Organizations Leadership Jul 6, 2015

Is Your Com­pa­ny Cul­ture Too Strong?

A diver­si­ty of view­points can help orga­ni­za­tions weath­er disruption.

Yevgenia Nayberg

Based on the research of

Willemien Kets

Alvaro Sandroni

The online retail­er Zap­pos is known for hav­ing fast, free ship­ping, free returns for a year, and no short­age of ser­vice rep­re­sen­ta­tives who go above and beyond — some­times out­landish­ly so — to make cus­tomers hap­py. But accord­ing to a for­mer Zap­pos direc­tor of busi­ness devel­op­ment and brand mar­ket­ing, cus­tomer ser­vice is not the point — it is the byproduct.

I read about how Zap­pos is focused on cus­tomer ser­vice,” Aaron Mag­ness says in an inter­view with strategy+business. It isn’t. It’s focused on com­pa­ny cul­ture, which leads to cus­tomer service.”

Of course, Zap­pos is not the only firm to use its cul­ture to dis­tin­guish itself. South­west, Nord­strom, Weg­mans, and Enter­prise have all famous­ly relied on a strong cor­po­rate cul­ture to deliv­er great cus­tomer ser­vice — as well as more engaged employ­ees, bet­ter pro­duc­tiv­i­ty, and ulti­mate­ly, increased profitability.

But what makes a strong cul­ture so effec­tive? And are there times when a strong cul­ture can work against an organization?

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New research by Willemien Kets, an assis­tant pro­fes­sor of man­age­r­i­al eco­nom­ics and deci­sion sci­ences at the Kel­logg School, sug­gests that a strong cul­ture serves a util­i­tar­i­an pur­pose: it sets expec­ta­tions, increas­ing the like­li­hood that, faced with uncer­tain­ty, mem­bers of a team will all be on the same page.

Kets, along with her coau­thor, Alvaro San­droni, a pro­fes­sor of man­age­r­i­al eco­nom­ics and deci­sion sci­ences at the Kel­logg School, argues that cul­tur­al norms make inter­ac­tions eas­i­er — a good thing much of the time. But in fast-chang­ing indus­tries, or in a tumul­tuous econ­o­my, the broad­er diver­si­ty of view­points that a weak­er com­pa­ny cul­ture engen­ders can lead to few­er missed opportunities.

My Thoughts about Your Thoughts

Suc­cess­ful col­lab­o­ra­tion requires us to accu­rate­ly gauge oth­er people’s beliefs and inten­tions. In doing so, we tap into some­thing called the­o­ry of mind.” It means I’m try­ing to think about your mind,” Kets says. I’m try­ing to put myself into your shoes, to think about what you would do. To do that, I use my own expe­ri­ence as a guide.”

Imag­ine that you have trav­eled to a for­eign coun­try where you do not under­stand the cul­tur­al con­ven­tions. Is it a soci­ety where peo­ple say what they mean or com­mu­ni­cate more sub­tly, rely­ing in part on non­ver­bal ges­tures? When con­vers­ing with locals, how much are you expect­ed to take what you hear at face val­ue or read between the lines?

Exces­sive con­formism ham­pers the abil­i­ty of an orga­ni­za­tion to adapt.”

The more you under­stand about the cul­ture, the eas­i­er it will be to com­mu­ni­cate effec­tive­ly, because your own thoughts and pref­er­ences will guide you well regard­ing those of the peo­ple around you. Con­verse­ly, a lack of under­stand­ing will make it dif­fi­cult to inter­nal­ize oth­ers’ view­points, which can have a range of con­se­quences — from some­thing as triv­ial as miss­ing a joke to fail­ing to rec­og­nize when you are in a poten­tial­ly harm­ful sit­u­a­tion, such as a robbery.

Cul­ture works the same way in cor­po­ra­tions. A strong cor­po­rate cul­ture sets the rules of engage­ment. As Kets explains, a man­ag­er can choose to com­mu­ni­cate with her team in a vari­ety of ways: terse­ly, or diplo­mat­i­cal­ly, or even pas­sive-aggres­sive­ly. Some­one who can accu­rate­ly gauge her intent will be in a good posi­tion to suc­ceed on her team. More­over, an entire team or com­pa­ny that com­mu­ni­cates flu­id­ly — every­one antic­i­pat­ing how every­one else will respond — is ide­al­ly sit­u­at­ed to han­dle a crisis.

A Cul­ture that Helps and Hinders

Using game the­o­ry, the researchers mod­eled how peo­ple might decide which groups to join. Researchers assumed that, with­in each group, it would be eas­i­er for pairs of indi­vid­u­als to coor­di­nate on a task when they shared a com­mon cul­ture, as they would also share a com­mon vision for how the task should proceed.

The researchers demon­strat­ed that when coor­di­na­tion was reward­ed, and when a group’s cul­ture was strong, its mem­bers became increas­ing­ly like-mind­ed: indi­vid­u­als who were a good fit” for the cul­ture were dis­pro­por­tion­ate­ly attract­ed to that group, while indi­vid­u­als with a dif­fer­ent vision opt­ed to go elsewhere.

In oth­er words, over time, a strong com­pa­ny cul­ture increas­es homophi­ly” — the well-known ten­den­cy to grav­i­tate to like-mind­ed peo­ple. You see it every­where,” says Kets. Peo­ple like to inter­act with peo­ple like themselves.”

But is homophi­ly desirable?

With their mod­el, researchers were able to char­ac­ter­ize broad sit­u­a­tions in which high homophi­ly, and thus a strong com­mon cul­ture, exerts a pos­i­tive influ­ence. Specif­i­cal­ly, where there is a sta­ble eco­nom­ic envi­ron­ment — and the sta­tus quo is work­ing quite fine, thank you — hav­ing a strong shared cul­ture can be ben­e­fi­cial, as it enables mem­bers of a group to bet­ter work together.

Con­sid­er, for instance, the homophilous cor­po­rate cul­tures that served indus­tri­al giants like IBM or Gen­er­al Elec­tric well ear­ly in the 20th cen­tu­ry. Such com­pa­nies, says Kets, thrived” under well-defined expec­ta­tions and conformity.

The same prin­ci­ple applies out­side of the cor­po­rate world, too. Europe after the Indus­tri­al Rev­o­lu­tion is a typ­i­cal exam­ple where peo­ple didn’t move very much, and there was not much tech­no­log­i­cal inno­va­tion. Every­thing was kind of set­tled,” says Kets. You have some­thing that works and you just want to employ it.” She explains that new­ly formed nation states in 19th cen­tu­ry Europe were focused on craft­ing nation­al cul­tures,” com­plete with his­to­ry muse­ums and oth­er cul­tur­al hall­marks. In our the­o­ry, that is indeed what you would want to do. You don’t want con­flict; you want it to be very clear what the norms are.”

Diver­si­ty Breeds Resilience

But Kets and San­droni found that homophi­ly may not ben­e­fit all types of inter­ac­tions. In sit­u­a­tions marked by high stakes and con­stant upheaval, says Kets, exces­sive con­formism ham­pers the abil­i­ty of an orga­ni­za­tion to adapt.”

The IBM of the ear­ly nineties, for instance, was not pre­pared for change. That’s the sto­ry that peo­ple tell. Hav­ing peo­ple work togeth­er well and com­mu­ni­cate effec­tive­ly — it cre­ates an entrenched cul­ture. You’re not open to out­side ideas,” says Kets. There may be a bet­ter option, but I won’t it because that isn’t how things are done around here.”

Alter­na­tive­ly, a weak­er com­pa­ny cul­ture — one that is uncon­strained, a lit­tle chaot­ic — will lead to less con­formism. An orga­ni­za­tion com­posed of diverse view­points, and even dis­sent, may not run as smooth­ly or effi­cient­ly as pos­si­ble. In a cri­sis, every­one may not be on the same page; there will be mishaps and mis­read­ings. But the lack of an estab­lished way of doing things — the sheer unpre­dictabil­i­ty of every encounter — increas­es the like­li­hood that, if there is a bet­ter out­come, peo­ple will find it.

Any­time there doesn’t appear to be dis­sent, it means that the cor­po­rate cul­ture has just shift­ed way too much toward con­sen­sus,” argues David Sacks, co-founder and for­mer CEO of the cor­po­rate social net­work­ing ser­vice Yam­mer. That means the lead­er­ship doesn’t wel­come dis­sent enough.”

For a fast-chang­ing Sil­i­con Val­ley com­pa­ny, after all, there may be far more dan­ger in doing the sta­tus quo well than in miss­ing out on a bet­ter opportunity.

Featured Faculty

Willemien Kets

Member of the Department of Managerial Economics & Decision Sciences faculty until 2017

Alvaro Sandroni

E.D. Howard Professor of Political Economy, Professor of Managerial Economics & Decision Sciences

About the Writer

Kellogg Insight Editorial Team

About the Research

Kets, Willemien, and Alvaro Sandroni. 2014. “A Belief-Based Theory of Homophily.” Working paper.

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