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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 Achievement made by an individual unit in

DHL International’s corporate Introduction the enclaves must remain subordinate to the
culture, which may be used The notion of clan as applied in business enclaves’ overall goals, and hence it follows
as a benchmark for other strategy and general management has been that any individual unit in the enclaves may
companies in the service very well established. A clan organization, as be expendable. However, since each unit is a
industry sector. Suggests that the term is being used here, is a business- member of the group, and the group resources
the business success factors oriented social enclave consisting of compa- would be reduced by the elimination of a unit,
of this organization lie in its nies and individuals who are bound by units are not dispensed with casually. Unlike
adoption of the culture and strong, non-contractual bonds. This article modern western holding companies which
structural characteristics of a provides a case study of how the founder of buy and sell single operations for short-term
clan organization. Clan orga- DHL International nourishes his company’s gain, business-oriented clans and social
nizations can create for corporate culture based on the structural enclaves do not easily sever ties of member-
themselves a more manage- characteristics of a clan organization. ship with individual units or members, even if
able social space that will Now one of the key players in the interna- those units become a burden to the bottom
provide them with protection tional courier express delivery industry, DHL line. It is these communally-oriented values
and stability. The clan International was set up by a Hong Kong which maintain the internal stability within
metaphor, and its organizing Chinese, Po Chung, in 1972. DHL held, until the social enclaves.
the mid-1980s, a near monopoly in the world- It is suggested that companies which have
principles, may provide guide-
wide courier express delivery service. By the created social enclaves often are the best
lines to be used by companies
1990s, changes in business conditions created performers in a turbulent market or indus-
to manage strategically within
new demands on service providers for trial environment where uncertainty pre-
a turbulent environment.
quicker and more effective responses, and for vails. These social enclaves are seen to nour-
Argues that when the general
an ability to identify key success factors for ish a clan-based organizational culture. The
conditions within an environ-
one’s own company. For Po Chung, the key clan metaphor, and its organizing principles
ment are moving towards are seen to be able to provide guidelines and
turbulent conditions, the business success factors, under turbulent and
uncertain conditions, lie in a clan structure benchmarks for other companies to manage
business organizations within strategically within a turbulent and uncer-
that environment should and a clan culture.
It has been suggested that when the general tain business environment. Ultimately, this
prepare for their own struc- article suggests that a clan organization is an
tural consolidation to ward conditions within a business environment
are moving towards turbulent conditions, ideal organization type whose configuration,
off uncertainties. Such a as well as social and cultural characteristics,
structural consolidation can organizations within that environment
could be emulated.
be modelled after the forma- should prepare for their own structural con-
tion of social enclaves, or solidation to ward off uncertainties[1]. That
consolidation can take the form of alliances
clans. Methodology
or social enclaves. These social enclaves, or
domains of less turbulent, more manageable DHL’s clan structure and culture became
social space which is created and protected by apparent during an in-company study[3]. The
one or more members, will provide organiza- study had investigated the structural relation-
tions with the protection not afforded to firms ships among the basic assumptions fundamen-
attempting to survive on their own[2]. tal to the common cognitive processes of orga-
Social enclaves can be compared with East nizational members[4]. Key executives were
Asian family clans and Japanese keiretsu interviewed and transcripts of their responses
whose social structures have common charac- to a standard set of open-ended questions were
teristics. These enclaves and groups are analysed to identify the basic assumptions and
bound by strong, non-contractual bonds. The values by the researcher. The observations
glue which holds them together is a shared and propositions in the study were
vision of their needs, their goals and their subsequently presented to the founder, Po
sanctioned ways in which things should be Chung. In an interview with him a year after
done. They have a common direction and a the study, we were able to confirm our proposi-
Management Decision common culture. Of special significance is the tions. The following section outlines some
35/2 [1997] 94–99 fact that these groups are more supportive of those propositions which are translated as the
© MCB University Press one another than competitive when they are characteristics of a clan organization. It is
[ISSN 0025-1747] faced with external threats and adversaries. followed by a further section which discusses
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Andrew Chan the ways in which DHL has configured itself Importance of individuals and internal
Corporate culture of a clan along the lines of a clan culture to maintain stability
organization: a case study of survival, competitiveness and growth. For DHL, its human resource policies are
DHL International designed in such a way as to ensure loyalty.
Management Decision The selection process begins by socializing
35/2 [1997] 94–99 members to identify with the image of the
The characteristics of a clan
organization courier, as told in traditional Chinese stories.
Contrary to Hermes, the messenger in ancient
The structural characteristics of a clan orga- Greek myths, the depiction of the messenger-
nization, modelled after clan culture, are courier by DHL has a distinctly Chinese char-
derived from the ways they develop and acter, mundane and industrious. In a company
evolve in a business as that organization brochure the courier is featured as an ancient
grows. It is argued that organizations can Chinese soldier on a fast horse, bringing the
create for themselves a more manageable latest battle reports to the Emperor, by taking
social space which will provide them with the shortest and fastest route. This representa-
tion essentially reinforces a personification of
protection and internal stability through
the notions of dedication, trustworthiness and
adopting a clan culture. To date, at least eight
diligence. Such a value transforms psychic
characteristics have been identified:
energies, harnessing them into a template for
1 a belief in the importance of the individual conscious and purposeful actions. According
clan member; to Theresa Lai, DHL’s human resource direc-
2 a belief in the importance of maintaining tor, a stable membership is considered to be a
internal stability; core of this company, and these staff are pro-
3 organizational cohesiveness and internal- tected from poaching. In order to cater to
ization of a we/they mentality; individuals’ needs and aspirations, and to help
4 attempts to differentiate strongly the clan members achieve their potential, a full variety
from its external environment and the of training and developmental opportunities
building of a defensive wall against exter- are provided to all staff. These training and
nal instability in order to attain a level of development activities are concurrently used
self-sufficiency (isolationism); as socialization tools. Staff in DHL are trained
in the company’s five principles of leadership:
5 socio-cultural barriers to entry to mini-
1 lead by example;
mize dilution of the culture, such as a
2 maintain self-confidence and self-esteem of
common set of socio-cultural beliefs and others;
behaviours used in self-identification and 3 focus on the situation, issue or behaviour,
as a cognitive leash; not the person;
6 a belief in the importance of clan identity 4 maintain constructive relationships with
and culture as exemplified by its tradi- your staff, peers and managers; and
tions, rituals, rites and heroes/heroines 5 take initiatives to make things better.
which are to be protected at all costs:
(attacking the symbols of the organiza- Organizational cohesiveness and we/they
tional clan is the same as attacking the mentality
organization itself); According to Andy Tseng, the general man-
7 a greater latitude of trust and acceptance ager of DHL, the next success factor stresses
organizational cohesiveness and minimizes
of deviancy for clan members than for
competition among organizational members.
outsiders and a defence of organizational
This is done by upholding the principles of
honour and survival before all else
“Focus on the issue, not on people” and “Main-
through the use of draconian penalties for tain self-respect of others”. To differentiate
going outside the zone of indifference; and between the clan (we) and its competitors
8 a set of clan elders who interpret the law, (they), and to reinforce organizational cohe-
and provide punishment (e.g. suspensions siveness, the company emphasizes a,we/they
and termination). mentality. This is achieved by investing heav-
ily in tactics to overwhelm competitors in a
battle, and then upholding the company’s
DHL International as a clan distinctiveness. For example, whenever a new
organization competitor arrives, DHL will form an ad hoc
taskforce to address the issue. A standard
It would appear that DHL International pos- operating procedures manual entitled “Crisis
sesses those eight features. An examination management procedure” provides a set of
of the facets of DHL International’s corporate approved responses to external threats. It
culture and structure illustrates these clan persuades organizational members to view
features and business success factors. competitors as external threats. Such was the
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Andrew Chan case in Mexico where UPS attempted to enter access SPS to describe the package’s entire
Corporate culture of a clan the market. DHL immediately countered this history. The result is not only convenience
organization: a case study of threat by cutting prices[5]. and quality service, but it equally helps to
DHL International A culture of consensus and commitment build customer loyalty.
Management Decision much like that in a family is formed. George
35/2 [1997] 94–99 Pun, quality, R&D manager at DHL for 13 Socio-cultural barriers to entry and the
years, says that the backbone of the culture is “cognitive leash”
“communication, consensus and commit- Socio-cultural barriers to entry are built into
ment. New people will be shocked by this the recruitment and selection policies of
kind of directness. But the attitude is very DHL. To ensure future success, specific
important”. Information technology man- attempts are made to select those who are
ager, Ho Wai Chiu, adds to that comment by positive, stable and suited to the culture of
describing DHL in one sentence: “I can use DHL. The outcome of this selection process
family to describe it but it does not include was confirmed in the interviews conducted
the formal side. We are like brothers”. The with the management team members at DHL.
general manager in Hong Kong supports this The findings also supported a hypothesis that
view by encouraging staff to use words like those who had served for more than four
“we” and”us” instead of “I” and “you”. He years held a common set of beliefs, values and
believes that words like “cross- functional co- behaviours. Respondents identified a com-
ordination” and “taskforce” help to maintain mon understanding of the interlocking rela-
a cohesive group. tionships between organizational beliefs,
values and how critical events facing the firm
Differentiation from external environment, are to be handled. This structure hinges on
building of walls and isolationism the belief that organizational members are
DHL has used a number of proven strategies “Theory Y” people, in the sense that they are
to achieve self-sufficiency and protection driven towards higher-order needs, such as
from the external environment. A key suc- responsibility, developmental opportunities,
cess factor has been to make use of third- self-control and self-direction at work. The
party alliances. This involves linking up with relationships culminate in the basic tenet
other transport operators in the areas of air that DHL is capable of dominating its envi-
freight, warehousing and metropolitan and ronment as shown in Figure 1.
domestic courier services. By doing so, DHL According to Edgar Schein[10], these events
offers a total, sole supplier transport service and decision-making criteria are manifesta-
to the marketplace[6]. Such alliance building tions of the management’s basic set of
has progressed to the point that JAL, assumptions regarding their reality. Thus,
Lufthansa, and Nissho Iwai have obtained a enslaved to this common view of their world,
57 per cent stake in DHL International[7]. organizational members become bound by
This newest alliance provides the company this cognitive leash to the firm’s way of doing
with greater stability by guaranteeing its things by their own mental processes. The
own supply of flight carriers and enriching cognitive leash is reinforced in existing man-
the professional knowledge within DHL. agers and supervisors through training using
To integrate with this diverse network of such programmes as those available through
services fully, the firm uses state-of-the-art the “Frontline Leadership” package. Virginia
technology such as the Document Manage- Darley, the customer service manager,
ment System[8] and a worldwide package explains that “this is to ensure everyone
trace and track system[9]. These systems learns the same company theory and apply
provide links with sophisticated the same methods or management styles to
transport/delivery services using scheduled, solve problems in order to reduce conflicts
chartered and self-owned aircraft as well as within the company…The company also
road-based transport. These systems are net- encourages all managers to use the same
worked and rendered distance-controllable course context in application”. The concept of
through the “Shipment Process System” (SPS) total customer satisfaction (TCS) is another
and “DHL AutoLink”. The SPS improves cognitive leash in the sense that it holds in
information access and retrieval processes. check people’s baseline behaviour in dealing
The AutoLink, however, is installed to with the customers.
improve response rate on customer enquiries,
principally in facilitating the physical track- Belief in the importance of clan identity
ing of an en route consignment. These two and culture
systems enable the company to monitor its Every new hire goes through a series of orien-
own delivery-time commitments. Thus, when tation programmes after joining. Within the
a customer calls to enquire “Where is my first three months of employment, employees
package?” “Who signed for it?” or “What time are first exposed to a three-hour programme
did it arrive?”, a customer service agent can called the “Winning orientation”. Within the
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Andrew Chan Figure 1
Corporate culture of a clan The interlocking relationship of basic assumptions in DHL International
organization: a case study of
DHL International
Management Decision
35/2 [1997] 94–99

following month, new hires are oriented basics” orientation helps supervisors
through the one-day “Know our DHL” pro- empathize with staff and realize the pivotal
gramme. To ensure that the socialization roles of front-line couriers in the business.
begun in the first weeks has taken hold, in the
ninth month of employment, new hires take a
Trust of members and draconian penalties
full-day “Back to basics” programme.
In the ritualistic induction programme, The clan business configuration provides
“Winning orientation”, all new hires watch a allowances for mistakes as well as for
12-minute video featuring the history and improvement. Victor Wong, the intracity
structure of the company. During this video, express manager, when asked if he had made
new hires are first introduced to the founder any mistakes since joining DHL replied: “Yes,
and hero figure of DHL International, Po but small events. I can explain to others why I
Chung. The next video programme, “Know did it that way. In the process, I learned that I
our DHL”, provides inductees with formal have to keep others depends on
structural knowledge on the organization. the situation. DHL can afford managers to
Trainers faultlessly deliver a well-rehearsed make mistakes as they don’t know the prob-
script detailing the company structure, its lem”. Virginia Darley continued:
products and services. A third video features Actually I have a quite western mind [I] am
good at project type jobs…but under this
a simulated work flow showing how orders
environment I have to care for others’ feel-
are taken from customers, and the steps that ings…Human interface is very important
a parcel must go through to be delivered at here. To give a sense of self-respect and
the doorstep of the recipient. To give the audi- respect to others is important. That is what I
ence a feel of what it is really like to be a learnt here. It was also my difficulty when I
courier, an operations supervisor provides a joined…[I] am a very straight person whodid
realistic job preview to help explain and illus- not fit with this environment of “guanxis”,
trate the daily duties of a DHL operations or relationships. I don’t care about
supervisor/ courier. In this way, all employ- others…[I] am not good at handling human
interface…but I am good at personnel man-
ees are given their formal initiation into
agement and I can say I am successful now.
DHL. They should now know the theory
behind the courier business. However, they At the same time, the environment can be
have yet to get a good feel for culture of the draconian if members fail to abide by the three
business nuts and bolts. Cs — communication, consensus and commit-
As the CEO and his top management ment. Failure to inform and involve others can
believe that it is important for staff to get a result in ouster from the organization. The
feel for the nuts and bolts of the operation worst failure is dishonesty. Because of the
team duties, supervisory staff who pass their great stock placed on trust in the organization,
probation, especially those serving in non- dishonest staff are often asked to resign in lieu
operational capacities, are invited to work of summary dismissal. What is at work here is
hands-on, as a courier for a day. This “Back to a subtle psychological contract, based on a
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Andrew Chan tacit understanding of reciprocation that Keynote Speech of the Singapore Productivity
Corporate culture of a clan commensurates with an act, whether right or Board, and in tertiary education institutions
organization: a case study of wrong. The critical leverage appears to be that such as Stanford, IMD, St Gallen, Chinese
DHL International of honour. In a clan context, members are University of Hong Kong, and the Hong Kong
Management Decision regarded as trustworthy and intelligent indi- University. According to the address, the
35/2 [1997] 94–99 viduals who can exercise discretion and judge- company’s philosophy is embodied in three
ment when executing their duties. Unlike basic tenets which are:
their counterparts in some conventional orga- 1 decentralization in terms of giving staff
nizations in which this kind of honour is like the authority and trust to carry out neces-
something that is tagged on, staff at DHL sary decisions, and to push decisions to
derive satisfaction and honour in the sheer act the lowest level;
of performing their roles and duties. 2 strategic thinking whereby staff from
assistant manager level are trained to look
Clan elders to interpret the law and to at business using a “helicopter” view, and
hand out punishment to make decisions that can be used as
Last, all of the clan structure and success strategic weapons against competitors; and
factors depicted so far have been made possi- 3 Asian family attitudes stressing the idea
ble through the engineering efforts of Po that loyal and diligent staff must be repaid
Chung, who is seen as a patron and a father- with humanistic treatment, reciprocal
figure of his organization even outside the commitment, care and respect from the
DHL community. Po Chung, like a chief clan company.
elder, issues commands and judgements from
his office through his team of general man- Flowing from these basic tenets, Po Chung
agers – the minor clan elders. Like any chief holds the belief that every member of staff
clan elder, his words are the clan’s law, has six fundamental rights:
revered and unchallenged, and often taken as 1 the right to be involved because manage-
essential guides informing thoughts and ment has institutionalized genuine, bot-
actions within the company. tom-up involvement;
2 the right to understand his or her career
path, career opportunities and how one
Conclusion can realize them;
3 the right to be held accountable, to share
The clan culture of DHL, as Po Chung himself in the ownership of the group’s problems,
agrees, is a crucial factor inherent in the and to share the inherent risks and
company’s capability to maintain competi- rewards;
tiveness and growth under turbulent and 4 the right to affect one’s destiny, and the
uncertain conditions. Our observations and opportunity to influence one’s own future;
propositions derived from the initial in-com- 5 the right to make a commitment, and to be
pany study were confirmed and validated by able to affirm one’s obligation to the com-
Po Chung, in an interview conducted with pany;
him one year after the company cultural 6 the right to a covenantal or familial rela-
analysis. Po Chung, in that interview, tells us tionship with the company.
that the company exemplifies strong manage-
ment values, especially in areas pertaining to These six fundamental rights enable mem-
human asset development. This commitment, bers to fulfil their needs and to realize mean-
which we interpret as an urge to sustain ingful and fulfilling work relationships. It
internal stability, resonates the indigenous seems a climate of trust is anchored around
character of clan, and social enclave struc- these principles. Company policies and rules
ture formation under turbulence and uncer- are laid down to protect these human assets.
tainty. Such a gradual transformation has Full membership in the clan engenders full
been possible through the blessings of those accountability and a corresponding full co-
clan elders who believe their own career optation. Po Chung claims that staff are
attaintment is the manifestation of the com- empowered to make decisions right to entry-
pany’s human resource and career develop- level positions. Unlike many other CEOs who
ment policies. To reciprocate, this core of only claim to empowerment, Po Chung has
loyal clan members helps to build the “strong acted on that basis. Everyone is considered in
wall” which has protected the company from charge of quality in the company. Almost
the turbulence posited by competitors, and anyone can come forward on that count to
environmental uncertainty. deal with quality problems.
The company’s philosophy is well docu- The close kinship mechanisms of the
mented in the founder’s speech which he has clan’s social enclave protects clan members
given over the last ten years to audiences in from outside temptations and threats at all
forums including Business Week Interna- costs. By striving to treat all clan members
tional, a Pacific-Rim conference, the Annual as equals, the behaviours and attitude of
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Andrew Chan top management communicate this The generalizability of the clan metaphor
Corporate culture of a clan possessiveness to all levels. It is seen that this for organizational operation is as yet
organization: a case study of familial internal climate acts to minimize unknown. It is argued that familial clans are
DHL International internal competition. Hence, politicking is not restricted to the East Asian culture. To a
Management Decision rendered meaningless. Human relationships large extent, familial clans throughout the
35/2 [1997] 94–99 are built on openness in communication, and world tend to develop under similar condi-
all information is freely available through tions. Social enclave formation seems to be
contributions to the departmental suggestion natural for human existence under condi-
box and “cityhall” sessions in which staff tions of uncertainty. As business environ-
ideas and queries about management’s ments become increasingly turbulent with
actions are explained by the senior staff. greater interconnectedness among
Externally, DHL, consistent with the clan economies and industries, business clan
principles, has also anticipated and prepared formation may become a major movement
for the age of the “virtual corporation“. This throughout the business world.
is in the sense that it “relates partnership
with other companies throughout the sup- References
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Application questions 3 How might you increase the application of

1 Can you articulate those uncertainties in these values among your staff ?
your general environment, as well as those 4 To what extent can your organizational
in your particular business environment? culture cope with those contingent factors
2 To what extent are your company’s values in the environment? How would you
understood by your staff ? nourish a new culture?
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