Article

The Corporate Cookie Cutter fallacy 

Why copying a winning company culture might be the worst career move you'll ever make

by Jens Højgaard, CEO, Maestro Business 

Management literature is full of it, business consultants sell it bundled up in “need to have packages” and business schools teach it en mass: ready-made, winning cultural programs that – in hindsight – proved successful in another organisation.

  • Need a performance culture? Just do what Nike do. 
  • Need a culture of continuous improvement? Why not copy Toyota and go Lean? 
  • Need a safety culture? How about Alcoa – they score excellent! 
  • Need a service culture? Let’s borrow some craziness from Zappos.
  • Need a low cost culture? Ryan Air is the place to go for insight.

It might seem intriguing to copy cultural elements of already successful companies into your own; they have already made it through the scrutiny of real life application and this comfortably proves that it actually works. As a nice side effect you can make a huge shortcut by merely copying them.

The only problem is that it can severely hurt your credibility and even worse destroy your company.


Why not to copy GE

In the cultural turnaround of GE, former CEO and President Jack Welch among other things needed to change the old GE culture. The culture of the old conglomerate had grown increasingly indolent and unable to meet the challenges of a new world order.  Mr. Welch needed to turn this culture into a high performing culture. One of the methods he used was the so-called Forced Ranking or Vitality Curve. In this method, all employees in the company are divided into three groups:

  • A-players. The 20% highest performing individuals. 
  • B-players. The 70% mid-level performers. 
  • C-players. The 10% lowest performers.

This was done annually at all organisational levels and for all teams. After dividing the company into these three ranks, A-players got promoted, B-players kept happy and C-players were fired. Year after year, the ranking was reset, GE employees re-evaluated and appropriate actions taken. The principle briefly described above made miracles at GE.

Now enter Microsoft. In 2000 founder Bill Gates, stepped down as CEO of Microsoft and was followed by Steve Ballmer. As opposed to Bill Gates, with his background in software coding, Mr. Ballmer was a hard-hitting business-man. He introduced forced ranking into Microsoft on a global basis in 2006.

The following notion that in any team of 10 people, no matter how qualified, two are going to be promoted, seven will receive a mediocre performance review and one is fired, eventually turned Microsoft’s culture from being extremely innovative, into extremely competitive. However, the competition was infertile: it turned Microsoft into an internal “dog-eats-dog” culture and not into an externally orientated competition-based culture as was intended. Top players refused to share ideas with other top performers out of pure self-preservation, and the individual-based performance culture began eroding collaboration throughout Microsoft. 

The once so proud innovation culture of Microsoft eroded away in just a few years and thus began Microsoft’s lost decade. While the forced ranking system worked miracles in turning the Old GE culture into the highest performing company in the world, that exact same principle stifled Microsoft’s ability to innovate - something that did not go unpunished in the tech industry. In November 2013, Microsoft officially abandoned the practice, but the damage was irreversibly done by then. In February 2014 Steve Ballmer retired from his job as CEO.

 

Blindly copying for sustainable output? 

The forced ranking system is one of many examples of how naively copying apparent cultural elements, from one successful culture into another in mild cases are a mere waste of corporate resources - and in severe cases can have catastrophic consequences. The forced ranking system that worked well in GE destroyed Microsoft’s innovation. It also led to the rotten culture and cataclysmic meltdown of Enron. The recent controversy regarding Amazon’s bruising work culture, among many others, is also closely linked to forced ranking. 

The number of companies who have embraced Toyota’s Lean manufacturing system or Motorola’s Six Sigma quality system, into their own organizational cultures since the early 2000s, is astonishing. But with an estimated overall failure rate, of more than 90% it is equally astonishing that companies continue investing vast amounts of money, resources and management credibility to continue failing.

The public sector is no exception and never has public expenditure on outside consultants been greater. Hospitals are undergoing major Lean roll outs. Nursery homes are engaged in forced rankings among nurses, physiotherapists, and certified nursing assistants. Schools are enforcing high performance cultures while public agencies, the defence sector and overall public services are obliged to follow New Public Management principles. These are all programmes intended to reduce bureaucracy, cost and inefficiency while improving the service levels. In reality they tend instead to overproduce stress and sick leave, technocratic control and a loss in value creation and overall quality. This has thrown many Western countries into a major public leadership crisis.

 

Think opposite

The old saying in scientific studies is that “correlation does not imply causation” meaning that humans are often biased by a severe logical fallacy that; if two events occur simultaneously, one must cause the other. In fact the causation might be the other way around – if at all.

It would be very easy for an outsider to see the forced ranking principles used at GE as:

“To achieve a high performing culture we must use forced ranking. We must periodically weed-out the poorest performing individuals.” 

While in fact what made GE successful through forced ranking was a mind-set of:

“Forced ranking is part of being a high performing culture, along with the strongest HR support and severance package and outplacement process anywhere in the world. Forced ranking is always based on the individual’s behaviour and values and not on their individual performance. Organizational performance is the side effect of attracting, retaining and promoting people with the right cultural fit.”

Standing on the outside, trying to comprehend what made Toyota successful, you might conclude:

 “If you want a Lean culture you must do house keeping/5S and Value Stream Mapping. You must refer to culture as Kata, and improvements as Kaizen or Kaikaku. Authoritarian compliance to Lean principles are of outmost importance.”

While John Deere or Parker Hannifin – two of the world’s most successful lean companies outside the automotive industry - would claim that:

“Because we are a culture of continuous improvement it makes sense to do housekeeping and hold a systematic focus on increasing value. We are using words and vocabulary that do not alienate the individuals in our organization, or unnecessarily exalt certain people within the organization.”


While mediocre scoring countries on the PISA rank (Programme for International Student Assessment) such as the United Kingdom and Denmark, might believe that:

“A high PISA score proves an excellent public school system.” 

 High performing countries like Finland and China might claim that:

 “Excellent, skilled teachers and disciplined, motivated students yield high PISA scores in public schools.”

 

Carefully designed culture 

When working with organisations that succeed in changing an entire culture – a pattern becomes very clear. The long-term performing business cultures have difficulty explaining exactly what they do that leads them to be so successful. This is because what they actually do is completely internalised, driven from values, aspirations and collective desires. They seldom follow textbook examples of conventional wisdom. They very often have their own developed vocabulary and methods suited to the organisation and supporting its main reason for existence. What they do is deeply ingrained in the day to day operations and in their collective mind-set.

They understand how to shrink the change process and gently embed it into the current culture. The goal is not to apply tools, techniques and fancy vocabulary from other cultures, but instead to shape their own culture, requiring a consistent internal ingenuity to create its own tools and techniques.