Saturday, January 18, 2014

The Chicken and Egg problem: Culture vs Strategy

In Business Anthropology it is important that we speak in simple language to our clients and seek to inform through clarity rather than impress through obfuscation. "Corporate Culture" and its relation to "Corporate Strategy" is a case in point. The question often comes up in the business community, What is Corporate Culture and Why is it resistant to good strategy?

A recent book entitled "Leverage" addresses this question in this interview from the Economist

From the point of view of the Applied Business Anthropologist, we might say that a simple definition of corporate culture, from a lay point of view, is
 "That's how WE do things around here and have done so ever since I've been here." 
At the same time, from a technical anthropological point of view, an applicable definition comes from Structural - Functional theory. We can begin by saying a corporation is a social institution made up of the following, as defined by Bronislaw Malinowski,
"Each institution has personnel, a charter, a set of norms or rules, activities, material apparatus (technology), and a function." (A Scientific Theory of Culture and Other Essays)
The business enterprise is an institution that has a corporate culture.  Its function is the creation of profit for its owners. It does this by investing in personnel, material apparatus to be used to perform activities that generate a product based on a certain set of norms, rules, and processes, to produce a product or service for sale at a price that is greater than the total cost of production. The owner's of the business are organized under a charter (Articles of Incorporation and By-laws) recognized by the State and empowered by the State to conduct such business under the laws of the state. The corporate culture is how all of this is done to maintain the institution.

A strategy MUST arise from the institutional base that leaders have to work with or else the strategy will fail. A good and effective strategy recognizes the basic elements of management as taught in B-School. "What are the institution's Strengths and What are its Weaknesses". A good strategy uses the former to offset the latter. The second step of the strategy is to know your business environment -- that is, "What are the opportunities for us to make a profit or increase our profits?" and, "What are the threats to our position in the market and to our profits?" All of this must be done within the principles established in the Charter and the Laws that govern the institutional Charter.

The Corporate Culture is conservative, it represents the lessons from the past that have worked and its goal is long term, .i.e. to survive. A Corporate Strategy is a plan to use what we have today to insure that we will achieve our long term goal tomorrow. That is, the relation between Culture and Strategy is a Chicken and Egg problem.
Today's Corporate Culture is Yesterday's Strategy Made Manifest,    Tomorrow's Corporate Culture is Today's Strategy Made Manifest.