Corporate Culture: Killer or Catalyst

Corporate culture is often described as “the way we do things around here”; it refers to the beliefs and behaviours that determine how a company operates both internally and externally.  Corporate culture may be shaped intentionally or it may just develop organically from the cumulative traits of the people that an organisation hires.

In the 1960s, the supermarket chain Victor Value was in a position to take over a smaller chain called Tesco.  Then the founder died and the sons took over.  They weren’t interested in the business and started helping themselves to the takings – that was a cue for everyone else to join in.  Tesco later took over what was left of Victor Value.

In 2016, Wells Fargo was the world’s biggest bank by market capitalisation (the sum value of all its shares).  Then it came out that over several years, employees who were being pushed to cross-sell banking products to existing customers had created millions of fake accounts for customers without the customers being aware of them.  That led to a $185m fine.  The aggressive selling culture nearly killed the company.

Then there is Netflix which puts its success down to its culture.  The CEO, Reed Hastings, published a Culture Deck, a presentation of their culture on the internet that has been viewed millions of times.  The CEO sees the greatest risk to the Netflix business model as a lack of innovation.  The purpose of Netflix’s culture is therefore to promote innovation.

Summarised as “No Rules Rules”, the Netflix culture features concepts such as radical candour – anyone is allowed to challenge a decision as long as they explain themselves, and that includes the CEO’s decisions.  Another feature is sunshining where employees are required to publicly explain actions and decisions they have taken.  There are effectively no policies.  You can take as much holiday as you want, and are encouraged to do so as that promotes new ideas.  There is no expenses policy – you are expected to act always in Netflix’s best interests, that is all.  The aim is to emulate a high-performing sports team – a temporary dip in performance is allowed, but if your manager decides they would not fight to keep you (and that is the test), then you are let go with some of the most generous severance packages around, and there is no shame attached to this.

You have to wonder if the culture can withstand further expansion or acquisition.  But so far it has and the results are there to be seen: revenue per employee at Netflix is nine times that of Disney, and shareholder value per employee is three times that of Google. 

Reed Hastings claims that the Netflix culture is encapsulated in a quote from Saint-Exupéry’s The Little Prince:

“If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders.  Instead, teach them to yearn for the vast and endless sea.”

Data Sources: Tesco internal history, Fortune magazine, www.economist.comjobs.netflix.com/culture, http://www.investopedia.com

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