Having a good grasp of your organizational culture can help you hire the right people and adopt the right approach to change. But determining what type of culture your firm has isn't always easy. In this first part of a two-part podcast, Guy Gage, founder of consulting firm PartnersCoach, discusses the three types of culture he sees most often in CPA firms, and ways you can tell which predominates in your firm.

What you'll learn in this podcast:

• Why culture is the "immune system" of an organization.
• Why having a strong culture can actually be a problem.
• The three types of cultures often found in CPA firms.
• How to determine which type your firm has.
• How leaders can work with, not against, culture during times of change.

Play the episode below or read the edited transcript:
 

To comment on this podcast episode or to suggest an idea for another episode, contact Courtney Vien, a JofA senior editor, at Courtney.Vien@aicpa-cima.com.

Transcript:

Courtney Vien: Hello and welcome to the Journal of Accountancy podcast. I'm Courtney Vien, a senior editor with the Journal of Accountancy. Today's topic is organizational culture. We often hear that term, "culture," but what does it really mean? How can culture affect how firms respond to change, and whether they hire the right people? To shed light on some of those questions, I'll be speaking with Guy Gage, founder of PartnersCoach, a consulting and coaching firm for accountants and accounting firms. He has more than 20 years' experience coaching accountants. We'll hear from him in a moment, but first, please listen to this word from our sponsor.

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Vien: Hello, Guy.

Guy Gage: Hi, how are you?

Vien: I'm doing great. Nice to have you here.

Gage: Good to be here. Thank you.

Vien: We're here today to talk about culture. We often hear the term "organizational culture," but what does culture really mean? Can you help us pin it down?

Gage: This is an interesting irony in that culture is fairly easy to describe but difficult to see. It's the way I describe it. So, for instance, we know that culture is a combination of shared practices, norms, and beliefs that shape what people do and how they do it. That's the easy part. That's defining it. What gets difficult is when we start to try to define what it really means. Because it is so ingrained and automatic and it's simply defined as, "Well, that's just the way we do things around here." It's hard to know exactly what those things are. It's like, Courtney, if I asked you to describe everything in the room you're in. And you'd go around and talk about all the different objects. Probably it would be a long time before you talk about the air in the room. It's that invisible thing that is very important obviously, but we don't really think much about it or acknowledge it as there but is critical in its presence.

Vien: You spoke about culture and hiring at our 2021 ENGAGE event, and during your talk to you referred to culture as the "immune system" of an organization. By that you mean that one of its roles is to accept what's healthy or familiar to an organization, and to reject what's unfamiliar. Can you give us an example of how this works?

Gage: Yes, so here's a perfect example, Courtney. We see a lot of mergers and acquisitions going on, particularly in the acquisition world where staff of one firm are now under a new title, a new headship, if you will, a new leadership team, a new name. And oftentimes those staff really struggle with learning the new culture and some will choose to actually leave that culture because it's so foreign to the way they used to have it, the way it used to be. And they had become so ingrained in "how we do things around here" then it is it makes it difficult for them to get acclimated to a new way. But it also goes the other way. You bring in a new individual or a new practice line or something like that, that changes the "way we do things." Well, the first reaction is to repel it. That's the first natural response. What happens is when a new person comes in and starts to assert themselves and make their opinions known, for instance, or offer suggestions, a lot of times it's viewed as impinging on "the way we do things around here" and it's typically not received very well for that reason.

Vien: And obviously this can lead to problems when an organization needs to change or to accept new ideas, or even new employees.

Gage: Yes, this is something that I've picked up just from observing what happens in firms with strong cultures, is whenever they try to expand or diversify or somehow adopt a way of being that is outside the boundaries of the norms you get a lot of pushback, which is one of the reasons why a lot of firms are struggling with adapting to being a 21st-century firm. We hear a lot about what that means in terms of diversity and inclusion, in terms of advisory and consulting, in terms of expanding into the technology, artificial intelligence, and there's a lot of pushes. There are a lot of pressures that impose on firms that make it difficult for them to change, and primarily it's because their cultural norms don't permit them. "That's not the way we do things. That's not who we are." And so consequently, it's a longer process to adapt and adjust. Point being then what makes it a strong culture also could be an inhibitor to being an expanded and developing firm as well.

Vien: How can organizations overcome this tendency to reject what's new and different?

Gage: This is the role of leadership. In the end, the norms and practices have got to be flexible enough to account for something new. Leaders are the ones who declare this foreign approach, this foreign person, this foreign practice, this thing that is outside our boundaries as friendly, and we want to bring it in. It doesn't mean it's going to happen overnight. But it goes a long way to making it an acceptable component to their firm.

Vien: What role does onboarding play in this process?

Gage: Yeah, unfortunately, onboarding oftentimes is learning the software and learning where to enter your time, all the nuts and bolts on what to do. But there's not much time on how to do things. For instance, what does it mean — and I used to say this to the new staff — what's it going to mean when you hand in your tax prep work and you get it back from the reviewer and there's two pages of review notes? Does that mean you're an idiot? Does that mean you're failing? Does that mean that you're on a 90-day notice and they're going to fire you? Well, no.

We have to give people an idea of entering this new environment [and] what should be expected. Those are the easy ones. The problem is, we don't know how to handle the norm kind of things.

Vien: To onboard people correctly it helps to know what your culture is. There's been research done on organizational culture that identifies several different types of cultures that a workplace might have. Can you tell us about this?

Gage: Sure. I was introduced to the concept of organizational culture early in my career. Dr. Edgar Schein, who was with the MIT Sloan School of Management, wrote a book on organizational culture. It was fascinating and it really helped me to understand the dynamics of what goes on in an organization. Since then, I've become a student of that whole system's view of what's really happening here and why is it happening, and then how do you shape it otherwise?

There've been numerous researchers since [then] obviously that have weighed in as well. In one particular model by [Robert E.] Quinn and [Kim S.] Cameron, they have established what they call archetypes or formations of what a culture might look like. The reason why I like their model so well is it is so applicable to what I see in CPA firms.

Vien: Cameron and Quinn identified four main archetypes. But they also note that a firm or organization can have more than one.

Gage: Yeah.

Vien: Although usually one will be predominant. You mentioned there are three of these archetypes that you see most often in accounting firms. There's the clan culture, the hierarchical culture, and the market culture. First can you tell us about the clan culture and what that's like?

Gage: Sure. They named each of these archetypes based on the predominant influencer. In a clan, it's about us being together — very relational, very strong attempts to harmony and stability, people getting along, working together. There's a fair amount of "if I don't particularly care for someone or what someone's doing, I'm probably not going to say much about it because we just don't want to shake things up." There's a peaceful coexistence that tends to occur. But the net result is a real, comfortable, stable, enjoyable setting in which I can do my work and enjoy my career. That's the harmonious element of a clan culture.

Vien: And how would you characterize the hierarchical culture?

Gage: That's also very common in CPA firms. That really has to do not just so much with the hierarchy, but it's more about structure. It is to say we do things in a structural way. We organize ourselves. We have frameworks around how things are organized and so we have processes and procedures, for instance, which all firms do, but there's a higher level of importance of following those policies and procedures and practices than in a harmonious culture. In a harmonious culture it's more important to find ways of getting along and tolerating and accepting variation among people. In a hierarchical firm, we're going to tolerate people, and so long as they're compliant with what we do here and how we go about doing it, procedures, the right processes, the right steps to follow.

Vien: And how about the market culture? Tell us about that one.

Gage: The market culture is very externally focused. It's about how to present itself out there to the marketplace. They're very conscious of things like image and appearance. They really want to have a reputation, and an image that they have expertise and they're able to interact with clients in different market segments. But it's very externally focused.

A lot of times those kinds of organizations are so client oriented that sometimes they do it at the expense, maybe of a people orientation. Whereas just the converse is true in the clan or in the hierarchical setting.

Vien: How can firms know which archetype predominates for them?

Gage: As you mentioned earlier, firms are really a combination of archetypes. But typically there's one that's the lead and then the others follow in behind that. Those can be identified a lot of times in three ways that I know of. One is going back to the values and principles of the founders.

Typically firms don't start up just like a weed somewhere. They start off with a vision of a founder. That founder has certain attributes, certain values that they hold that are important to them. They build the firm then around those values. It's always good to know what those are. If you're a third or fourth generation past the founder, sometimes it's hard to uncover those founding values and principles, but nonetheless, they're part of the DNA.

A second area is speaking to new people to the firm. When they come in, I remember I used to do 30-day, 60-day, and 90-day check-ins. In my conversations, it was not just, "How are you fitting in, how are you finding your way, what are you experiencing?" But I was also on the alert for "what do you notice going on here? How do we do things — the way we do them? What seems to be important here?" It's not a judgment or a criticism, just that, "You know, I noticed that" and then fill in the blank.

That's the second area. I think the third area, which was mentioned actually in the ENGAGE Conference, someone mentioned that they also do look for that in their exit interviews. Exit interviews oftentimes are not very useful. It's because we ask people, why are you leaving? Well, no one's going to say why they're leaving. There are other ways of getting that information than doing it that way.

But one of the questions that you could ask is, "As you were here, what did you notice that made it more challenging to be here? And some practices that you notice going on around you that the firm seems to be built upon?" Sometimes they can give you gleanings into those automatic things that "we never really thought about it, but yeah, I guess that is true."

Vien: How can knowing your culture help you when it's time to change?

Gage: Well, ideally, what you want to do is develop a vision that's consistent with who you are as a firm, but what's important is not just that but then institute strategies and approaches that work with and are aligned with our cultural norms so that you may have a vision that's expanded beyond where you are, but how you get there isn't by necessarily an edict from on high, when "the leadership says this and so therefore everyone salute." If you're in a firm where you're used to having a lot of opinion, a lot of weigh-in, a lot of input from a lot of different groups of people, you need to allow a timeline that accommodates those inputs.

So it's not just where you're going, but also how you're getting there and the more aligned you are with your culture, the quicker you're going to get there, and the more you're going to be able to bring people along in an accelerated sort of way.

Vien: If you don't know what your firm's culture is, you can run into problems, such as hiring the wrong people. Can you give us an example?

Gage: I think the best example of that is a firm that I know of hired a real experienced senior manager. It was a midlevel-type firm — and really are doing well actually — and they brought in a senior manager from a larger firm to fill a slot where there was a void. And this person came in with a lot of, not only experience, but a lot of good ideas. But a lot of the good ideas were centered around processes and "the way we do things" and procedures, checklists. "Why are you doing it this way? It would be better if we did it that way." And those ideas were great, but when there's a constant barrage of them and it's said to a very strongly hierarchical firm who take pride in their procedures and "the way we do things," and our quality control and "there's a reason why."

This person just didn't take the time to find out. It was bristled against. "Who is this person coming in, questioning all of our judgment and what we're doing?" So they weren't taken as suggestions and opportunities to develop, they were taken as criticisms of their insufficiencies and their inadequacies in something they took pride in: their hierarchy, their structure.

Vien: So that person maybe wasn't a good fit for that firm's culture?

Gage: Probably not. And so in my conversation with them, I said, "What would you like to have known when you interviewed this person?" Then so we had discussion around how do you go about giving feedback? Both the staff — how do you give feedback to firm's leaders? How do you share your opinion? What's your style? Do you like very direct, aggressive in your face? Which some firms love and if you can't be that person, you're going to die around here because you're going to get eaten alive. Other firms say, "No, we like it done in a more respectful way, an easier way. We'll eventually come around, but we've got to get used to your idea first," and so just knowing a person's style goes a long way.

Vien: Again, that was Guy Gage, founder of PartnersCoach. In the second part of this podcast, he'll talk more about culture and how it ties into hiring, and he'll reveal the questions you should ask job candidates to determine whether they're a good fit for your culture. This has been the Journal of Accountancy podcast. Thank you for listening.