Newsletter - August 2007
Central Eastern Europe: Evolution of Corporate Culture
August 9 , 2007 - By Catherine Balcarek
The concept of corporate culture brings to mind certain values and rules of behavior (both within and outside the organization), which are shared by employees and management and, from a moral point of view, are considered binding. Central Eastern Europe is an interesting region to discuss in this context due to the fairly recent transition from a planned to market economy. As a strategy consultant and executive search professional working in the Czech Republic and CEE for much of the last decade, I have had the opportunity to directly observe the striking changes in the business climate; the transition from organizational culture – either lack thereof or malignant in nature - as a common cause of company-wide crisis to the currently mainstream recognition of corporate culture as a key competitive advantage has been particularly noticeable.
In the past, matters concerning corporate structure and culture have often been beyond the interest of company management in most Czech and other CEE organizations, as political affiliations and meeting the demands of key stakeholders in the government were the highest objective and the one key to profitability. The concept of meeting the needs of customers, both internal and external to the organization, was non-existent. Although the year 1989 brought democracy and freed the population from decades of oppressive communist rule, it would take at least another decade of adjustment and hard work to adopt the western business mindset. Self-interest, greed, lack of initiative and the strong presence of a collective vs. individual mindset defined the early years of transforming the economy; the importance of leadership and corporate culture as an integral part of a successful organization were largely ignored. The following are specific means in which (undefined or negative) corporate culture directly caused many CEE company scandals or, in the least, significantly deepened an existing crisis¹:
Failure of corporate culture to reflect major changes in society: A fundamental conflict between the organizational structure / purpose and the reality of the surrounding world; this is a continued challenge for many companies operating in CEE, further compounded by the unprofessional and at times criminal conduct of company management and owners (short-term personal interests, asset-stripping). There has been a failure to recognize customer needs, respond in a flexible way to the changing conditions, and subsequently modify the organizational value system.
Management instead of leadership: Following the fundamental political changes in the region, managers in many organizations have tended to focus on building bureaucratic, hierarchical structures with (usually) centralized decision-making power instead of recognizing the significance of leadership via transparent and frequent communication, formulation of vision and mission, as well as outlining a specific strategy to achieve pre-set objectives. In addition, the concept of trust has been markedly absent from most organizations. Employees were not valued and felt that they ‘did not matter’ as individual contributors to company success; as such, the lack of personal accountability has been alarmingly apparent.
Frequent existence of ‘sub-cultures’: In a best practice scenario, corporate culture should be adopted by the entire organization, despite its size and organizational structure. Having existed in a non-democratic system for many years and often since their inception, CEE organizations are often characterized by a number of ‘sub-cultures’ within various divisions / departments. As such, major deviations from the developed and desirable corporate culture occur, and personal interests diametrically opposed to the goals of the overall organization are promoted. This results in lack of support of the company strategy, goal implementation, and loyalty, and has often led to a crisis state.
With the arrival of best practices in the form of leading US and western corporations, the CEE business climate has been gradually improving. Increasingly, the attention of top management has been shifting to the significance of corporate culture as one of the leading factors in achieving competitive corporate advantage and achieving leadership within their respective industries.
The new millennium brought with it a change in perceptions and the realization that, with the impending war for talent , companies with lack of cohesive corporate culture or one which interferes with business objectives will very likely lead to a significant ‘brain drain’ as gifted young professionals explore career development opportunities outside the region. Recent studies reveal that best employers in CEE (Microsoft was #1) achieved higher results in the positive corporate culture category, starting from cultivating the feeling that employees are the organization’s most important asset ; 58% of those employed by ‘Best Employers’ agreed with this statement as opposed to only 26% in other organizations². Other criteria within the corporate culture category included ‘open door’ policy, approachable leaders, interest in employee opinions, and a generally positive “everyone counts” environment; collectively, they have been directly correlated with achieving higher business results. While 67% of those employed by companies at the top of the Best Employer survey felt that senior leaders care about employee opinions, only 33% of their counterparts in non-winner organizations agreed.
Although significant challenges remain in the CEE business landscape, there is compelling evidence that the concept of corporate culture has shifted from a non-topic and/or ‘behind-the-scenes’ contributor to corporate crises to a much more widely recognized area of great potential and source of competitive advantage.
¹ Adapted from a 2001 study by R. Zuzak, Research Assistant at the Faculty of Agricultural Economics and Management, University of Agriculture, Prague, Czech Republic.
² Hewitt Associates, 2006 CEE Best Employers survey
Catherine Balcarek is vice president of global talent acquisition for OI Partners, Atlanta. She can be reached at cbalcarek@executrack.net.