Great Company Culture Is More Than Creating a Nice Place to Work

When Glenn Carroll talks to managers about the culture at their organization, about 80% of them say it needs to change. Yet they’re often unsure how to influence culture, so they fall back on a small set of change mechanisms like aligning leaders around values and using culture-related training and communications.

This problem motivated Carroll, a professor of organizational behavior at Stanford Graduate School of Business, and Jennifer Chatman, dean of the University of California, Berkeley’s Haas School of Business, to write Making Organizational Culture Great: Moving Beyond Popular Beliefs. Their book is structured around common beliefs — including misconceptions — about culture and how leaders can think beyond them to effectively shape it. The book’s perspective and practical tips are grounded in wide-ranging research and peppered with real-life examples from Apple, Netflix, Southwest, and other major corporations.

In this interview, Carroll and Chatman discuss key themes and ideas from the book, along with what they hope readers take away from it for the benefit of their organizations.

As experts on organizational behavior, there are many books you could have chosen to write. Why this one?

Carroll: There used to be a lot of skepticism about culture, with executives asking, “Does it even matter?” Now it’s widely recognized as important, but there’s hesitation about what to do because leaders don’t have training in this like they do in finance or accounting. They need someone to help them understand the research.

Chatman: The research is compelling — such as how culture matters for the bottom line. But it hasn’t necessarily penetrated into the common lore, so there’s still misunderstanding about how culture works. Practicing managers have been grasping very superficial notions of culture in the popular press, like “7 Rules to Manage Culture Effectively,” which are often unsubstantiated. We wanted to get the real story out there based on research.

You structure the book around five popular beliefs related to organizational culture. Will you highlight a couple and why they are important?

Carroll: One belief is that culture is inert; you can’t change it. We tell the story of Alan Mulally, who came to Ford Motor Company from Boeing. Ford is an American institution and has done things the same way, literally, for decades. Mulally comes in as CEO and just changes everything in ways people initially thought were crazy, such as rewarding leaders to communicate about problems with their business lines. But he was able to transform the culture and transform Ford in a way that affected the bottom line. It’s the idea that you can change culture if you have a vision for it and know what you’re doing.

Chatman: Many people still believe culture doesn’t matter on the bottom line. That Ford story shows it does. We also tell a story about Genentech, where a senior VP named Jennifer Cook was executing on a five-year strategic plan to triple her large division’s business. By being deliberate in changing the culture, such as increasing a push for innovation and reducing excessive focus on results, it only took her 11 months to triple the business, showing that culture can change and that it matters for the bottom line.

You talk about culture as a “hard” rather than “soft” management tool. What does that mean?

Carroll: In many people’s minds, culture is about perks: free food, retreats, games. Which makes it sound really soft. In reality, culture is a social control mechanism — how you get people on the same page and get them to behave. If you don’t conform, you’ll be ostracized and maybe even fired. That’s a tough world, and there’s nothing soft about it. It may involve soft skills, but the implications aren’t soft at all.

Chatman: Culture is much more than “Ooh, is this a nice place to work?” It’s a vehicle for what the organization is trying to accomplish, and that requires deliberate action like rewarding those who come along and punishing those who don’t. Organizations like GE and Cisco have high prescribed rates of turnover based on employees’ failure to orient to their strategic priorities. That’s a strong culture practice, and that’s what we mean by social control.

How do you define “cultural fit,” and how should organizations think about it?

Chatman: When you talk about fit, people assume you’re talking about high culture fit, like hiring people who fit the culture you’ve created. But we argue that culture should change when you change your strategy, so that means people already in the organization may not fit the next culture you need to create. You can intentionally bring in people who don’t fit the current culture to create a different culture. A business in a technologically advancing industry might hire people more willing to take risks to break out of a rut of risk-aversion.

Carroll: Think of fit as how well a person buys into the defined norms, beliefs, and values of the culture, and how much those are internalized. It’s “Do you believe in what we think you should believe in?” People have great ability to identify good fit, even when they may not be able to articulate why exactly “That person really is one of us.” Which means they’ll make the right decisions for your organization even when you’re not there. We talk about how Sheryl Sandberg shadowed Reed Hastings for a day when she was COO of Facebook and he was CEO of Netflix. At the end she said — I’m paraphrasing — “I sat through all those meetings with you and you didn’t make a single decision.” He smiled and said, “That’s the way we like it.”

What are some overlooked tools for influencing culture?

Chatman: Assigning people to onboard other people can be an enculturating experience for the person you’ve assigned to that job. They need to learn the culture and they’re committed to ensuring someone else fits the culture really well. There’s research to back this up.

Carroll: One that people don’t often think of is a job rotation program. When people go through different parts of the organization — different functions, different areas — they learn a lot about what the culture’s like in different places and they also meet a lot of people and become committed to them. This ensures everyone’s on the same page and promotes solidarity. Amazon does this really well.

One big-picture takeaway you’d like readers to embrace from your book?

Chatman: Culture can be managed. You have to be deliberate, consistent, and comprehensive about it. Most leaders are deeply immersed in their culture and mistakenly assume other people understand it as well as they do. You have to link every event and every decision to the culture you’re cultivating, because people won’t do it on their own.

Carroll: I want people to recognize that when it comes to shaping culture, the intellectual part isn’t super-challenging. What’s really hard is the behavioral part because you have to be consistent and tell a coherent story. The late great GE CEO Jack Welch said that great managers have to be “relentless and boring.” He meant they’ll feel bored because they’ll repeat the same message over and over, hundreds or thousands of times. But that’s what it takes to get it through. So the big takeaway is that cultivating culture isn’t as complicated as you think — but still hard to do.