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HR Impact on Corporate Culture


By: 
Date: July 1 2005

A great strategy is no guarantee of long-term business success. Many other factors impact organizational performance. One such factor is corporate culture which helps an organization create a high performance environment which supports business strategy implementation. Because culture is so important to the success of a firm, human resource professionals need to increase their profiency at impacting culture.

Ask a HR leader to describe their employers culture and most will provide an insightful answer. Responses like "team orientated", "performance-driven" and "family atmosphere" might be some common responses. However, ask this same HR leader to articulate their role in shaping corporate culture and their responses become a bit vague. The reason is that few terms have been more ignored or misunderstood by human resource professionals than corporate culture.

This is increasingly alarming given that HR, more than any other business function, plays a key role in shaping, reinforcing and changing corporate culture. The fact is that culture directly contributes to the bottom line as well as impacts the company´s very survival. Given the importance of culture to a firm´s success, it will serve the human resource function well to increase it´s ability to close the gap between HR planning and cultural awareness.

What is Corporate Culture?

Human Resource leaders need a more thorough understanding of corporate culture if they wish to have an impact.

Culture defines the proper way to think, act and behave within an organization. Those who do things in the "proper" way will fit-in and can become quite successful. Those who chose not to do things in the proper way do not last long with an organization. They are told, "we don´t do things like that here."

Senior management defines what is considered proper within the organization. Leaders create cultures which they believe will provide them with a competitive advantage. If the company competes in an industry that relies on innovation, management will create cultures where creativity is consider the proper way to think, act and behave. This is because culture helps an organization adapt to its external environment as well as drives internal integration.

Educating Organizational Leaders

For human resource professionals, the implications are clear. To impact culture, HR leaders must work with company executives to help define what the organization considers proper with regards to how people think, act and behave.

This is not simply a "feel good" exercise. The ultimate goal should be to improve performance, both for the organization and for the individual. HR needs to help executives understand that if they do not accurately understand the strengths and weaknesses of the cultures they create, they will have a much harder time achieving their organization objectives. For example, one could cite the cultures at Enron and Arthur Andersen as examples of leaders not realizing the impact of their corporate cultures.

Also, executives often do not have an accurate understanding of the cultures that they create. Because they are removed from the front lines, executives tend to believe that the espoused culture they intended to create exists throughout the organization. However, often this is not the case and executives end up with an inaccurate perception of their corporate culture. Here HR can provide tremendous value by agreeing to keep a pulse on the corporate culture.

HR Cultural Levers

Human Resource professionals have at their disposal many of the necessary levers to create, sustain and change corporate culture. The challenge is for HR to make choices about the use of these levers and to where to focus their energy.

Pay Systems: Compensation and reward systems are one of the most important mechanisms HR can use to motivate employees to perform in ways that are proper. Quite simply, those employees who think, act and behave in the proper way should be rewarded. Those who do not should not receive rewards because doing so will send a mixed message to employees.

HR must be careful when designing such pay for performance reward programs. To effectively impact corporate culture, pay systems should reward not only job outcomes, but also behavioral expectations. For example, it is quite common for HR to design a pay system that rewards based simply on productivity. However, such narrowly defined expectations could be creating a culture that is counter to organizational success.

In one organization, sales employees were rewarded only on the number of accounts that they opened . What occurred however was an environment where sales employees where overly competitive with each other, teamwork was non-existent, employees only looked out for themselves, and they ignored company policies in order to close the deal. These employees in fact were demonstrating negative behaviors that were counter to the desired culture of the organization. Yet, based on the pay system designed by HR, they were rewarded. Such a pay system did not support the corporate culture and proved to be a valuable lesson for this HR team.

Performance Management: Performance management programs can greatly impact corporate culture because they clearly articulate to employees what is expected from them as well as provides a feedback mechanism to inform employees if they are being "proper" as defined by the corporate culture.

To impact culture, performance management systems need to also address employee behaviors and not just work objectives. Doing so helps to eliminate the mistake described above where employees were rewarded even though they demonstrated behaviors counter to the culture. So even though business objectives may be met, if behavior expectations are not the performance management process will point out this discrepancy to an employee so that their behaviors can be aligned with corporate culture.

Also, culturally aligned performance management systems have a strong element of differentiation. This means that those who think, act and behave in the proper way according to the culture should be given higher ratings, increases and/or promotions than those that do not. If your performance management process simply gives every employee the same rating and/or increase regardless of whether they are thinking, acting or behaving properly, your performance management process then does not impact corporate culture.

Recruiting and Selection: Talent acquisitions efforts impact culture by determining the types of employees brought into the organization. Savvy HR professionals look for more than just the right skills and capabilities in an applicant, they should also determine if the candidate will be a good cultural fit for the organization. To do this effectively, HR must have a solid understanding of the culture of the firm if they wish to determine if someone will fit into the culture. Questions focused on determining cultural fit should be a part of every new employee interview.

One organization recently hired a human resource director and failed to ask cultural fit questions. This particular director had a command and control approach as well as preferred to micromanage his direct reports. Employees within the human resource function soon began to resign because the new manager did not display actions or behaviors that were in alignment with the culture that had always promoted empowerment, open communication and an emphasis on employee development. The director was soon let go because he did not fit into the culture desired by the organization even though he possessed the proper skills, education and experience.

Training & Development: By focusing on training and development efforts that help employees to think, act and behave in the proper way, HR can impact the culture. Training programs can be designed to help employees demonstrate the behaviors desired by the corporate culture. Also, those who are successful within a culture should be given additional development opportunities so that they can assume positions of greater responsibility. By developing and promoting those that support the corporate culture, HR again is again having an impact.

Also, organizations that promote employee development as part of their corporate culture should ensure that enough resources are allocated to HR´s training and development budget. The allocation of scarce resources is another sign that employees look for when determining if an organization is serious about creating the culture they espouse.

To see how this all works together, let´s look at a situation where leadership wants HR´s help to create a corporate culture that focuses on teamwork and collaboration. First, HR can establish reward programs that are team-based. Next, they can create a performance management process that evaluates employees on their teamwork and coordination behaviors. HR can help shape training programs designed to improve employee teamwork skills and how to function as a high performing team. Lastly, HR can look to hire individuals who have demonstrated an ability to work well in teams and have experience leading teams. By leveraging these 4 elements alone, HR could have a tremendous impact on shaping a teamwork and collaboration based corporate culture.

As this article demonstrates, HR professionals have many levers at their disposal to impact corporate culture. Other HR elements that could be leveraged include organizational design, corporate values, and even the physical work environment. The truth is that the ability to perceive the limitations of one´s culture and to develop the culture adaptability is the essence and ultimate challenge of HR leaders. Those HR professionals looking to provide value to their organization must understand how they impact corporate culture.



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