Does Focusing on Cultural Fit Harm Innovation?
Organizational psychologist Adam Grant recently appeared on the Recode Decode podcast, arguing that companies that focus on hiring, cultivating, and retaining workers who fit well with the corporate culture are setting themselves up to fail long-term. He reasons that overemphasizing cultural fit results in a homogeneous workforce that is rigid and susceptible to groupthink, and ultimately puts companies at higher risk of being disrupted.
But does focusing on cultural fit actually harm innovation? Many of the companies today considered the most innovative prioritize cultural fit when hiring and socializing employees.
Cultural homogeneity means that employees share the same ideas about how work is or should be done in an organization. For example, employees in a culturally homogeneous company might all believe that teamwork and collaboration are more important than individual achievement. Importantly, cultural homogeneity does not necessarily mean a lack diversity along other lines, such as gender or race — a gender and racially diverse workforce can still be made up of employees with similar beliefs and values about how best to do work.
Cultural homogeneity is thought to help employees coordinate with one another and, in turn, help organizations function more efficiently. For example, an employee who believes in the value of speed, autonomy, and a willingness to make mistakes will more effectively coordinate with a colleague sharing these same beliefs than with a colleague who values deliberateness, caution, and precision.
However, researchers have hypothesized that cultural homogeneity is a double-edged sword: while some homogeneity helps employees coordinate, too much might stifle innovation due to a lack of diverse cultural ideas. Indeed, one of the arguments for gender and racial diversity is that they can produce deeper cultural diversity, or employees with unique perspectives and novel ways of working and tackling complex problems, which should help organizations generate creative and innovative solutions.
And seen from this perspective, Grant’s argument is reasonable. He alludes in the interview to evidence from the Stanford Project on Emerging Companies (SPEC), which found that technology companies focused on cultural fit were faster to IPO, but afterwards exhibited lower growth rates than companies with other cultural models.
On the whole, however, the evidence for a trade-off between a homogeneous, productive culture and a diverse, innovative culture is inconclusive. The SPEC study that Grant cites has limitations: time to IPO and growth rates are imperfect proxies for efficiency and innovation respectively, the study is restricted to Silicon Valley technology companies, and it is unclear whether corporate cultures can be so neatly categorized into just a few buckets. Other studies have provided mixed results — one prominent study found little evidence that performance drops when companies with more homogeneous cultures encounter rapidly changing market conditions.
My collaborators and I tested how cultural diversity (the converse of cultural homogeneity) impacts organizational performance using novel data: the comments that employees write about the culture of their companies on Glassdoor.com. As expected, we found that companies with seemingly little cultural diversity, those in which employees mention similar norms and values when characterizing the company, are more profitable and efficient. But we were puzzled that many of these same companies also demonstrate a high capacity for growth and innovation. Like prior work, we did not find evidence of a trade-off between cultural homogeneity and diversity. What are we all missing?
We made strides towards solving this puzzle by discovering another type of cultural diversity: within-employee diversity. In some companies, the average employee tends to subscribe to a large, diverse set of norms and values, while in others a typical employee is focused on a narrow, more limited set. For illustration, Netflix purportedly has a very broad culture that is organized around seven wide-ranging norms and values, each encompassing a set of more granular cultural ideas. Consequently, individual employees tend to subscribe to a larger, more diverse set of beliefs about appropriate ways to do work. In contrast, the retailer Nordstrom is said to be organized around a much narrower credo — “use good judgment in all situations” — which encourages employees to act with responsibility and autonomy. Employees here tend to focus on a more limited, less diverse set of beliefs inspired by this simple credo.
We measure within-employee cultural diversity as the diversity of norms and values that employees mention on average when characterizing an organization’s culture, and observe that some companies exhibit higher within-employee cultural diversity than others, even when comparing organizations with similar resources operating in the same industry.
We show that cultural diversity can not only stem from divergent ideas between employees (more of which results in disagreement, confusion, and lower productivity), but also within employees (which we hypothesized promotes creativity and innovation). We tested this hypothesis by examining whether within-employee cultural diversity is associated with a company’s capacity for growth and innovation, as measured by market valuation, patent volume, and patent quality.
We found that companies with higher within-employee cultural diversity demonstrate a greater capacity for growth and innovation, even when comparing otherwise very similar companies.
But why might within-employee cultural diversity promote innovation and creativity? Cultural sociologists have theorized that culture operates less like a set of rules that prompt people to behave in particular ways, and more like a “toolkit” of resources that people actively use to accomplish tasks. Access to a large, diverse cultural toolkit should be especially useful for employees working on complex tasks, such as generating novel and creative solutions to tough problems. For instance, success working on a complex project may at times require intense teamwork and selfless commitment, at other times the relentless pursuit of individual performance, or perhaps some unique combination of these different logics. Employees with broader cultural toolkits should be better equipped to use a diverse array of cultural ideas to complete complex tasks.
Importantly, our study suggests that there is not necessarily a trade-off between cultural homogeneity and cultural diversity, or between a homogeneous, productive culture and a diverse, innovative culture. Corporate cultures can reap the efficiencies of cultural homogeneity between employees, but also the innovation benefits of cultural diversity within employees. The challenge for leaders, then, is selecting and molding employees so that there is widespread agreement about the importance of a common yet diverse set of cultural norms and values. But how difficult is it to foster consensus around a broad, diverse set of cultural ideas? And how exactly do employees use diverse cultural toolkits to be creative and innovative? We need future research to answer these important questions.
Visit my website for more information about my research.
