tures often accompany organizations that havebecome virtual: employees work either at home oron the road, reporting in to a central base mainly hy

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

both sociability and solidarity are lacking, there areindeed environments that invite such cultures and dono harm whatsoever to the organization, its people, orits products in the process. Still, there is the stigma ofan "unfriendly" organization to contend with, whichis the reason this case study uses a disguised name forits subject.

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

Take sociability. At UBS, professors work mainlyon their own, researching their specialty, preparingclasses, 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 contactdoes occur, it is witb clients, students, or researchsponsors rather than with colleagues. In fact, facultymembers may actively avoid sociability on campusin order to maximize discretionary time for privateconsulting work and research for publication.

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

lieve, sets the standards and controls outputs, such asjournal articles. In addition, it shapes employment op-portunities and determines career progress. There isno point, the professors' thinking goes, concerningthemselves 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 diminishedsociability or solidarity compromises the competitiveposition of UBS, a highly renowned institution. Thereason is that many professors do indeed do their bestwork alone or with scholars from other institutionswho share similar interests. Moreover, M.B.A. andotber academic programs don't necessarily need inputfrom groups of staff members; most professors knowwhat to teach and are disinclined in any case to takethe advice of others. Indeed, the only reason for meet-ings in this environment is to decide on academic ap-pointments and promotions. This activity involvesconsideration of scholarship, which requires neithersociability nor solidarity. Finally, UBS need not worrythat its employees are losing focus or urgency abouttheir work - one of the biggest risks of low-solidarityorganizations. On the contrary. UBS attracts a self-selecting group of highly autonomous, sometimesegocentric 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 corporatecommunity. If the culture fits, wear it.

142 HARVARD BUSINESS REVIEW November-December

electronic means. Of course, fragmented organiza-tions sometimes reflect dysfunctional communi-ties in which ties of sociability or solidarity havebeen torn asunder by organizational politics, down-sizing, or other forms of disruption. In these cases,the old ties of friendship and loyaltyare replaced by an overriding con-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 the following busi-ness conditions:n When there is little interdepen-dence in the work itself. This might occur, for ex-ample, in a company in which pieces of furniture orclothing are subcontracted to individuals who workout of their homes and then assembled at anothersite. A second example might be a firm composed oftax lawyers, each working for different clients.D When significant innovation is produced primar-ily by individuals rather than by teams. (This, itshould be noted, is becoming increasingly rare inbusiness, as cross-disciplinary teams demonstratethe power of imlike minds working together.)n When standards are achieved by input controls,not process controls. In these organizations, timehas proven that management's focus should be onrecruiting the right people; once they have heenhired and trained, their work requires little supervi-sion. They are their own best judges, their ownharshest taskmasters.G When there are few learning opportunities be-tween individuals or when professional pride pre-vents the transfer of knowledge. In an internationaloil-trading company we have worked with, for ex-ample, employees who traded Nigerian oil nevershared market information with employees tradingSaudi crude. For one thing, they weren't given anyincentive to take the time to do so; for another,each group of traders took pride in knowing morethan the other. To give away information was togive away the prestige of being at the top of thefield-a market insider.

The Communal Organization:High Sociability, High Solidarity

A communal culture can evolve at any stage of acompany's life cycle, hut when we are asked to il-lustrate this form, we often cite the characteristicsof a typical small, fast-growing, entrepreneurialstart-up. The founders and early employees of suchcompanies are close friends, working endless hoursin tight quarters. This kinship usually flows into

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

People in fragmentedorganizations often work with

their doors shut or at home.

has one or at most two products and just as fewgoals (the first usually being survival). Becausefounders and early employees often have equity inthe start-up, success has clear, collective benefits.In communal organizations, everything feels in sync.

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

Regardless of their stage of development, com-munal organizations share certain traits. First, theiremployees possess a high, sometimes exaggerated,consciousness of organizational identity and mem-bership. Individuals may even link their sense ofself with the corporate identity. Some employees atNike, it is said, have the company's trademark sym-bol tattooed above their ankles. Similarly, in theearly days of Apple Computer, employees readilyidentified themselves as "Apple people."

Organizational life in communal companies ispunctuated by social events that take on a strongritual 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 heldat the Hurlingham Club and the Natural HistoryMuseum in London. The company also offers itsemployees a master class on creativity that featuresa speech by a celebrity. Dave Stewart, former gui-tarist of the rock band tbe Eurythmics, even playeda set during his presentation. And finally, Thomp-son holds an annual gala awards ceremony for thecompany's best creative teams. Winners go to lunchin Paris. Other communal companies celebrate en-trance into their organizations and promotionswith similar fanfare.

The bigh solidarity of communal cultures is of-ten demonstrated through an equitable sharing ofrisks and rewards among employees. Communalorganizations, after all, place an extremely high

HARVARD BUSINESS REVIEW November-December 1996 143

British-Borneo Petroleum Syndicate: A Communol OrganiSynergy is a term that gets handled ahout quite a bit,

as in "Wouldn't it be terrific if our divisions, operatingcompanies, or functional areas had more synergy?Then they could learn from one another and share newideas - even exchange market or technological infor-mation." This hope, while admirahle in theory, oftenremains just that in practice-a hope.

Not so at British-Borneo Petroleum Syndicate,where a communal culture-combining high sociabil-ity and high solidarity-dovetails effectively with thecompany's strategic need for cooperation and inter-change among functions and locations. Indeed, thesynergy among groups at British-Borneo is perhaps itsgreatest competitive advantage. The London-basedcompany, which has grown more than tenfold in the1990s to reach a market capitalization of $550 millionin 1996, explores for and produces oil and gas in theNorth Sea and the Gulf of Mexico. Success in thiskind of endeavor arises from speed of movement, riskmanagement, 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-orches-trated, complex interfaces with other players in themarket and with governments. And finally, successcomes from employees committing to strategies thatare rather long-term. The exploration phase for mostventures will take several years, and production-hence cash flow - often lags a few years heyond that.

British-Borneo's high levels of soeiahility can beseen in the honest and relaxed way employees inter-

act. They talk ahout their feelings openly and oftenhelp one another out - without making deals. In addi-tion, they are a team that plays together out of the of-fice-at picnics, parties, and hall games. This convivi-ality is, in some part, management's doing. Managershave systematically tried to recruit compatible peoplewith similar interests and backgrounds. And theyhave improved on this foundation with regular team-building events such as Outward Bound courses for allnew hires, frequent social events, and active supportof company softhall, track, and sailing teams. Every-one in the company is invited to participate, fromhoard members to clerks.

British-Borneo's sociability, however, has not comeat the expense of solidarity. The company's employeesdisplay a strong sense of urgency and will to win. Theyare clearly committed to a common purpose. Indeed,in the United Kingdom, the company's strategy isknown and understood by people of every rank, in-cluding secretaries and other support personnel. Thewidespread knowledge and acceptance of British-Borneo's ohjectives have come about through carefuleffort. The company devotes considerahle time andenergy to hammering out - through workshops andbrainstorming sessions - a collective vision that isowned hy the staff.

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

value on fairness and justice, which comes intosharp focus particularly in hard times. For example,during the 1970 recession, rather than lay peopleoff, Hewlett-Packard introduced a 10% cut in payand hours across every rank. It should be noted thatthe company's management did not hecome demo-nized or despised in the process. In fact, what hap-pened at Hewlett-Packard is another characteristicof communal companies: their leaders commandwidespread respect, deference, and even affection.Although they invite dissent, and even succeed inreceiving it, their authority is rarely challenged.

Solidarity also shows itself clearly when it comesto company goals and values. The mission state-ment is often given front-and-center display in acommunal company's offices, and it evokes enthu-siasm rather than cynicism.

Finally, in communal organizations, employeesare very clear ahout the competition. They knowwhich companies threaten theirs-what they dowell, how they are weak-and how they can be

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

Given all these characteristics, it is perhaps notsurprising that many managers see the communalorganization as the ideal. Solidarity alone may besymptomatic of excessive instrumentaiism. Em-ployees may withdraw their cooperation the mo-ment they become unahle to identify shared advan-tage. In some cases, particularly where there arewell-established performance-related reward sys-tems, this attitude may be reflected in an exagger-ated concern with those activities that producemeasurahle outcomes. By contrast, organizationsthat are characterized primarily by sociability maylose their sense of purpose.

However, where both soeiahility and solidarityare high, a company gets the best of both worlds - or

144 HARVARD BUSINESS REVIEW November-December 1996

zationarc cncourngcd to strip things down to reality whenthey communicate ahout the company's husiness.This frankness creates an atmosphere of cballenge anddehnte, wbicb is one of tbe ballmarks of a high-solidar-ity L-nvironmcnt.

Finally, British-Borneo is a classic high-solidarityenvironment in its adherence to strict performancestandards. The culture does not tolerate underachieve-nient. Outstanding results arc gcnt-rously rewarded,hut it is not unusu;il for someone who does not mea-sure up to be asked to leave, sooner rather tban later.

We've mcntinned some of tbe sources of British-Borneo's culture, hilt it is critical to note tbat perhapsthe most important source is CEO Alan Gaynor,wbose charismatic leadership sets an example.Gaynor participates in tbe company's many socialfunctions, for example, and is open about his feelings.At the same time, he is intolerant of suhpar perfor-mance and is relentlessly focused on strategic goals.

Tbat Gaynor is a maior driver of Britisb-Borneo'seonimun;il culture, however, is emhleniatic of one oftbis form's challenges. While a communal culture isusually difficult to attain and sustain, a strong leadercan mamige both to powerfully effective ends. Butshould the leader ever leave, tbe community he or sbecreated can easily collapse. Because of its fragility, acommunal culture is also difficult to export. Tbat isthe challenge Gaynor faces today, in fact, as British-Borneo's embryonic operations in Houston, Texas, gothrough a dramatic expansion.

does it? Tbe answer is that tbe communal culturemay he an inappropriate and unattainable ideal inmany husiness contexts. Our research suggests tbatit seems to work hest in religious, political, andcivic organizations. It is mucb harder to find com-mercial enterprises in this quadrant. The reason isthat many businesses that achieve the communalform find it difficult to sustain. Tbere are a numberof possible explanations. First, high levels of socia-hility and solidarity are often formed around partic-ular founders or leaders whose departure mayweaken eitber or hotb forms of social relationship.Second, the higb-sociability balf of the communalculture is often nntitbcticnl to what goes on insidean organization during periods of growth, diver-sification, or internationalization. Tbese massiveand complex cbange efforts require focus, urgency,and performance-the stuff of solidarity in its un-diluted form.

More profoundly, though, there may be a built-intension hetween relationships of sociability and

solidarity tbat makes the communal business en-terprise an inbcrently unstable form. The sinceregeniality of sociahility doesn't usually coexist-itcan't-with solidarity's dispassionate, sometimesruthless focus on achievement of goals. When thetwo do coexist, as we have said, it is often in reli-gious or volunteer groups. Perhaps one reason istbat people tend to ioin these groups after they'vehecome familiar with, and agree with, their objec-tives. (A cburcb's policies, procedures, beliefs, andgoals, for instance, arc made well known to pro-spective members before they join. Once insidetbe organization, members find little "strategic"dissension to get in the way of friendship.) By con-trast, when people consider employment at a husi-ness enterprise, they may not know what tbe orga-nization's beliefs and values arc - or tbey may knowthem and disagree witb them hut join the organiza-tion anyway for financial or career reasons. Overtime, tbeir objections may manifest tbemselves inlow-solidarity behaviors.

In their attempts to mimic tbe virtues of commu-nal organizations, many senior managers havefailed to tbink through wbether high levels of bothsociability and solidarity are, in fact, what theyneed. Again, from our research, it is clear that thedcsirahlc mix varies according to the context. Inwbat situations, then, does a communal culturefunction well?D When innovation requires elahorate and exten-sive teamwork across functions and perhaps loca-tions. Increasingly, high-impact innovation cannotbe achieved by isolated specialists. Ratber, as tbeknowledge base of organizations deepens and diver-sifies, many talents need to combine (and combust)for truly creative change. For example, at tbe phar-maceutical company Glaxo Wellcome, researchprojects are undertaken by teams from different dis-ciplines-sucb as genetics, chemistry, and toxicol-ogy-and in different locations. Without sueb team-work, drug development would be much slowerand competitive advantage would be lost.D When tbere are real synergies among organiza-tional suhunits and real opportunities for learning.We emphasize the word real because synergy andlearning are often beld up as organizational goalswithout hard scrutiny. Botb are good-in theory. Inpractice, opportunities for synergy and learningamong one company's divisions may not actuallyexist or be worth tbe effort. However, wben tbey doexist, a communal culture unquestionably helps.• When strategies are more long-term than short-term. That is to say, when corporate goals won't bereached in tbe foreseeable future, managerial mech-anisms aie needed to keep commitment and focus

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high. Tbe communal culture provides bigh socia-bility to bolster relationships (and the commitmentthat accompanies them) and high solidarity to sus-tain focus. Indeed, we have seen communal cul-tures help enormously as organizations have goneglohal-a long and often tortuous process during

There may be a built-in tensionbetween sociability andsolidarity that makes communalcultures inherently unstable.

which strategies have a tendency to be open endedand emergent, as opposed to the sum of measurablemilestones.n When the business environment is dynamic andcomplex. Altbough many organizations claim to bein such an environment, it is perhaps most pro-nounced in sectors like information technology,telecommunications, and Pharmaceuticals. Inthese industries, organizations interfaee with theirenvironment through multiple connections involv-ing technology, customers, the government, com-petition, and research institutes. A communal cul-ture is appropriate in this kind of environmentbecause its dynamics aid in the synthesis of infor-mation from all these sources.

Changing the CultureThere is clearly an implied argument here that

organizations should strive for a form of communi-ty suited to their environment. Reality is never soneat. In fact, managers continually face the chal-lenge of adjusting their corporate community to achanging environment. Our research suggests thatover the last decade, a number of large, well-estab-lished companies with strong traditions of loyaltyand collegiality have been forced, mostly throughcompetitive threat, to move from the networked tothe mercenary form. To describe the process astricky does not do it justice. It is perhaps one of themost complex and risk-laden changes a managercan face.

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

pany's troubles to its corporate culture. Sociabilitywas so extreme that highly politicized cliques ruledand healthy information flow stopped, particularlybetween R&D and marketing. (During tbis period,many of Philips's new products flopped; critics saidthe reason was that they provided technology that

consumers didn't particularly want.}Meanwhile, authority was routinelychallenged, as were company goalsand strategies. Management's lack ofcontrol allowed many employees torelax on the job. They had little con-cern with performance standardsand no sense of competitive threat.In short. Philips demonstrated manyof the negative consequences of anetworked organization. However,

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

Timmer attempted just such a transformation,first by trying to lower managers' comfort level. Heimplemented measurable, ambitious performancetargets and beld individuals accountable to them.In the process, many long-serving executives leftthe company or were sidelined. Timmer also con-ducted frequent management conferences, atwhich the company's objectives, procedures, andvalues were clearly communicated. He demandedcommitment to tbese goals, and those employeeswho 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, wbicb had been lost during theturnaround - thus moving the company from mer-cenary toward communal. Meetings began to focuson the company's values and on gaining consensus.In short, Timmer was trying to reestablisb loyaltyto Pbilips and connections among its members.Timmer was scheduled to retire in October, and itremains to be seen in wbat direction his successor.Cor Boonstra, will take tbe company.

Boonstra's challenge is formidable. Once organi-zations try to reduce well-establisbed ties of socia-bility, they can inadvertently unleasb a process tbatis difficult to control. Unpicking emotional rela-tionsbips may make solidarity difficult, too. Theresult: organizations can devolve toward an inap-propriate fragmented form. From there, recoverycan be difficult

This precise phenomenon, in fact, can be seen inthe uncomfortable transition now occurring 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 quahty programming and publicservice-on efficiency and productivity. In theprocess, strict performance standards have heenset, and colleagues have had to vie against one an-other for scarcer resources. As sociahility has di-minished, talented individuals who once sawthemselves as part of a communal culture haverailed against what they consider target-orientedchanges. Some have decided to stay and stuhbornlydefend their own interests; others have chosen toleave. With its communal culture heading towarda fragmented one, the BBC faces no alternative hutto reinvent itself.

How, then, does an organization change its cul-ture from one type to another without wreaking toomuch damage? How does a manager tweak levels ofsociahility 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 currentform 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-theexample set by a leader, the personalities of eertainmembers, the physical setting of the organizationor its history, or simply the amount of cash in thebank. Likewise, solidarity can arise for many rea-sons. Our purpose here has been not to analyze v/hyorganizations have different levels of sociahilityand solidarity but to examine what happens totheir culture when they do, and what that meansfor managers who seek satisfied employees andstrong performance. However, before attempting tochange levels of sociability or soli-darity, a manager needs to think a bitlike a doctor taking on a new patient.Tbe patient's past and current condi-tions are not only relevant but alsocritically important to assessing thebest future treatment.

Our research shows that to in-crease sociahility, managers can takethe following steps:

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

stated as an explieit goal. In itself, such an an-nouncement may signal that management seeks toincrease sociability.

Increase social interaction among employees byarranging casual gatherings inside and outside theoffice, such as parties, excursions-even book clubs.These events might be awkward at first, as em-ployees question their purpose or simply feel oddassociating outside a business setting. One wayaround this problem is to schedule such gatheringsduring work hours so that attendance is essentiallymandatory. It is also critical to make these inter-actions enjoyable so that they create their own posi-tive, self-reinforcing dynamic. The hard news formanagers is that sometimes this orchestrated so-cializing requires spending money, whieh can bediffieult to rationalize to the finance department.However, if the husiness environment demandshigher levels of sociability, managers ean eonsiderthe expenditure a good investment in long-termprofitability.

Reduce formality between employees. Managerscan encourage informal dress codes, arrange officesdifferently, or designate spaces where employeescan mingle on equal terms, such as the lunchroomor gym.

Limit hierarehieal differences. There are severalmeans to this end. For one, the organization chartcan he redesigned to eliminate layers and ranks. Al-so, hierarchy has a hard time coexisting with sharedfacilities and open office layouts. Some companieshave narrowed hierarchical differences hy ensuringthat all employees, regardless of rank, receive thesame package of henefits, park in the same lot (withno assigned spaces), and get bonuses based on thesame formula.

How does an organizationchange its culture from one

type to another withoutwreaking too much damage?

Act like a friend yourself, and set the example forgeniality and kindness by earing for those in trou-ble. At one communal company we know of, man-agement gave a three-month paid leave of absenceto an employee whose young son was ill, and thenallowed her to work on a flexible schedule until hewas completely well. Sociability is increased whenthis caring extends beyond crisis situations-for

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instance, when management welcomes the familiesof its employees into the fold by inviting them tocompany picnics or outings. Indeed, many high-sociability companies hold Christmas parties forthe children of employees or give each family a spe-cial holiday present.

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

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

Create a sense of urgency. Managers can promotea sense of urgency in their people by developing avisionary statement or slogan for the organizationand communicating it relentlessly. In the late1980s, for example, Gerard van Schaik, then chair-man of the board of Heineken, took his companyglobal with the internal war cry Paint the WorldGreen. The message was clear, focused, and actionoriented. It worked. Today Heineken is the most in-ternational beer company in the world.

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

Encourage commitment to shared corporategoals. To do so, managers can move people betweenfunctions, businesses, and countries to reducestrong subcultures and create a sense of one compa-ny. Disney, for example, identifies highfliers-can-didates that show promise-and then moves themthrough five divisions in five years. These individu-als then carry the organization's larger strategic

picture and purpose with them tbrouj^bout theirlater positions at Disney, pollinating each divisionin the process.

Building the Right CommunitySo far, we bave stressed three primary points.

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

Finally, we have claimed tbat patterns of organi-zational life are often conditioned by factors out-side the organization, such as the competition, theindustry structure, and the pace of technologicalchange. But a company's culture is also governed bychoices. Senior executives cannot avoid or denythis fact. Managers can increase tbe amount of so-ciability in tbeir staffs by employing many of thedevices listed above; similarly, they can manipulatelevels of solidarity through tbe decisions theymake. In short, these choices have the ability to af-fect what kinds of experiences members of an orga-nization enjoy-and don't-on a day-to-day basis.Executives are therefore left witb the job of manag-ing the tension between creating a culture that pro-duces a winning organization and creating one thatmakes people happy and allows tbe authentic ex-pression of individual values. Tbis challenge is pro-found and personal, and its potential for impact onperformance is enormous. Culture can hold backthe pressures for corporate disintegration if man-agers understand what culture means-and wbat itmeans to change it. 9Reprint 96605 To order reprints, see the last page of this issue.

148 HARVARD BUSINESS REVIEW November-December 1996