Editor’s Note: Ganesh Rajagopalan is a seasoned management consultant and former investment banker. He is also a leading author on Flevy, having published numerous business frameworks on topics such as Strategy Development, Investment Analysis, and Value Chain Analysis. You can view all his materials here.
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Corporate Culture is incredibly impactful across all aspects of an organization–its people, values, direction, leadership, structure, and so forth. In fact, culture is a source of competitive advantage for many companies. Therefore, it is very important to understand a company’s culture–and be able to dissect it to understand its strengths, weaknesses, and how those weaknesses can be improved to benefit the organization. One powerful framework to do understand organizational culture is the Competing Values Framework.
Competing Values Framework came about as a result of research into organizational culture that a firm sees fit to be effective in a given context/business environment to deliver results that it is targeting.
It found that the culture that a firm adopted resulted from a mix of competing factors that it had to evaluate. These are classified as a continuum from:
- Internal to External (on one dimension); and
- Flexibility to Control (on the other dimension).
Internal - Organizations and managers are viewed as effective if they have harmonious internal relationships and processes. Thus we have internal orientation with integration, collaboration & unity as drivers of efficiency at this end.
External – Organizations and managers are viewed as effective if they if they successfully compete against others and establish a market niche. So at the other end are differentiation, competition, and rivalry as drivers of efficiency.
Flexible – Organizations and managers are viewed as effective if they are changing, adaptable, and transformational. Thus we have flexibility, discretion & dynamism driving efficiency at this end
Control – Organizations and managers are viewed as effective if they are stable, predictable, and consistent. Hence at the other end is stability, order & control driving efficiency.
Competing Value Framework provides the overall dimensions – approaches, shapes, forms, practices & activities that compete with each other as organizations and people try to become effective or more effective i.e. the combination of key factors amongst these they believe is best suited to deliver higher and higher value.
Quadrant 1 – Represents a culture with internal emphasis – on people & processes – with varying degrees of flexibility.
Quadrant 2 – Represents external emphasis – on market & competition – with varying degrees of flexibility.
Quadrant 3 – Represents external emphasis – on market & competition – seeking varying degrees of stability/control.
Quadrant 4 – Represents internal emphasis – on people & processes – with varying degrees of control.
Thus Each of the four quadrants represent the core or principal values or culture which people/organizations believe will help them to be effective i.e. add value/greater value.
The core culture appropriate to an organization depends upon their judgement of the needs for success given the nature of the industry, product-market segment, competitive environment, customer segments that they operate in etc.
It is important to note that the four core values actually are based on fairly contrary focus: Flexibility vs. Stability (Control), Internal vs. External. This is the reason why it is called as Competing Value Framework.
As can be seen there is a continuum from one end to the other of these opposite focal points and organizations could fall on various points on this continuum usually with one of the quadrants as their core value/culture.
Organizations need to know/understand the core value/culture that presently drives them, understand its appropriateness in the present and expected future circumstances/environment/context and initiate changes if and when necessary.
In this sense the cultural orientation needs to be dynamically evaluated as the industry and business environment changes to ensure continuous effectiveness and value addition.
The framework has relevance to the leadership styles a culture would encourage for effectiveness, the managerial competencies each culture will focus on, HR role and competencies to be developed and so on.
These and many other aspects of the framework has been covered in a 90+slide ready-to-use presentation with slide notes available at Flevy here. Please do check it out.