Platt Perspective on Business and Technology

When silo walls mean there is no overall corporate culture – 1

Posted in book recommendations, business and convergent technologies, strategy and planning by Timothy Platt on October 18, 2011

Corporate culture means a wide variety of things, but at its core it represents a shared understanding of behavior, practice and accountability. I frequently refer to corporate culture as a body of shared judgment, perspective and opinion that is so ingrained and automatic as to become background assumption – and in effect invisible unless specifically brought up or challenged. There is an element of truth to that but here and for this posting I focus on the positive value of corporate culture as a matter of behavior and opinion learned and shared, and as a source of due diligence restrictions that rest on historical precedent and organizational experience. In that, corporate culture promotes effective behavior, consistent with the organization’s history and image, and with its ongoing strategic and operational planning as a whole.

“As a whole” is very important here as corporate culture, when developed and instilled across an organization, becomes a consistent part of that organization and its ongoing practices. It becomes part of what defines the organization and it represents its values as a single cohesive entity. Yes, corporate cultures usually includes a lot of details such as dress codes too, that do not necessarily directly support core business strength and sustained market share per se, but for here I primarily focus on core-sustaining elements.

I have written about silo walls and the problems they can create in stymieing shared effort and overall efficiencies. I have written about the way silo walls can create breaks and discontinuities, and inconsistencies in effectively realized and followed operational processes and their underlying strategic rationale. Silo walls block knowledge and best practice sharing and limit the effectiveness of the organization in more fully utilizing the value of its human capital. (See, for example, one of my first postings to this blog: Connecting an Organization Together, Version 2.0.)

Here I focus on the impact that thick silo walls can have on capacity to develop, maintain and share a commonly held corporate culture – and on the due diligence implications that arise from that.

• Ultimately, when an organization is partitioned by the presence of thick silo walls marking off separate organizational fiefdoms there can be no single organizing corporate culture.
• I add that this might or might not be a bad thing depending on circumstances, and I bring up three possible scenarios here in this posting to explain that assertion.

1. Merger and Acquisition (M&A) and related paths to thick silo walls, and to development of local cultures that may be at odds with the needs of the overall organization:

In this scenario, internal silo walls are in fact largely formed from external business-defining walls that had marked off the outer boundaries of the organizations that have now entered into a merger or acquisition. Even under the best conditions with active and proactive support from the top, loosening of the “us versus them”, or even an “us and them” attitude can take time. And so can an effective, realized merging of operational processes and strategies – as actually followed-through upon and on all levels. Merging of corporate cultures can and does take even longer and even when the organizations coming together start out basically oriented and thinking in primarily the same direction.

This all takes place in the context of a series of forced, strategically organized and pre-planned mergers and wall breakings that almost always take place within a newly combined organization coming out of an M&A event. These higher level organizational and table of organization level combinings generally coincide with the assignment of senior management for running the various major functionally and otherwise defined branches of the new table of organization. Often this means at least some executives from company A now supervise people who had worked primarily for B and it should be assumed as a given that teams will be merged at all levels with management cross-over there too – with formerly A managers supervising A and B, combined teams.

This places pressure on the newly combined organization and on the people and teams who work there to find effective ways to reconcile differences and to find workable compromises for moving forward and for meeting goals and priorities.

2. Organizations that have become sclerotic in their organization from internal turf fighting and drift, and in need of change management:

If the basic trend for M&A scenario cases is for a gradual breaking down of silo walls, and reconciliation and combining of processes and best practices, this is a scenario where walls tend to thicken and become more impermeable, and where they proliferate. Think of the sclerotic organization that is drifting towards irrelevancy in its marketplaces as in effect following a pattern antithetical to that of a successful M&A as even if the headcount remains unchanged – even if it grows, organizationally and as a matter of overall effectiveness it is as if this business were shrinking. It is just doing that without lowering its fixed operating and other/related expenses, at least until it hits a crisis of such severity that even it cannot ignore that.

Organizations following this basic scenario model do not face a challenge of reconciling corporate cultures as a part of a larger overall process of reconciliation and merger. They in effect lack a true corporate culture, and any counterpart to one that they do hold to is strictly ad hoc and reactionary to the moment – and self-protective and locally defined.

3. The special case of wholly-owned subsidiaries where their value resides in their having their own perhaps unique organization and culture:

I return in this scenario to M&A, and particularly to acquisitions but of a very particular type. In scenario one, above, I wrote primarily in terms of businesses combining to increase market share and market community reach, productivity scale and related measures of business vitality – within a shared arena of core capabilities and business focus. Here I turn to the situation where a business acquires a smaller organization that offers it a distinct strength or capability that is outside of its current core capabilities – but that will be vital if this larger organization is to remain cutting edge and long-term successful. In this case, think in terms of a larger, established organization with a solid, reliable market base that buys out a smaller, perhaps early stage venture with a true blue ocean strategy capability.

The most important long-term strategic decision the acquiring business might make under this circumstance is to hold its smaller acquisition at a distance and to help it preserve and maintain the unique value proposition that it offers. I have seen too many companies buy out sources of real potential value and even routes to their own long term viability and success – simply to crush the life out of them by imposing processes and structures, and corporate cultures that can only serve to stymie and deaden them.

I am going to pick up on this third scenario in a continuation piece as a next series installment. My primary goal there will be to look at the challenges of corporate structure and internal walls, and corporate cultures – from the perspective of ubiquitous computing and communications with its always connected capabilities.

For a general reference on blue ocean strategies, see:

• Kim, WC and Mauborgne, R. (2005) Blue Ocean Strategy: how to create uncontested market space and make the competition irrelevant. Harvard Business School Press.

You can find this and related postings at Business Strategy and Operations – 2 and the first 200 postings in this general directory at Business Strategy and Operations.

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