Heterogeneity of Corporate Culture -
How corporate culture is managed in German organisations and what could be done better

Master Thesis

by

Sven Röhm

2004

Preface
Corporate culture has gained importance in the business world in the last two decades. The consideration of corporate culture, nevertheless, differs significantly in organisations. Some organisations have taken their corporate culture into account for strategic decisions (e.g. cultural fit during Mergers & Acquisitions) but other organisations have tended to neglect this issue at all (Deal and Kennedy, 1999).

Deal and Kenndy (1999) consider corporate culture as a hidden success factor of organisation which ensures commitment of the employees. According to them (1999), organisations with a ‘strong’ corporate culture outperform “run-of-the-mills companies by a massive margin” (Deal and Kennedy, 1999: 2).

Corporate culture, nevertheless, has been a controversially discussed topic in the literature on which different general ‘best practices’ had been suggested by academics. However, it can be argued that the few empirical studies of corporate culture, notably Kotter and Heskett’s (1992) quantitative survey, have been methodologically limited (Alvesson, 2002), e.g. to few senior managers of the examined organisations. Therefore, this project employs, besides interviews with senior managers of the three examined German organisations, a survey which is focused on employees of different hierarchical and divisional levels in one organisation. The findings of the research clearly show that corporate culture is a far more heterogeneous phenomenon than many academics suggest (e.g. Kotter and Heskett, 1992; Deal and Kennedy, 1982).

In this research, corporate culture appears as a network of interrelating cultural patterns which is unique to different organisations due to different organisational and environmental challenges. The survey also identified that the perceptions of corporate culture differ between senior management and the employees. Therefore, the employees’ perception of the corporate culture must be taken into account in order to prevent cultural dichotomy. Furthermore, the senior management should implement a sustainable process of monitoring the development of corporate culture. Continuous monitoring enhances the understanding of the organisation and the consequences of managerial actions. Consequently, this can help to raise commitment and efficiency of the workforce.

Table of Contents

Preface ... 7
Acknowledgements ... 9
Table of Contents ... 11
List of Tables ... 14
List of Figures ... 15
List of Boxes ... 16

1 Introduction ... 17
1.1 Background of Corporate Culture Studies ... 18
1.2 Research Aims and Objectives ... 19
2 Literature Review ... 21
2.1 The Architecture of Corporate Culture ... 21
2.2 The Main Elements of Corporate Culture ... 24
2.2.1 Artefacts ... 24
2.2.2 Values, Beliefs and Attitudes ... 30
2.2.3 Basic Assumptions ... 33
2.3 Determination of Corporate Culture in its Wider Context ... 35
2.3.1 The Sources of Corporate Culture ... 35
2.3.2 The Harrison and Handy Model ... 36
2.4 Corporate Culture and Performance ... 38
2.4.1 Underlying Assumptions ... 38
2.4.2 Academically Suggested Relationships ... 40
2.5 Cultural Heterogeneity in Organisations ... 42
2.6 Summary ... 45

3 Methodology ... 47
3.1 The In-depth Interviews ... 49
3.1.1 Sampling ... 49
3.1.2 The Interview Design ... 50
3.1.3 Data Analysis of the Interviews ... 52
3.2 The Focus Group Interview ... 53
3.2.1 Sampling ... 54
3.2.2 Focus Group Interview Design ... 55
3.2.3 Data Analysis of the Focus Group Interview ... 57
3.3 The Questionnaire-based Survey ... 58
3.3.1 Sampling ... 59
3.3.2 The Questionnaire Design ... 59
3.3.3 Data Analysis of the Survey ... 66

4 Research Findings ... 69
4.1 In-depth Interviews ... 69
4.2 Focus Group Interview and Survey at Centrotherm ... 76

5 Conclusions ... 91
5.1 Diverge Perceptions of Cultural Artefacts in Organisations ... 92
5.2 Oversimplification and Generalisation of Corporate Values, Beliefs and Attitudes ... 93
5.3 The Interrelationship between Corporate Culture and Structure 9... 5
5.4 Existence of Subcultures and Cultural Heterogeneity ... 96
5.5 Non-existence of Pragmatic Relationships between Corporate Culture and Performance ... 97
5.6 Summary ... 98

6 Recommendations ... 99

References ... 105
Appendices ... 111

1 Introduction
It is estimated by the renowned market research institute Gallup that approximately € 260 billion a year (about 12 percent of the German gross domestic product of about € 2,100 billion according to Deutsches Statistisches Bundesamt (2004); hereafter abbreviated as GDP) get lost within the German economy due to missing commitment (Kröger, 2004). Gallup refers to unnecessary high absenteeism rates of employees, their unwillingness to perform beyond the minimum requirements, and risk avoidance (i.e. better to do nothing than something wrong) in order to preserve their work places (Kröger, 2004). Consequently, each employee in Germany could, statistically, contribute additional € 6190 to the profits of the organisation every year (where about 42 million people are in work relations in Germany according to the Deutsches Statistisches Bundesamt, 2004) if s/he was fully committed and motivated.

However, it can be observed that some organisations generate more commitment and motivation of their employees than others which goes beyond the notion of strategic, environmental and structural issues (Deal and Kennedy, 1999). Academics (e.g. Brown, 1998; Kotter and Heskett, 1992; Peters and Waterman, 1982) refer in this regard to the corporate culture – the soul of an organisation – as noted below.

The basis of work relations between employers and employees is compensation (Deal and Kennedy, 1999). People work to afford and to maintain a comfortable life (Deal and Kennedy, 1999). Thus, they are involved in and contribute to organisational aims which are generally the creation of products or services. This contribution can usually be ‘scientifically’ measured in terms of output, put-through and time (Weidner and Freitag, 1998). It is, furthermore, fixed in work contracts and psychological contracts between employers and employees and shows the general expectation of what should be done at a minimum from both sides. That usually means that an employee has to work a certain amount of hours a week and should fulfil certain tasks which have been allocated to him. In return, the employee gets an agreed compensation in monetary terms. However, employees tend to neglect their duties or even leave companies, despite an appropriate compensation, when they do not feel comfortable within the organisation (Deal and Kennedy, 1999). Hence, they are not fully committed to their organisations.

Corporate culture directly affects commitment either in a positive or in a negative way (Peters and Waterman, 1982). As noted above, some organisations are able to create more commitment than others, which relates to the corporate culture (Peters and Waterman, 1982; Deal and Kennedy, 1999). Commitment drives the behaviour of the employee at the workplace. It can comprise the willingness of simply showing up at work or of even contributing more than expected. It can, furthermore, reflect the willingness to take additional shifts, to bring in ideas and performance beyond the agreed level. Commitment is a less scientifically measurable phenomenon. It is often referred to by analysing absenteeism rates, the amount of extra-hours worked in the organisation, etc (Jost, 2003). However, organisations often struggle to identify the extent of commitment in comparison to contribution because the boundaries are blurred.

1.1 Background of Corporate Culture Studies
There is only a brief outline of the background of corporate culture studies given here because the below noted literature will be introduced in more detail in the literature review (Section 2).

Corporate culture is a fairly young discipline. The path for corporate culture theory was evened by the Human Relations School in the 1950s and 1960s which emphasised to take human needs into account (Brown, 1998). This approach opposed the Modern Structural Theory (e.g. Lawrence and Lorsch) in the 1960s which described organisations as purely rational and mechanistic entities (Brown, 1998). However, early organisational sociologists such as Max Weber and Emile Durkheim identified non-mechanistic and ‘irrational’ features of organisational life in the early twentieth century, e.g. myths, rites and charismatic leadership (Brown, 1998). As a consequence, the focus on this non-mechanistic and irrational part of organisational life increased throughout the twentieth century; and created the basis for the corporate culture theory (Brown, 1998).

The first wave of corporate culture literature emerged in the late 1970s and early 1980s, notably the work of Handy (1978), Deal and Kennedy (1982), Peters and Waterman (1982) and Schein (1985). This first wave was succeeded by a variety of work pieces throughout the 1990s, e.g. Brown (1998), Hampden-Turner (1994) and Kotter and Heskett (1992). Nevertheless, although there are some studies and theories of corporate culture, organisations still differ widely in terms of their corporate culture. This indicates that none of the corporate culture approaches have had a significant breakthrough yet. Apparently, the ‘best practice’ of corporate culture, which was passionately sought for by a variety of academics, either does not exist or has not been found; and € 260 billion loss a year alone in Germany might indicate shortcomings in finding the ‘best practice’ for corporate culture.
Therefore, this text explores corporate culture by using adequate, pre-existing theory and both qualitative and quantitative research in order to develop a framework of how corporate culture could be described in the illustrated three German organisations.

Thus, relevant cultural patterns in the regarded organisations will be outlined and their relationships to each other must be identified by using interviews with representatives of the senior management at first. Secondly, it must be examined whether the outlined patterns are perceived homogeneously throughout different hierarchical and divisional levels of the organisation by the means of a survey, or the perception is unequally distributed between different organisational (e.g. senior management, shop-floor) and divisional groups. Finally, the impact of the corporate culture on the organisational performance must be examined because organisations invest in corporate culture for an economic reason.

An overview about the content and structure of this thesis is given by the following research aims and objectives.

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