Intangible Capital and Culture

Culture is the least tangible of the structural capital assets. It can be hard to define but everyone knows it is there. Culture can be a productive or a destructive force within an organization. In general, a culture is what it is—and can be especially hard to change. As a starting point, it is important to be able to describe the basic features of a culture as a first step to self-knowledge.

In the IC processes that we use to map out the intangibles of organizations, culture characteristics are captured although they do not feed into the overall rating of the intangibles. The logic is that there is no one right culture but that understanding the predominant culture is critical to the success of all other management efforts. That’s pretty much the way we view it, although we know that there are people that specialize in trying to change culture. And we know from experience that a bad fit between management efforts and existing culture can be a recipe for failure.

We recently had an experience with a very numbers-based organization. Their corporate culture demands precise calculations of everything. We had been hired to help them scale their organization. As a way of setting the stage for the project, we put up a drawing that showed the huge gap between the market coverage of their existing staff and the potential market—on the order of 50:1. Yet when they saw this graphic, the management team ignored this amazing disparity between their existing and potential markets. Instead, they immediately started arguing about the accuracy of the numbers behind the ratio (that would, by the way, have changed the 50:1 ratio only slightly). From that experience, we learned to vet every number so that this kind of discussion wouldn’t derail our future conversations—although we have never let up in trying to help the team see the forest for the trees.

A good place to start in understanding your own culture is to use the following basic dimensions of culture including:

• The extent to which the business culture is homogeneous or heterogeneous
• The extent to which there are counteracting subcultures
• The extent to which it is difficult to adapt to the culture
• The extent to which the vision, mission and goals of the organization is communicated and understood throughout the organization
• The extent to which the employees consider the working environment open
• The extent to which employees have a sense of pride in their workplace

When you are ready to dig deeper, you will want to provoke a discussion among staff members and management. The focus should be on the values and behaviors that the culture encourages. Self-understanding is the first step in understanding culture.

Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization.