Corporate Culture

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For a while--it really was back when Reagan was in the White House--corporate culture of this type was hot stuff. The book Corporate Cultures: The Rites and Rituals of Corporate Life, by Terrence E. Deal and Allan A. Kennedy, became a big best-seller. Every CEO worth his or her inflated salary had to nod knowingly when the talk turned to squishy subjects like mission and values. But then the fad dissipated, as fads do. More important, the demands of the marketplace intensified. Competition heated up. The pace of technological change quickened. In the 1990s businesspeople seemed to survive and prosper only if they could cut costs beyond recognition, deliver unprecedented levels of quality and service, and develop relationships with customers so intimate they were almost embarrassing. Nobody had time for luxuries like corporate culture. Probably nobody thought it would play too well, either. Even corporate executives can't expect employees to get misty-eyed over a new mission statement right after thousands of their colleagues get the ax.

Of course, some companies never got the message that they were supposed to forget about culture. Three come to mind immediately.

The first is Quad/Graphics, the Wisconsin-based printer. (Full disclosure: Quad is Inc.'s printer.) Founder Harry Quadracci takes his trust-the-employees culture so seriously that he still runs his annual Quad/University, in which managers literally walk out of the plant for up to three days and leave it in the hands of hourly workers. The second is Southwest Airlines, famous for its wild and woolly--not to say manic--culture. Everybody at Southwest, from CEO Herb Kelleher to the newest gate attendant, pitches in to make sure that customers have a good time and that airplanes get unloaded and reloaded and back in the air fast. The third: Nucor, the steel company, with its austere egalitarianism ("Senior executives do not enjoy any traditional perquisites," proclaims a company document) and day-in, day-out focus on production.

All three companies went from Inc. 500 size to Fortune 500 size in only a few decades, even though they were competing in some of the toughest businesses around. They're growing and thriving today. The graybeards in those industries are still wondering how they do it.

How they do it. the fact is, powerful cultures have powerful effects on how a company's people work together. Look at Southwest. Its strategies are no secret. Other airlines have duplicated its no-frills, point-to-point service. But maybe you remember that Wall Street Journal article a few years ago detailing the intricate, help-each-other-out teamwork necessary for a Southwest ground crew to turn its planes around in one-third the time other airlines require. Reading the article, you could only conclude that those employees wanted to get that plane back up in the air and making money. Somehow it's hard to imagine the workers at American or Delta caring much, one way or the other.

Walk into a high-culture outfit and you feel the difference right away. Earlier this year I spent a day at AES Corp.'s Thames facility, near New London, Conn. Only 15 years old, AES operates electric-power-generating plants in 35 countries. In 1995 it racked up $107 million in earnings on $685 million in revenues. It's a company that does bizarre things like planting millions of trees in Guatemala (to make up for the carbon dioxide produced by its facilities) and asking teams of hourly workers to manage its multimillion-dollar cash-reserve funds. No doubt I sounded a little skeptical when I asked one of the technicians about the latter practice. "Yeah, I was a little nervous at first," he agreed. Then he proceeded to explain how, with just a few phone calls, he had learned to get a good rate on $5 million worth of commercial paper. "It was a lot of fun," he concluded.

In such an outlandish atmosphere, the unusual becomes the usual. At AES, materials-handling technicians negotiate contracts with coal suppliers, thereby reducing the need for high-priced managers. Machine operators order replacement parts themselves, ensuring a minimum of downtime. When plant manager Dan Rothaupt wanted to change the bonus plan, he put it to a vote of the employees. It lost resoundingly--and so no one was left feeling that management had rammed an unwanted compensation system down employees' throats. With such a culture, is it any wonder that AES thrives even in today's competitive environment?

A successful corporate culture, however, is not some kind of black magic. It derives its power not just from abstractions but from specific practices that employees understand as symbolizing and representing the culture. It pays off not because it's some kind of softheaded do-goodism but because it relates to the specific competitive demands of today's marketplace. Consider a handful of mini case studies illustrating the relationship between the practices of culture--the artifacts, so to speak--and how they enable companies to outstrip their competitors.

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