Corporate culture of a clan organization

Andrew Chan Assistant Professor, City University of Hong Kong, Department of Business and Management, Kowloon, Hong Kong
Uses a case study to illustrate DHL Internationals corporate culture, which may be used as a benchmark for other companies in the service industry sector. Suggests that the business success factors of this organization lie in its adoption of the culture and structural characteristics of a clan organization. Clan organizations can create for themselves a more manageable social space that will provide them with protection and stability. The clan metaphor, and its organizing principles, may provide guidelines to be used by companies to manage strategically within a turbulent environment. Argues that when the general conditions within an environment are moving towards turbulent conditions, the business organizations within that environment should prepare for their own structural consolidation to ward off uncertainties. Such a structural consolidation can be modelled after the formation of social enclaves, or clans.

Introduction
The notion of clan as applied in business strategy and general management has been very well established. A clan organization, as the term is being used here, is a businessoriented social enclave consisting of companies and individuals who are bound by strong, non-contractual bonds. This article provides a case study of how the founder of DHL International nourishes his companys corporate culture based on the structural characteristics of a clan organization. Now one of the key players in the international courier express delivery industry, DHL International was set up by a Hong Kong Chinese, Po Chung, in 1972. DHL held, until the mid-1980s, a near monopoly in the worldwide courier express delivery service. By the 1990s, changes in business conditions created new demands on service providers for quicker and more effective responses, and for an ability to identify key success factors for ones own company . For Po Chung, the key business success factors, under turbulent and uncertain conditions, lie in a clan structure and a clan culture. It has been suggested that when the general conditions within a business environment are moving towards turbulent conditions, organizations within that environment should prepare for their own structural consolidation to ward off uncertainties[1]. That consolidation can take the form of alliances or social enclaves. These social enclaves, or domains of less turbulent, more manageable social space which is created and protected by one or more members, will provide organizations with the protection not afforded to rms attempting to survive on their own[2]. Social enclaves can be compared with East Asian family clans and Japanese keiretsu whose social structures have common characteristics. These enclaves and groups are bound by strong, non-contractual bonds. The glue which holds them together is a shared vision of their needs, their goals and their sanctioned ways in which things should be done. They have a common direction and a common culture. Of special signicance is the fact that these groups are more supportive of one another than competitive when they are faced with external threats and adversaries.

Achievement made by an individual unit in the enclaves must remain subordinate to the enclaves overall goals, and hence it follows that any individual unit in the enclaves may be expendable. However, since each unit is a member of the group, and the group resources would be reduced by the elimination of a unit, units are not dispensed with casually . Unlike modern western holding companies which buy and sell single operations for short-term gain, business-oriented clans and social enclaves do not easily sever ties of membership with individual units or members, even if those units become a burden to the bottom line. It is these communally-oriented values which maintain the internal stability within the social enclaves. It is suggested that companies which have created social enclaves often are the best performers in a turbulent market or industrial environment where uncertainty prevails. These social enclaves are seen to nourish a clan-based organizational culture. The clan metaphor, and its organizing principles are seen to be able to provide guidelines and benchmarks for other companies to manage strategically within a turbulent and uncertain business environment. Ultimately, this article suggests that a clan organization is an ideal organization type whose conguration, as well as social and cultural characteristics, could be emulated.

Methodology
DHLs clan structure and culture became apparent during an in-company study[3]. The study had investigated the structural relationships among the basic assumptions fundamental to the common cognitive processes of organizational members[4]. Key executives were interviewed and transcripts of their responses to a standard set of open-ended questions were analysed to identify the basic assumptions and values by the researcher. The observations and propositions in the study were subsequently presented to the founder, Po Chung. In an interview with him a year after the study , we were able to conrm our propositions. The following section outlines some those propositions which are translated as the characteristics of a clan organization. It is followed by a further section which discusses

Management Decision 35/2 [1997] 9499 MCB University Press [ISSN 0025-1747]

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the ways in which DHL has congured itself along the lines of a clan culture to maintain survival, competitiveness and growth.

Importance of individuals and internal stability

For DHL, its human resource policies are designed in such a way as to ensure loyalty . The selection process begins by socializing members to identify with the image of the courier, as told in traditional Chinese stories. Contrary to Hermes, the messenger in ancient Greek myths, the depiction of the messengercourier by DHL has a distinctly Chinese character, mundane and industrious. In a company brochure the courier is featured as an ancient Chinese soldier on a fast horse, bringing the latest battle reports to the Emperor, by taking the shortest and fastest route. This representation essentially reinforces a personication of the notions of dedication, trustworthiness and diligence. Such a value transforms psychic energies, harnessing them into a template for conscious and purposeful actions. According to Theresa Lai, DHLs human resource director, a stable membership is considered to be a core of this company , and these staff are protected from poaching. In order to cater to individuals needs and aspirations, and to help members achieve their potential, a full variety of training and developmental opportunities are provided to all staff. These training and development activities are concurrently used as socialization tools. Staff in DHL are trained in the companys ve principles of leadership: 1 lead by example; 2 maintain self-condence and self-esteem of others; 3 focus on the situation, issue or behaviour, not the person; 4 maintain constructive relationships with your staff, peers and managers; and 5 take initiatives to make things better.

The characteristics of a clan organization

The structural characteristics of a clan organization, modelled after clan culture, are derived from the ways they develop and evolve in a business as that organization grows. It is argued that organizations can create for themselves a more manageable social space which will provide them with protection and internal stability through adopting a clan culture. To date, at least eight characteristics have been identied: 1 a belief in the importance of the individual clan member; 2 a belief in the importance of maintaining internal stability; 3 organizational cohesiveness and internalization of a we/they mentality; 4 attempts to differentiate strongly the clan from its external environment and the building of a defensive wall against external instability in order to attain a level of self-sufficiency (isolationism); 5 socio-cultural barriers to entry to minimize dilution of the culture, such as a common set of socio-cultural beliefs and behaviours used in self-identication and as a cognitive leash; 6 a belief in the importance of clan identity and culture as exemplied by its traditions, rituals, rites and heroes/heroines which are to be protected at all costs: (attacking the symbols of the organizational clan is the same as attacking the organization itself); 7 a greater latitude of trust and acceptance of deviancy for clan members than for outsiders and a defence of organizational honour and survival before all else through the use of draconian penalties for going outside the zone of indifference; and 8 a set of clan elders who interpret the law, and provide punishment (e.g. suspensions and termination).

Organizational cohesiveness and we/they mentality

According to Andy Tseng, the general manager of DHL, the next success factor stresses organizational cohesiveness and minimizes competition among organizational members. This is done by upholding the principles of Focus on the issue, not on people and Maintain self-respect of others. To differentiate between the clan (we) and its competitors (they), and to reinforce organizational cohesiveness, the company emphasizes a,we/they mentality . This is achieved by investing heavily in tactics to overwhelm competitors in a battle, and then upholding the companys distinctiveness. For example, whenever a new competitor arrives, DHL will form an ad hoc taskforce to address the issue. A standard operating procedures manual entitled Crisis management procedure provides a set of approved responses to external threats. It persuades organizational members to view competitors as external threats. Such was the

DHL International as a clan organization

It would appear that DHL International possesses those eight features. An examination of the facets of DHL Internationals corporate culture and structure illustrates these clan features and business success factors.

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case in Mexico where UPS attempted to enter the market. DHL immediately countered this threat by cutting prices[5]. A culture of consensus and commitment much like that in a family is formed. George Pun, quality, R&D manager at DHL for 13 years, says that the backbone of the culture is communication, consensus and commitment. New people will be shocked by this kind of directness. But the attitude is very important. Information technology manager, Ho Wai Chiu, adds to that comment by describing DHL in one sentence: I can use family to describe it but it does not include the formal side. We are like brothers. The general manager in Hong Kong supports this view by encouraging staff to use words like we andus instead of I and you. He believes that words like cross- functional coordination and taskforce help to maintain a cohesive group.

access SPS to describe the packages entire history . The result is not only convenience and quality service, but it equally helps to build customer loyalty .

Socio-cultural barriers to entry and the cognitive leash

Socio-cultural barriers to entry are built into the recruitment and selection policies of DHL. To ensure future success, specic attempts are made to select those who are positive, stable and suited to the culture of DHL. The outcome of this selection process was conrmed in the interviews conducted with the management team members at DHL. The ndings also supported a hypothesis that those who had served for more than four years held a common set of beliefs, values and behaviours. Respondents identied a common understanding of the interlocking relationships between organizational beliefs, values and how critical events facing the rm are to be handled. This structure hinges on the belief that organizational members are Theory Y people, in the sense that they are driven towards higher-order needs, such as responsibility, developmental opportunities, self-control and self-direction at work. The relationships culminate in the basic tenet that DHL is capable of dominating its environment as shown in Figure 1. According to Edgar Schein[10], these events and decision-making criteria are manifestations of the managements basic set of assumptions regarding their reality . Thus, enslaved to this common view of their world, organizational members become bound by this cognitive leash to the rms way of doing things by their own mental processes. The cognitive leash is reinforced in existing managers and supervisors through training using such programmes as those available through the Frontline Leadership package. Virginia Darley, the customer service manager, explains that this is to ensure everyone learns the same company theory and apply the same methods or management styles to solve problems in order to reduce conicts within the companyThe company also encourages all managers to use the same course context in application. The concept of total customer satisfaction (TCS) is another cognitive leash in the sense that it holds in check peoples baseline behaviour in dealing with the customers.

Differentiation from external environment, building of walls and isolationism

DHL has used a number of proven strategies to achieve self-sufficiency and protection from the external environment. A key success factor has been to make use of thirdparty alliances. This involves linking up with other transport operators in the areas of air freight, warehousing and metropolitan and domestic courier services. By doing so, DHL offers a total, sole supplier transport service to the marketplace[6]. Such alliance building has progressed to the point that JAL, Lufthansa, and Nissho Iwai have obtained a 57 per cent stake in DHL International[7]. This newest alliance provides the company with greater stability by guaranteeing its own supply of ight carriers and enriching the professional knowledge within DHL. To integrate with this diverse network of services fully, the rm uses state-of-the-art technology such as the Document Management System[8] and a worldwide package trace and track system[9]. These systems provide links with sophisticated transport/delivery services using scheduled, chartered and self-owned aircraft as well as road-based transport. These systems are networked and rendered distance-controllable through the Shipment Process System (SPS) and DHL AutoLink. The SPS improves information access and retrieval processes. The AutoLink, however, is installed to improve response rate on customer enquiries, principally in facilitating the physical tracking of an en route consignment. These two systems enable the company to monitor its own delivery-time commitments. Thus, when a customer calls to enquire Where is my package? Who signed for it? or What time did it arrive?, a customer service agent can

Belief in the importance of clan identity and culture

Every new hire goes through a series of orientation programmes after joining. Within the rst three months of employment, employees are rst exposed to a three-hour programme called the Winning orientation. Within the

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Figure 1 The interlocking relationship of basic assumptions in DHL International

following month, new hires are oriented through the one-day Know our DHL programme. To ensure that the socialization begun in the rst weeks has taken hold, in the ninth month of employment, new hires take a full-day Back to basics programme. In the ritualistic induction programme, Winning orientation, all new hires watch a 12-minute video featuring the history and structure of the company . During this video, new hires are rst introduced to the founder and hero gure of DHL International, Po Chung. The next video programme, Know our DHL, provides inductees with formal structural knowledge on the organization. Trainers faultlessly deliver a well-rehearsed script detailing the company structure, its products and services. A third video features a simulated work ow showing how orders are taken from customers, and the steps that a parcel must go through to be delivered at the doorstep of the recipient. To give the audience a feel of what it is really like to be a courier, an operations supervisor provides a realistic job preview to help explain and illustrate the daily duties of a DHL operations supervisor/ courier. In this way, all employees are given their formal initiation into DHL. They should now know the theory behind the courier business. However, they have yet to get a good feel for culture of the business nuts and bolts. As the CEO and his top management believe that it is important for staff to get a feel for the nuts and bolts of the operation team duties, supervisory staff who pass their probation, especially those serving in nonoperational capacities, are invited to work hands-on, as a courier for a day . This Back to

basics orientation helps supervisors empathize with staff and realize the pivotal roles of front-line couriers in the business.

Trust of members and draconian penalties

The clan business conguration provides allowances for mistakes as well as for improvement. Victor Wong, the intracity express manager, when asked if he had made any mistakes since joining DHL replied: Yes, but small events. I can explain to others why I did it that way . In the process, I learned that I have to keep others informed...it depends on the situation. DHL can afford managers to make mistakes as they dont know the problem. Virginia Darley continued:
Actually I have a quite western mind [I] am good at project type jobsbut under this environment I have to care for others feelingsHuman interface is very important here. To give a sense of self-respect and respect to others is important. That is what I learnt here. It was also my difficulty when I joined[I] am a very straight person whodid not t with this environment of guanxis, or relationships. I dont care about others[I] am not good at handling human interfacebut I am good at personnel management and I can say I am successful now.

At the same time, the environment can be draconian if members fail to abide by the three Cs communication, consensus and commitment. Failure to inform and involve others can result in ouster from the organization. The worst failure is dishonesty . Because of the great stock placed on trust in the organization, dishonest staff are often asked to resign in lieu of summary dismissal. What is at work here is a subtle psychological contract, based on a

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tacit understanding of reciprocation that commensurates with an act, whether right or wrong. The critical leverage appears to be that of honour. In a clan context, members are regarded as trustworthy and intelligent individuals who can exercise discretion and judgement when executing their duties. Unlike their counterparts in some conventional organizations in which this kind of honour is like something that is tagged on, staff at DHL derive satisfaction and honour in the sheer act of performing their roles and duties.

Clan elders to interpret the law and to hand out punishment

Last, all of the clan structure and success factors depicted so far have been made possible through the engineering efforts of Po Chung, who is seen as a patron and a fathergure of his organization even outside the DHL community . Po Chung, like a chief clan elder, issues commands and judgements from his office through his team of general managers the minor clan elders. Like any chief clan elder, his words are the clans law, revered and unchallenged, and often taken as essential guides informing thoughts and actions within the company .

Keynote Speech of the Singapore Productivity Board, and in tertiary education institutions such as Stanford, IMD, St Gallen, Chinese University of Hong Kong, and the Hong Kong University . According to the address, the companys philosophy is embodied in three basic tenets which are: 1 decentralization in terms of giving staff the authority and trust to carry out necessary decisions, and to push decisions to the lowest level; 2 strategic thinking whereby staff from assistant manager level are trained to look at business using a helicopter view, and to make decisions that can be used as strategic weapons against competitors; and 3 Asian family attitudes stressing the idea that loyal and diligent staff must be repaid with humanistic treatment, reciprocal commitment, care and respect from the company . Flowing from these basic tenets, Po Chung holds the belief that every member of staff has six fundamental rights: 1 the right to be involved because management has institutionalized genuine, bottom-up involvement; 2 the right to understand his or her career path, career opportunities and how one can realize them; 3 the right to be held accountable, to share in the ownership of the groups problems, and to share the inherent risks and rewards; 4 the right to affect ones destiny, and the opportunity to inuence ones own future; 5 the right to make a commitment, and to be able to affirm ones obligation to the company; 6 the right to a covenantal or familial relationship with the company . These six fundamental rights enable members to full their needs and to realize meaningful and fullling work relationships. It seems a climate of trust is anchored around these principles. Company policies and rules are laid down to protect these human assets. Full membership in the clan engenders full accountability and a corresponding full cooptation. Po Chung claims that staff are empowered to make decisions right to entrylevel positions. Unlike many other CEOs who only claim to empowerment, Po Chung has acted on that basis. Everyone is considered in charge of quality in the company . Almost anyone can come forward on that count to deal with quality problems. The close kinship mechanisms of the clans social enclave protects clan members from outside temptations and threats at all costs. By striving to treat all clan members as equals, the behaviours and attitude of

Conclusion
The clan culture of DHL, as Po Chung himself agrees, is a crucial factor inherent in the companys capability to maintain competitiveness and growth under turbulent and uncertain conditions. Our observations and propositions derived from the initial in-company study were conrmed and validated by Po Chung, in an interview conducted with him one year after the company cultural analysis. Po Chung, in that interview, tells us that the company exemplies strong management values, especially in areas pertaining to human asset development. This commitment, which we interpret as an urge to sustain internal stability, resonates the indigenous character of clan, and social enclave structure formation under turbulence and uncertainty . Such a gradual transformation has been possible through the blessings of those clan elders who believe their own career attaintment is the manifestation of the companys human resource and career development policies. To reciprocate, this core of loyal clan members helps to build the strong wall which has protected the company from the turbulence posited by competitors, and environmental uncertainty . The companys philosophy is well documented in the founders speech which he has given over the last ten years to audiences in forums including Business Week International, a Pacic-Rim conference, the Annual

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top management communicate this possessiveness to all levels. It is seen that this familial internal climate acts to minimize internal competition. Hence, politicking is rendered meaningless. Human relationships are built on openness in communication, and all information is freely available through contributions to the departmental suggestion box and cityhall sessions in which staff ideas and queries about managements actions are explained by the senior staff. Externally, DHL, consistent with the clan principles, has also anticipated and prepared for the age of the virtual corporation. This is in the sense that it relates partnership with other companies throughout the supplier chain so that it can marshall more resources than it has on its own by using both internal and external collaborations[11]. Such a collaborative network of independent companies working in strategic alliances are able to share costs, skills and access to global markets as well as to capitalize on the power of information[12]. Companies, like co-opted clan members, band together synergistically so that they can dominate the market[13]. Such an example is the 1992 alliance involving DHL, Lufthansa Airlines, Japan Airlines and Nissho Iwai Corporation with each rm performing a separate function of the core business process. In this way, there is tremendous improvement in the supply of ights and hub space. It is a move to anticipate the business process re-engineering which DHL began to embark on in 1996. This signicant move also changes its style of doing business. Instead of waiting for the customers to approach, DHL continuously seeks to provide new products and services. Customers are actively co-opted into the social enclave. Customer loyalty is secured as a redoubt around this larger community . It explains the success of DHL in maintaining the dominant market share, in staying the leader, and in growing at an increasing rate under the turbulent conditions which organizations face. We postulate an increase in environmental uncertainty and in social enclave formation in the run up to the twentyrst century . There is an imperative for organizations in this kind of condition to benchmark, and to emulate the clan metaphor and its organizing principles if they are to continue to grow, stay competitive and survive.

The generalizability of the clan metaphor for organizational operation is as yet unknown. It is argued that familial clans are not restricted to the East Asian culture. To a large extent, familial clans throughout the world tend to develop under similar conditions. Social enclave formation seems to be natural for human existence under conditions of uncertainty . As business environments become increasingly turbulent with greater interconnectedness among economies and industries, business clan formation may become a major movement throughout the business world.

References
1 Terryberry, S., The evolution of organizational environments, Administrative Science Quarterly, Vol. 12, 1968, pp. 590-613. 2 McCann, J. and Selsky, J., Hyperturbulence and the emergence of type 5 environments, Academy of Management Review, Vol. 9 No. 3, 1984, pp. 460-70. 3 Cheung, K., Corporate culture match: a Hong Kong case study using an ethnographic approach, City University of Hong Kong, Hong Kong, 1994. 4 Schein, E., Organzational Culture and Leadership, Jossey-Bass, San Francisco, CA, 1985. 5 Delgado, D., Is my package in yet?, Business Mexico, Vol. 4 No. 4, 1994, pp. 10-11. 6 Edstein, G., Reshaping a logistics group for the future, International Journal of Physical Distribution and Logistics Management, Vol. 22 No. 3, 1992, pp. 30-2. 7 Mecham, M., DHL International extends world network, Aviation Week and Space Technology, Vol. 137 No. 9, 1992, p. 32. 8 Kingma, J.M., Imaging system for European offices of DHL Worldwide Express, IMC Jounral, Vol. 30 No. 4, 1994, pp. 7, 28. 9 Gaffin, A., DHL takes advantage of telephone server tool, Network World, Vol. 11 No. 26, 1994, p. 39. 10 Schein, E., Organizational Culture and Leadership, Jossey-Bass, San Francisco, CA, 1985. 11 Davidow, W. and Malone, M., The Virtual Corporation: Structuring and Revitalizing the Corporation for the 21st Century, Harper Business, New York, NY, 1992. 12 Byrne, J., Brandt, R. and Port, O., The virtual corporation, Business Week, 8 February 1993, pp. 36-40. 13 Hastings, C., The New Organization: Growth the Culture of Organziational Networking, McGraw-Hill Europe, Maidenhead, Berkshire, 1993.

Application questions
1 Can you articulate those uncertainties in your general environment, as well as those in your particular business environment? 2 To what extent are your companys values understood by your staff ?

3 How might you increase the application of these values among your staff ? 4 To what extent can your organizational culture cope with those contingent factors in the environment? How would you nourish a new culture?

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