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What is 'Corporate Culture'

Corporate culture refers to the beliefs and behaviors that determine how a company's employees and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires. A company's culture will be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction and every other aspect of operations.

BREAKING DOWN 'Corporate Culture'

Alphabet (GOOGL), the parent of Google, is well known for its employee-friendly corporate culture. It explicitly defines itself as unconventional and offers perks such as telecommuting, flextime, tuition reimbursement, free employee lunches and on-site doctors. At its corporate headquarters in Mountain View, Calif., the company offers on-site services such as oil changes, massages, fitness classes, car washes and a hair stylist. Its corporate culture helped it to consistently earn a high ranking on Fortune magazine's list of 100 Best Companies to Work For.

History of Corporate Culture

Awareness of corporate or organizational culture in businesses and other organizations such as universities emerged in the 1960s. The term corporate culture developed in the early 1980s and became widely known by the 1990s. Corporate culture was used during those periods by managers, sociologists and other academics to describe the character of a company. This included generalized beliefs and behaviors, company-wide value systems, management strategies, employee communication and relations, work environment and attitude. Corporate culture would go on to include company origin myths via charismatic CEOs, as well as visual symbols such as logos and trademarks.

By 2015, corporate culture was not only created by the founders, management and employees of a company, but also influenced by national cultures and traditions, economic trends, international trade, company size and products.

There are a variety of terms that relate to companies affected by multiple cultures, especially in the wake of globalization and the increased international interaction of today's business environment. As such, the term cross culture refers to “the interaction of people from different backgrounds in the business world”; culture shock refers to the confusion or anxiety people experience when conducting business in a society other than their own; and reverse culture shock is often experienced by people who spend lengthy times abroad for business and have difficulty readjusting upon their return. To create positive cross-culture experiences and facilitate a more cohesive and productive corporate culture, companies often devote in-depth resources to combating the occurrence of the above, including specialized training that improves cross-culture business interactions.

Examples of Contemporary Corporate Cultures

Just as national cultures can influence and shape a corporate culture, so does a company’s management strategy. In top companies of the twenty-first century, such as Google, Apple Inc. (AAPL) and Netflix Inc. (NFLX), less traditional management strategies that include fostering creativity, collective problem solving, and greater employee freedom have been the norm. It has been argued that this is also the key to these companies’ success. Progressive policies such as comprehensive employee benefits and alternatives to hierarchical leadership – even doing away with closed offices and cubicles – are a trend that reflect a more tech-conscious and modern generation. This trend marks a turning away from aggressive, individualistic and high-risk corporate cultures such as that of former energy company Enron.

High-profile examples of alternative management strategies that significantly affect corporate culture include holacracy put to use at shoe company Zappos (AMZN) and agile management techniques applied at music streaming company Spotify.

Holacracy is an open management philosophy that, amongst other traits, eliminates job titles and other such traditional hierarchies. Employees have flexible roles, and self-organization and collaboration is highly valued. Zappos instituted this new program in 2014 and has met the challenge of the transition with varying success and criticism.

Similarly, Spotify, a relatively young but very successful company, uses the principles of agile management as part of its unique corporate culture. Agile management in essence focuses on deliverables with a flexible, trial-and-error strategy that often groups employees in a start-up environment approach to creatively tackle the company’s issues at hand.

Characteristics of Successful Corporate Cultures

Corporate cultures, whether shaped intentionally or grown organically, reach to the core of a company’s ideology and practice and affect every aspect of business from each employee to customer to public image. The current awareness of corporate culture is more acute than ever. The Harvard Business Review identifies six important characteristics of successful corporate cultures in 2015. First and foremost is "vision": from a simple mission statement to a corporate manifesto, a company’s vision is a powerful tool. For example, Google’s modern and infamous slogan: “Don’t Be Evil” is a compelling corporate vision. Secondly, "values," while a broad concept, embody the mentalities and perspectives necessary to achieve a company’s vision.

Similarly, "practices" are the tangible methods, guided by ethics, through which a company implements its values. For example, Netflix emphasizes the importance of knowledge-based, high-achieving employees and, as such, Netflix pays its employees at the top of their market salary range, rather than an earn-your-way-to-the-top philosophy. "People" come next, with companies employing and recruiting in a way that reflects and enhances their overall culture. Lastly, "narrative" and "place" are perhaps the most modern characteristics of corporate culture. Having a powerful narrative or origin story, such as that of Steve Jobs and Apple, is important for growth and public image. The "place" of business, such as the city of choice and also office design and architecture, is also one of the most cutting-edge advents in contemporary corporate culture.

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