One of the most important components of corporate resilience is firm culture. A company’s culture defines how it views itself, how it acts and even how it thinks. Firms with strong cultures are often able to thrive under very difficult conditions while firms with weak cultures can struggle even when it has extensive resources and business conditions are highly favorable. This article sets forth key elements of corporate culture and how they impact firm resilience.

Defining Corporate Culture

One key component of every firm that impacts its resilience is its culture. Rather than consist of a single characteristic, a firm’s culture is the sum total of what it defines as important and how it believes it should carry out its business. In addition to comprising both spoken and unspoken rules about what should be prioritized and how things should be done, firm culture is also a force that guides a firm even when there are no clear rules about how to act in a particular situation. Culture is what firms do even when they are not thinking about what to do.

Firm culture is defined and impacted by several components, including values, work approach, cultural reach and cultural application.

Values. Firm values are one of the most important elements of corporate culture. In the most general sense, a firm’s values represent how it believes that it should carry out its business. For some firms, their most important value may be customer service while for others it may be always trying to be innovative. In practice, many firms are guided by a matrix of values that change over time with some values having a larger impact on a firm’s activities than others.

Work Approach. A second area that defines a firm’s culture is its work approach. A firm’s work approach can classified in several different ways, including:

• Emphasizing teamwork vs. emphasizing competition between individuals;
• A top-down approach where the firm strictly follows the lead set by the CEO vs. a bottom-up approach characterized by reacting in different ways to business situations;
• Rule-driven vs. encouraging flexibility; and
• Doing things the way that they have always been done vs. constantly trying to innovate.

These categories represent different ends of thought and operational spectrums. In practice, most firms are not fixed at one end of any spectrum or the other but rather exhibit tendencies toward certain types of work approach practices. Moreover, these work approach lines typically are not separate but rather often overlap to create unique cultural environments. to each firm. One firm, for example, may emphasize teamwork and innovation while the other emphasizing competition and rules.

A Work Approach Matrix

Emphasis on Teamwork	Emphasis on Internal Competition
Top-Down	Bottom-Up
Emphasis on Rules	Emphasis on Flexibility
Emphasis on Tradition	Emphasis on Innovation

Cultural Reach. Another key component of firm culture is cultural reach. Cultural reach refers to how far the culture of a firm extends both internally and externally. For some firms, management may be highly aware of and follow a firm’s culture but other employees in the firm may not be strongly guided by it at all.

Cultural reach also refers to how far the culture of a firm extends outside a firm. This means how aware third parties are of a firm’s culture and the degree to which it influences their buying decisions or business actions. For firms that are highly successful, their culture can become a model that other firms try to emulate.

Cultural Application. The fourth area of a firm’s culture is how it is applied on a day-to-day basis. Is a firm’s culture consistently followed even when it is difficult to do so? Or when a firm faces challenging external or internal situations does it forget its core cultural elements and simply do whatever is necessary to get by an operational or financial impasse?

An important aspect of cultural application, both internally and externally, is what the consequences are of not following a firm’s culture. For some firms. not acting in accordance with a firm’s culture may result in serious consequences, such termination of employment, while for other firms ignoring or even acting in contravention of a firm’s culture may be repeatedly ignored.

Firm Culture and Resilience

A firm’s culture has a significant impact on the two key elements of resilience: perseverance and agility. These elements have been discussed in a previous blog post. Measuring Adaptability: Valuation and Corporate Resilience

Firm Culture and Perseverance. One of the key elements of a firm culture is perseverance, which is the ability of a firm to keep going even when it is very hard not to quit. As a general rule, firms that have values that emphasize perseverance, have a well-defined work approach, have a wide cultural reach and consistently “walk the talk” and act in accordance with firm culture have higher levels of perseverance than firms who do not.

One practical example of this can be seen with respect to business planning. Some firms have long-term visions that are supported by detailed year to year plans. Firms that take this planning approach downplay internal or external circumstances that are inconsistent with the long-term vision and find ways to stay the course. Other firms constantly change their plans in the face of evolving internal and external business conditions.

Firm Culture and Agility. To be resilient, a firm must combine perseverance with agility. An agile firm must not blindly move forward despite external conditions but rather have the ability to respond to them.

From the perspective of culture, agility is based on several factors. One of these factors is the capacity to see and process changing internal and external conditions. Firms that have the ability to do this often have cultural values that emphasize looking outside of the firm and constantly comparing what the firm sees to what it expected. Large differences between what was expected to what is actually occurring serve as a basis for reevaluating business courses of action.

A second element of corporate culture that impacts agility is the ability of a firm to actually design a plan to respond to those changes and actually put it into practice. This ability touches many elements of firm culture, such as how well the firm can marshal internal and external resources to design a plan, how quickly plans can be created and how effectively the firm can work to implement plans once they are agreed upon.

The Perseverance/Agility Paradox. At first glance, it may seem that perseverance and agility are mutually exclusive. Yet a firm in fact can simultaneously exhibit high degrees of perseverance as well as agility. This is possible when its powers of perseverance are dedicated, not to moving forward in one direction at all costs, but rather systematically creating and supporting the conditions where reasoned rather than improvised agility is possible. This can thought of as a capacity to very diligently practice to make changes when necessary.

A firm can simultaneously exhibit perseverance as well as agility when its powers of perseverance are dedicated, not to moving forward in one direction at all costs, but rather systematically creating the conditions where reasoned rather than improvised agility is possible.

To provide an example, a highly resilient firm may be extremely disciplined about having a methodical approach to analyze market conditions. This could involve regularly commissioning third-parties to prepare reports on key GDP trends that impact demand for the company’s products or services. Highly diligent and structured consideration of external or internal conditions permits a company to evaluate the potential need to change a course of action but within the context of a well-thought analytical and operational framework. For a firm with this type of cultural DNA, change is a function of perseverance rather than a deviation from it.

Conclusion

Firm culture is a key component of corporate resilience. A firm’s values, its work approach, its cultural reach and its application of its culture all impact how a firm faces uncertainty and whether or not it can convert that uncertainty into opportunities to build shareholder value and improve its competitive position. Rather than treating them as mutually exclusive, a strong culture take two characteristics which are at times thought of as mutually exclusive, perseverance and agility, and turn them into a powerful corporate asset.