Corporate Culture

Business people having conversation in corporate environment
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Overview: The phrase corporate culture is shorthand for the body of formal rules and informal customs that characterize how a given company organizes itself, conducts business and treats its staff. It is perhaps more precise to talk instead about organizational culture, since the same issues pertain to organizations of all sorts, such as nonprofits, governmental agencies, partnerships and sole proprietorships, and not just to for-profit enterprises that are legally constituted as corporations.

See our article that offers tips for choosing employers, which addresses some of the following aspects of corporate culture from slightly different angles.

Bureaucracy: Companies that are characterized as bureaucratic tend to have extensive written work rules and procedures, many layers of management, and/or slow decision-making processes, with multiple approvals and sign-offs required to move ahead on a typical business initiative. The presence of robust legal, compliance, internal audit and/or risk management departments and systems is often an indication of a bureaucratic corporate culture.

Chain of Command: In corporate cultures that enforce military-style chains of command, employees typically only have direct dealings with peers, immediate superiors, and immediate subordinates. In large organizations that also have many layers of management, the flow of directives from above and information from below can be very slow, as the chain of command protocol requires multiple hand-offs along the way.

This also is bound to result in sluggish reaction times to changing business conditions.

Reward Structures: The correlation between performance and reward in some corporate cultures is rather weak, either because of the problems of measuring employee performance scientifically or because the company does not see an imperative to do so.

For instance, in nonprofits, government agencies and regulated utilities, the linkages between employee competence and the organization's financial health often are blurry at best. See our article on designing incentive systems.

Seniority: Some organizations make seniority, or years of experience, a key factor in determining an employee's eligibility for promotion or pay increase. Where such a corporate mindset exists, it normally is not found in formal written rules, but rather in customary practices in dealing with staff. Union contracts typically tie compensation and eligibility for promotion explicitly to seniority. In heavily unionized companies, such a culture also tends to carry over to the treatment of non-union management employees.

Paternalism: Some corporate cultures take a nurturing approach to employees, seeking to foster long-term employment and stable workforces through generous pay and benefits packages, as well as through a serious commitment to what has come to be called work-life balance issues. Companies with this sort of culture are becoming increasingly rare. More common are companies that expect their employees to be footloose, and which are comfortable with high employee turnover.

Some companies even encourage high turnover, in order to keep wages down and squeeze maximum effort out of eager new recruits, then dispose of them once they are burned out physically and/or emotionally. See our discussion of up or out policies.

Nepotism: Strictly speaking, nepotism consists of favoritism towards relatives. In a looser sense, it also can include favoritism towards friends, friends of relatives and friends of friends. Nepotism can manifest itself in hiring, promotion, pay, work assignments and recognition. That is, the beneficiaries of nepotism may be hired or promoted into positions that they otherwise would not merit had they not possessed the relationship in question. They may receive higher pay and more favorable work assignments than their peers, or be given awards and recognitions that they technically do not deserve.

See our articles on entrenched problem employees and, in a related vein, a political use of an employee survey.

To some extent, the existence of nepotism is in the eye of the beholder. The presence of high numbers of related individuals in a given firm or organization is taken as de facto evidence of nepotism by some people. Meanwhile, some companies see no problem with hiring related people, while others view this as a matter of concern. In cases where a work colleague or subordinate is a close relative of a senior executive, working with or managing that person can become a highly sensitive matter. At its worst, nepotism produces incompetence in key positions, and not just in managerial or executive slots.

Office Politics: Also called organizational politics, corporate politics or workplace politics. Broadly speaking, office politics encompasses the ways in which people wield power and influence in an organization. The phrase typically has negative connotations. When a firm is said to have a highly political culture, that usually is shorthand for saying that the officially stated goals of the organization actually have become subordinated to personality clashes and private agendas. Among the hallmarks of highly political organizational cultures are:

  • Nepotism (see section above)
  • Weak linkages between performance and reward (also see section on reward structures above)
  • Project approval dependent more on the position and influence of the proponent than on the object merits of the project itself
  • Rampant personal empire building (see section below)

Personal Empire Building: Increasing the size (as measured by a number of employees, budget, revenues, etc.) of an organization normally results in greater prestige and compensation for the manager or executive who heads it. Accordingly, there often is a political imperative for managers and executives to grow their organizations even if the result actually is harmful to the overall profitability of the firm. Among the means for achieving such growth are through new project proposals and by the lobbying for the takeover of existing departments and functions. See our article  that discusses personal empire building in more detail.