Corporate culture: Putting aldi in a scientific context




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Corporate culture: Putting ALDI in a scientific context


Scriptie

Ter verkrijging van de titel Bachelor of Science in de

Economie

aan de Vrije Universiteit Amsterdam

op gezag van drs. G.P. Melker

te verdedigen op vrijdag 30 juni 2006

des ochtends te 11.00 uur
door
Sander van Luit

geboren op 2 september 1985

te Zaandam

Contents
Introduction……………………………………………………………………….……… 3

Main question and subquestions…………………………………………………. 4


Part I


What is organizational culture?………………………………………………………… 5
Organizational culture in management- and organization literature………………………………………………………………………… 6

Sanders and Neuijen on organizational culture………………………………… 7




Part II


What are the essential characteristics of ALDIs organizational culture?………………. 10
Brandes’ view of culture………………………………………………………… 10

The manifestation of ALDIs culture …………………………………………… 11

The six dimensions of culture…………………………………………………… 16

Part III


Putting practice in theory: ALDIs culture according to Sanders & Neuijen…………… 19

Conclusion………………………………………………………………………. 19

Discussion……………………………………………………………………….. 19
References……………………………………………………………………………… 21

Introduction
Since a few years, the ALDI corporation has become more and more popular. Especially in the years surrounding the introduction of the euro, the standard European currency, the increase of consumer prices of competitors has drawn many customers to this discounter, who surprised everybody by even lowering their prices. The raise in turnover was logical in this context; estimates of a 15.7 percent difference between 2001 and 2002 have been suggested. (Gerhard & Hahn, 2005)

But not only the rise in numbers of customers, turnover and market share has been a sign of increasing popularity. What in the end maybe even will have proven to be more important, is the change in image of ALDI. In the beginning of the nineties, ALDI was known as a cheap store where only poor people did their weekly buying. But since then, a change in image had appeared, in that even the rich acknowledge now that ALDI is a cheap store, but one with quality products. Anecdotical, we can even say that in those years, more and more BMW’s and Mercedeses can be spotted to be parked in front of a ALDI store. (Gerhard & Hahn, 2005)

This success of ALDI leaves it traces in the estimated wealth of the two founders, Karl and Theo Albrecht, standing together between the most riches of the world, with estimates of the net worth of 17 and 15.2 billion dollars (Forbes, 2006).
One of the other interesting aspect of the ALDI company, is it secrecy about the way it works. Until a few years ago, this was all possible because of the legal status of the company; small regional companies did not have to publicize their numbers. Since a few years however, changes in the German law obligated them to do otherwise. Since then, more is known about the company. (Gerhard & Hahn, 2005)

Another factor that has helped demystifying ALDI has been the publication of the boek Bare Essentials: the ALDI way to retail success, by the German author Dieter Brandes (Brandes, 2004).

Brandes has been one of the top managers of ALDI in Germany for many years, and thus has a lot of insiders information, which he has brought to a great public.

An exceptional lot of emphasis in the book has been put on the corporate culture; the same culture that has made it nearly impossible to acquire information on the company.

But Brandes also claims that this culture in particular is one of the biggest success factors (Brandes, 2004, p.40); a culture that is so strong that ALDI has been able to retain its special status and the winning position among discounters for many years. For example, the most well-known brand name in Germany has been “ALDI” (Brandes, 2004, p. 31), and 76.4 percent of all consumers in Germany shopped at ALDI in 2002 (Gerhard & Hahn, 2005)
Taken all these facts together, it is clear that ALDI is a very interesting company. However, its success and the company as a whole have, due to the secrecy held by it, never scientifically been researched.

The book of Brandes gives us a deep inside look at the company, which very few other authors have given us. Therefore it is not strange that the book of Brandes is one of the most cited works in articles about the corporation.

This thesis is an attempt to put ALDIs organizational culture, which, according to Brandes, is one of its key success factors (Brandes 2004, p. 40), into a more scientific context in such a way that is has been researched more systematically, and with the eye of the scientist; it is logical that because Brandes has been working at the company for years, the impartiality of his work can be questioned.

By looking systematically at the practices of the ALDI, separated from the claim that these practices are reasons for success or not, it is possible to give further researchers a handle to look at ALDIs culture. Especially because Brandes is one of the few sources of information about the company, it is necessary that other sources will show up as well, to reject or confirm the claims made by Brandes. When such a model as that of Sanders and Neuijen is used to classify culture, other claims about the culture of companies can easily be compared by looking for example at the dimensions of culture. For example: has ALDI really such a process-orientation as Brandes claims? Or are there other signs that this is not true and ALDI is more results orientated than we thought?

When more and more information about the company should arise, claims about the success factor of this culture can be researched more extensively, now that it is known what this culture constitutes exactly. Also, comparisons with other companies, especially the competitors of ALDI, will be possible when its characteristics have been put down in clear classifications.

For now, this book of Brandes is just a starting point to give researchers in the area of Management and Organization a grip on the company.



Main question and subquestions

The question to be answered here will be the following:


How can the corporate culture of ALDI be put classified according to scientific literature on organizational culture?
The following questions have to be answered to get to a final answer on the main question:


  • What is organizational culture?

  • What are the essential characteristics of ALDIs organizational culture?

When these two questions have brought the necessary information available, the results of these can be put together to answer the main question.


The rest of the paper will have the following structure:

In part I, the first question will be answered: what is organizational culture? First there will be a look on the main theories in the management- and organization literature as to have a quick glance of the insights that are available. After that, specific attention will be put on the work of Sanders & Neuijen, two Dutch researchers that have put forward a theory to get some grip on the culture of organizations. The rest of the paper will be based on their work.

In part II, the book of Brandes will be used to make a consistent and as complete as possible view of the culture at ALDI, as objectively as possible. Quotes will be taken as to make clear how the company works, what its most important values and ideas are, and these will be put down systematically. There will be a search for inconsistencies, and if these arrive, there will be a search for the most probable claim. After this is done, the findings will be put into the theoretical framework to classify culture, following the theories of Sanders and Neuijen. Part II therefore is the realization of the second question above.

Part III will be the final work in which the two questions are combined into a conclusion about ALDIs corporate culture. This will be followed by a discussion about the findings of the research and the possible future of research in this area of management and organizational literature.


This will be the final paper that I am writing for my bachelor period economics at the Vrije Universiteit.

I want to thank drs. Gert-Jan Melker for his help and good advice in the time working up to the final version of this thesis.

Sander van Luit

Haarlem, june 2006



Part I

What is organizational culture?
Because one of the most important aspects of ALDI is its corporate culture, and the focus of this paper is to put this culture in a scientific context, it is important to make clear what organizational culture exactly means. This is to have a clear definition to work with, such that the culture as described by Brandes, and by other commentators on the ALDI culture, is the same as the culture as used in science.


Organizational culture in management- and organization literature

According to Hofstede, Neuijen, Ohayv & Sanders (1990), “the term ‘organizational cultures’ entered the U.S. academic literature (…) with an article in Administrative Science Quarterly by Pettigrew in 1979 (…).”. It is thus a rather recent addition to science on management and organization.

Since those years, organization culture has been seen as extraordinary important, comparable to structure, strategy and control (Hofstede et al., 1990).

According to Hofstede et al. (1990), all the authors on organization culture should acknowledge the following characteristics of the “organizational culture” construct:




  1. it is holistic

  2. it is historically determined

  3. it is related to anthropological concepts

  4. it is socially constructed

  5. it is soft

  6. it is difficult to change

However, because the construct of culture is soft, it is still hard to put in words what it exactly is. Many authors have begun to work on various parts of organizational culture to make this construct all the more clear and easier to work with.


One of the most important authors in this field of study has been proven to be Edgar Schein.

He defines organizational culture as “A coherent pattern of basic assumptions” (Schein, 1985, p.5-9). Neuijen (1992) explains Schein as following:

It is a pattern that a given group has invented, discovered or developed in learning to cope with its problems of internal integration and external adaptation.” (Neuijen, 1992, p.51)
For Schein (1985), organizational culture exists of three layers:
Organizational attributes

Professed culture of the organizational participants

The organization’s tacit assumptions
These three layers make clear what an organization’s culture is all about. Schein further states the importance and influence of the founder of an organization in the creation of its culture (Schein, 1983).
Another well-known name has been Hofstede; he is especially known for his study among national cultures. For Hofstede, organizational culture can be defined as following:
Organizational culture is “(…) the collective mental programming of the members and stakeholders of an organization” (Hofstede, 1986, p.102)


Sanders and Neuijen on organizational culture
Geert Sanders and Bram Neuijen are two researchers that have worked together closely with Hofstede, and have been able to bring an important contribution to the demystifying of the construct organizational culture.

Sanders and Neuijen’s definition of culture is stated as following:


Corporate culture is seen as the collective understanding of the members of a company towards how a company is working. It is about the whole of written and unwritten rules that shapes and canalises the social relations among the employees as well as the relations outside the company.” (Translated by the author from Sanders & Neuijen, 1992, p.14)
This definition of culture will be used in this paper; as leading researchers in the area of organizational culture, Sanders & Neuijen have been able to synthesize what is exactly meant when people talk about the culture of a company. The view of Brandes on corporate culture will be compared to this definition to make sure that the his definition is similar enough to make integration of his cultural characteristics in the model of Sanders & Neuijen possible.
In a study (Hofstede et al., 1990) in which Denise Ohayv participated too, the researchers have begun to develop the work of Hofstede, that is primarily based on differences in national cultures, to differences in culture among companies and even within companies.

The study showed a few factors, in which organizational culture manifests itself:




Figure 1: Manifestations of culture

Adapted from Hofstede et al, 1990

These concepts can be seen as the layers of an union. The outer three manifestations are rather clear practices that the members of an organization can see. They refer to deeper lying values, of which the members are less aware (Sanders & Neuijen, 1992, p.15)
The meaning of the four concepts can be stated as following:

Symbols are objects, words or actions that express what the organisations wants to be. Examples are working clothes, portraits and pictures, the furnishing of the offices, the humour and use of language.




Heroes (or anti-heroes) are real or imaginary persons who are admired or despised by the members of the organization. They refer to things that are required of the members or what should not be done.




Rituals are social habits that express something essential for the members of the organisation and that give a context to certain events. Examples are birthdays, jubilees, and the making of plans. The relations of power and influence are especially expressed by these rituals.




Values tell people what they should and shouldn’t in the context of the company. They are the premises on which the other manifestations of culture are grounded.

The values are the hardest manifestations of culture to change; they are the basis of all the other phenomena. Further it is important to realize that it is quite hard to discover the values of a corporation after studying the outer three manifestations of culture. (Sanders & Neuijen, 1992, p.15-17)


One of the advantages of the model of Sanders and Neuijen is that it gives easy handles on which a company can be classified on culture. Schein (1985) already noted that a company has certain layers of culture, such that it can be classified in these layers. But this model of Sanders and Neuijen gives practical and concrete manifestations of culture to look for.

The examples given above give certain phenomena that are easy to be found in a organization, and the concepts are easy to understand. Therefore, it is perfect to use this model for classifying a company like ALDI.


Besides these four phenomena, which are manifestations of culture, Sanders & Neuijen continue with the model as described in Hofstede et al. (1990), in which culture really can be classified. This is done on the following six dimensions:


  1. Process-oriented versus results-oriented

  2. Employee-oriented versus job-oriented

  3. Professional versus parochial

  4. Open system versus closed system

  5. Tight control versus loose control

  6. Pragmatic versus normative

(Neuijen, 1992; Sanders & Neuijen, 1992)


A proces oriented company is formalistic; employees don’t take risks, and do not put much effort in their job. Results oriented companies have employees that take risks and see every day as a new challenge. This dimension is maybe the most important aspect, because results-oriented companies are more effective than process-oriented companies (Sanders & Neuijen, 1992, p.42)

The employee-oriented company takes care of their people; it takes the responsibility for them and lets them actively participate. The job-oriented company uses much pressure to get the work done. The results of the employees are more important than the employees themselves.



Professional companies takes people only for their fitness for the job; private life and company are separated from each other. In parochial companies on the other hand the identity of the employee is greatly influenced by the membership of the organization.

An open system stands open for new and outside employees. These new employees will also quickly be able to get around in the company. In a closed system the colleagues can be seen as closed and secretive. Few people fit in the organization.



Tight control means that there is a great emphasis on discipline and control. Appointments are met with importance and seriousness. Loose control demands less discipline; appointments are not always taken seriously and a lot of jokes are made on the job.

In a pragmatic company results are more important than procedures. Flexibility is important. A normative company takes great care of following the procedures well. There is an important place for ethics and fair business.

(Sanders & Neuijen, 1992, p.41-44)
Two last characteristics of organizational culture are the distinction between strong and weak cultures and heterogeneous and homogenous cultures. The definition of these have been given by Sanders and Neuijen:
If culture is defined as a collective understanding, it can be said that if this understanding accounts for every employee of the company, and if the same understanding manifests itself in different employees in the same consequences, there is a strong culture” (Translated by the author from Sanders & Neuijen, 1992, p. 46)
In their eyes a weak culture is one in which only a limited number of employees are a part of this common understanding; there can be strong subcultures however, that oppose or pass each other. (Sanders & Neuijen, 1992, p. 46)

The distinction between a homogenous culture and a heterogeneous culture is less clearly defined, but it has been stated that if people in the same organization think differently in the same situations, “there is a weak, heterogeneous culture or there are several distinctive subcultures” (Sanders & Neuijen, 1992, p. 46)

In this paper a heterogeneous culture will be defined as a culture with no homogeneity and no strong subcultures; it means that every employee is quite distinct from all other employees, and therefore no subcultures can arise.
Using the model of Sanders and Neuijen as presented above, it is at first quite easy to find the essential characteristics of an organizational culture, because things as symbols, heroes and rituals are concrete phenomena that are, with some observation, easily identifiable facets of work. When these practices are clearly stated, it is possible to create a profile of the company’s culture by using the six dimensions that classify the culture researched.

Pro’s and con’s of the dimensions will be brought forward, and in the end, after weighing these, a conclusion can be made about ALDIs place in these dimensions.


In the rest of the paper the manifestations of culture at ALDI will be put down, so that these can be put in the context of the six dimensions and ALDIs corporate culture can finally be demystified and made scientific.

Part II

What are the essential characteristics of ALDIs organizational culture?
Now that it is clear what the definition of organizational culture is and how it can be classified using the model of Sanders and Neuijen, what is left is the manifestation of organizational culture at ALDI.


Brandes’ view of culture

In his book, Brandes takes 40 pages to emphasize the special culture of ALDI.

For him, the definition of culture may be stated as following:
The cultural rules viewed collectively work in many communities almost like laws – frequently even better. Cultural rules guide how members think, feel and behave. They are frequently passed on in subtle ways to new members of the organization and to subsequent generations. People are always looking for guidance and they find it in unwritten sources as well as in the literal rulebook. Cultural rules give each company its own, unique identity.” (Brandes, 2004, p.40)
This definition of Brandes has important similarities with the definitions of other authors. The “coherent pattern of basic assumptions” of Schein (1985, p.5-9) explains itself as the “law” that Brandes states above; it is coherent and based on the assumptions of the members of the organization. Also, the “collective mental programming” from Hofstede (1986, p.102) presents itself as the collectivity of “laws” and “how members think, feel and behave”.

Most important for this paper are the similarities between Brandes and Sanders and Neuijen, on whose work this paper is based.


Corporate culture is seen as the collective understanding of the members of a company towards how a company is working. It is about the whole of written and unwritten rules that shapes and canalises the social relations among the employees as well as the relations outside the company.” (Translated by the author from Sanders & Neuijen, 1992, p.14)
The written and unwritten rules of Sanders and Neuijen (1992) can be compared with the laws of Brandes, and the “relations” in the definition of Sanders and Neuijen are the cultural rules that guide “how members think, feel and behave”.
Companies develop ways of working that are specific to them, that make it clear to employees what the company considers ‘good’ or ‘bad’, ‘permitted’ or ‘forbidden’, what it ‘rewards’ and ‘punishes’.” (Brandes, 2004, p.40)
This description of culture reminds of Sanders & Neuijens classifications of culture in rituals and heroes; what is good and what is bad.
Because the views on culture of Brandes and Sanders & Neuijen have great similarities, it is possible to put the facts as brought forward by Brandes about ALDIs corporate culture into the model of Sanders and Neuijen and maintain the scientific credibility of the model.
Brandes puts a lot of emphasis on the culture of ALDI because according to him it is one of its key success factors. The following quote about managers that have left the company and went working for a competitor is a good example of this view:
These recruits are certainly making life difficult for their former employer, but simply adding the right people is not enough. There has to be the right framework to support them – the right culture.” (Brandes, 2004, p.64)
Culture is, according to Brandes, a key factor of ALDIs uniqueness, and is therefore a good start for investigation on the company.

The manifestation of ALDIs culture

In the following section, the characteristics of culture according to Sanders & Neuijen will be listed, and examples of ALDIs culture will be given to classify it into these characteristics.


What is special about ALDIs corporate culture?
In short, Brandes puts down the essential characteristics of ALDIs organizational culture down at the end of the chapter.
There he refers to the work of Don Clifford and Richard E. Cavanagh (Brandes, 2004, p.79)

Clifford and Cavanagh have attributed the success of some mid-sized companies in the United States to the following characteristics:




  • Strong sense of mission (passionately pursued values and goals

  • Unlimited attention to fundamental business tasks

  • Fierce opposition to any bureaucracy combined with an eagerness to experiment

  • An ability to think like the customer

(Quoting Brandes, 2004, p.79, referring to Clifford & Cavanagh, 1985)


Brandes claims that ALDI possesses all these characteristics, but that is has another key factor to success: uniqueness. It is hard to imitate the culture of ALDI, thus leaving few space for competitors (Brandes, 2004, p.79)
The chapter about ALDIs corporate culture ends with the following special characteristics of the company:
- Ascetism and low profile

There is no place – anywhere in the hierarchy – for personal vanity. Extreme frugality is a must. Waste is prohibited.



- Total customer orientation

Earning the trust of the customer means no tricks or sales ploys.



- Devotion to and passion for detail

Small wins count. The aim should be to achieve them daily.



- Simple systems

Implement the principle of simplicity and develop the courage to go for simple and rapid solutions.



- Rigor in action

Resist daily temptations and stick steadfastly to good concept.”


(Brandes, 2004, p. 80)

Symbols


One of the most obvious symbols of ALDI is the poorly furnished shops of the company; in few other things it is better proclaimed what ALDI wants to be: simple, cheap, but good.

This is only one reference to the general need of the company to be ascetic in every way.

Asceticism is the lack of all luxury; what is not needed to do business, is seen as a burden and needs to get rid off; it costs money and takes away the attention from what it is all about: the customer. Examples are the spartan interiors of the shops; the absence of telephones so that employees cannot make long, unnecessary calls that only cost money; simple furnishing of the break rooms for employees, and the simple items that are sold in the shops. In the last years, ALDI has brought more luxury items in its assortment, but that is because of shifting wishes of the customers. This principle of asceticism and simplicity is one of the most breaking and import facets of it’s corporate culture:
One could almost forget that this is by far the best-earning company in its sector in Germany. If you compare the cost of managerial staff and offices at competing companies that earn a fraction of the ALDI profits, the cultural differences appear even more stark. I think this is one factor – if not the biggest factor – behind the major differences in the annual statements.” (Brandes, 2004, p.45)
Frugality is the other important symbol and characteristic of ALDI; frugality goes hand in hand with ALDIs low profile. Not only the employees are pointed at this principle every time; one of the greatest examples has been Theo Albrecht, who always used both sides of paper, and always turns the light off when there is enough light from outside.

Searching for better lamps to save on electricity costs, using retread tires to recut the treads again as to save money, wind deflectors on trucks to cut fuel consumption are examples of the company’s constant search to get the costs lower and lower. Boxes are, together with the suppliers, made in such a shape that they can be immediately put onto the shelves without cutting them open, as to save on time and thus personnel costs. Again, luxury is something that is hard to find in the company. Luxury only costs money and is not necessary. In this way, the principle of frugality goes hand in hand with asceticism. (Brandes, 2004, p. 45-46)



Actions that can be classified as symbols are the way in which the returns are handled.

The culture of high quality and strong customer orientation manifests itself in the easy way that ALDI takes back its goods when the customer does not like it or it is not in a good condition. Of course it always is possible that the customer unjustly takes advantage of this service. However, ALDI trusts its consumers and does not want to take the risk to disappoint them. (Brandes, 2004, p.59)

This trust in consumers and therefore the trust of consumers in ALDI is an important symbol.

Heroes


There are not much heroes in the world of ALDI. One of the very few is one of the founders of ALDI, Theo Albrecht, who is known for his extreme frugality and his tight control of employees (Brandes, 2004, p.68). With the founding of the company, he has put this way of thinking into the culture of ALDI, thus ensuring that employees in every store understand what the basis of ALDI is.

The anti-hero might be the management consultant that according to Brandes is expensive and does not say anything new and breaking, and if he says something good, it is simple and something that is already being practised by the company. Rather use common sense than going to a consultant that can say the same in less simple words, or nothing useful at all. (see e.g Brandes, 2004, p. 54)



Rituals

An important ritual is the tight control of managers on the company, especially on the service to the customer. According to Brandes (2004, p.54), this is one of the most important cultural aspects of the company. ALDI has a simple and practical way of orienting to the customer.


The senior managers are at the beginning of this; they regularly visit the store, so that they can look trough the eyes of the customers themselves. When they know what is going wrong in the store, they can change the way things happen, or talk to the responsible employee. A customer with a negative experience will not come back soon to the store, costing the company more than the few benefits it can earn by not servicing the customer to the full extent.

Brandes also gives the example of Theo Albrecht, one of the two founders of ALDI, who went together with him to the store. A package of three chocolate bars cost 98 Pfennig, and Albrecht went with one of them, the package was torn open, to the cash register. The employee at the cash demanded 50 Pfennig. Albrecht asked why the employee asked this, and not about 33 Pfennig. The fact that the company maybe would lose some money, was of minor importance than the fact that a customer would expect to pay one third of the price (Brandes, 2004, p.57). Customer orientation is one of the most important aspects of ALDIs culture.

Theo Albrecht is a shining example of these rituals:

Theo Albrecht’s mistrust influenced the control culture in the company” (Brandes, 2004, p.68). ALDI therefore has a strong culture of controlling employees to make sure that they do business as is supposed to be. Spot checks are applied to employees every month.

Trust is the basic prerequisite for delegation. Nevertheless, it is important for supervisors to check whether and how the delegated tasks are being carried out.” (Brandes, 2004, p.68)
It often is hard for people to live up to the ideals of asceticism and frugality. That is why the company most often promotes its managers from within. These people are already acquainted with the corporate culture and have shown the discipline that is needed to have success.

People with good grades on universities are not always the people that are wanted; what is wanted are modest, hard working people with the right state of mind.


Brandes refers to the management consultant Rolf Berth (Berth, no year), who has researched this link between culture and success:

The management consultant Rolf Berth studied a large number of companies and concluded that a strategic concept can only be implemented effectively by the right personalities – failures, botched enterprises, bankruptcies are largely down to discrepancies between the tasks on the agenda and character. I believe ALDI has largely succeeded in bringing these two into sync.” (Brandes, 2004, p.47)

Experimenting is a ritual that shows what ALDI stands for: seeking the best solution for the least amount of money and time. ALDI needs no consultants, but does many of the things on a basis of experiment. If a new idea for improvement is brought forward, the new policy first will be introduced in 3 shops, so that on a small scale the results can be examined. An example is the implementation of a new cash registration system, in which in the Netherlands a suggestions has been developed that instead of prices, codes for products should be typed in, so that price changes did not have to be remembered by the employees, who needed to memorize the prices of all the products. The numbers for products, that did not change with time as opposed to prices, made it possible for ALDI cashiers to be the fastest and cheapest data cash registers in the world (Brandes, 2004, p.70).

Job enrichment and obsession for detail: Not only managers, but also the lower employees are given possibilities to do additional, interesting assignments. These employees are also useful to test new policies and projects, because they are the ones who have to work with it; if they don’t feel happy with the new way of working, it is logical that it should not be implemented.


The management also strives for continuous improvements (also known as kaizen). The collective knowledge of employees is greater than that of single persons, and the company also uses this knowledge to get to common sense solutions, and in this way the corporate culture gets confirmed again. An example of a common sense solution is that Theo Albrecht, who wanted to become an architect, looks at all the interior plans for new stores and almost always finds a better solution. In this way ALDI can save a lot of costs (Brandes, 2004, p.62). A perfect example of the obsession for detail that can lead to a lot of improvements.
Something that can be seen as a ritual, or more as a anti-ritual, is the total absence of publicity and gathering.

The managers of ALDI never have been in publicity; it is not needed, it takes away the attention from the work, and it can only do damage to the company.

Another manifestation of this is that within the company, there are no large gatherings too. There have never been Christmas parties or company parties, to regret of some employees.

Not only does this policy of secrecy has helped keeping the managers to their jobs instead of public appearances for the ego, it also has helped to keep competitors blind for the way ALDI works. This has helped the company to make quiet, but great successes. (Brandes, 2004, p.49)



Values


The three main values of ALDI can be stated as following:
Customer orientation

Frugality

Simplicity
In the end, customer orientation is the final goal of ALDI, and thus should have all priority. As stated earlier, Brandes sees this as the most important thing a company should pay attention to, for without customers there are no sales en there is no profit.

Common sense is one of the ways of working that goes together with simplicity. Also, common sense offers the possibility to orientate yourself unto the customer instead of things that only distract from it; things that are getting more and more complicated without helping the customer and thus the company.


Frugality is the key principle that makes it possible that the customer gets what it wants – a low price for high quality – and good profits for the company.

Simplicity is the second major value of the company:


(…) ALDIs success story is a lesson in simplicity. Although customer orientation, asceticism, rigor and discipline are essential ALDI features, simplicity is the company’s real secret.” (Brandes, 2004, p.70)

This culture of simplicity has especially been developed by the founders of ALDI, and found its way through the subsequent generations and levels of employees.

A clear and important manifestation of this principle is the small number of products, 700, that makes it all the more simple to keep the quality high and the prices low. Other examples are the fact that few statistics are recorded, the clear targets and responsibilities for employees, the small number of suppliers to stores and the sale directly out of delivery boxes.

ALDI puts its attention on a few things, as simple as possible, and makes sure that exactly that is done well.

“Why?” is an important question in the company. If things need not to be more complex, than why do it? An example is the fact that the company, unlike most other companies, does not have a system of budgets for managers, which takes much time and money, but is not needed. (Brandes, 2004, p.74)

Simplicity may lead to much improvements, but also can have its drawbacks in the form of bureaucracy. In ALDI however, this bureaucracy is hard to find. Managers are aware of the fact that small, extra rules can have some great improvements, but on a larger scale it will have a drawback when applying it to thousands of stores. Power struggles make it harder to stick to this aversion of bureaucracy, because power often is being put to practice by implementing guidelines from the “winning” party. (Brandes, 2004, p.65)


Other values of less importance can also be seen in the company.

For example, ALDI has had, in its history, some great problems with the labour unions.

One example of this was a plan of the ALDI to make it impossible for ill employees to earn the bonus on the salary, that was calculated by dividing turnover by hours worked. Because it is hard to find other employees in a few days, few hours were made, making the bonus higher, even for the ill people. ALDI wanted to scrap this, but the unions protested, and court decided that ALDI could not do this. Since then, ALDI has never tried to ignore or evade this rule.

Another example is the hiring of part-timers, which meant that some people were only called upon when it was not necessary. In agreements with the Work Council, it is stated that people would be scheduled for certain times to be called upon, and that they can have a say in how the schedule is organized. In the end, ALDI can have its own ideas about working with employees, but keeps itself to agreements made and does not try to evade or ignore the law. (Brandes, 2004, p. 52)

ALDI likes to do fair business and restrains itself from tricks that in the long run only can harm its image.
Suppliers are an other party that is fairly treated; ALDI is a trustworthy partner, and always pays as fast as possible.

Furthermore, stories of intimidation, pressure and abuse of power toward suppliers are not true.

A fair treatment to suppliers also requires that the purchasers of ALDI are fairly treated too. ALDI sees this in a special way; to avoid bribery and bargaining, ALDI prohibits taking gifts that are worth more than a calendar. Diners, holidays or even cars are never taken by the purchasers. This is not strange; with examples of a central purchaser buying amounts up to 2,5 billion euros, the stakes are high and it is tempting to take great gifts.

This policy prevents purchasers from putting their attention on other things than the company. (Brandes, 2004, p. 53)

What is related to the strong orientation of the customer, is that ALDI has a strong culture of credibility to the customer; the customer can trust the company because it has a few products with a constant quality.
“ALDI has become credible in the eyes of customers because talking and doing, advertising and reality, agree.” (Brandes, 2004, p. 58)

The company does not want to mislead the consumer; the customer orientation is of such an importance that ALDI cannot do anything different than putting the consumer first, even if this would mean some lower profits in the short run.

Quality is one of the best ways to serve the customers. ALDIs profile is that of high quality – low price. An important aspect of ALDIs way of working is the small assortment of only 700 products. ALDI does not accept offerings or discounts from suppliers, to guarantee that the assortment mix is based on quality and price, and not on other, less important aspects (Brandes, 2004, p.59). Many of its products therefore come very well out of tests held by consumer bonds.

In ALDI a certain discipline can be found to stick to things that have proven to work, and to resist temptations that seem to be a big improvement, but in the end will turn out to have a negative effect. Examples of these temptations are to widen the product range, to let suppliers have a vote in the assortment, and to put stores in more expensive locations.

It takes hard discipline to be an ALDI manager, but in many years it has proven to work:
ALDIs commitment to it’s goals – all of which are underpinned by strict faith in customer orientation – is consistent down to the smallest details. (…) Competitors have failed in copying ALDI largely because they have failed to face up to the contribution made to the company’s success by those rare qualities of asceticism, rigor and discipline which many managers find so difficult.” (Brandes, 2004, p.67)
Sometimes however, this also can have its drawbacks, when clearly advantageous opportunities are not taken because of sticking to things as they have been before.

The six dimensions of culture

In this paragraph, the culture of ALDI will be classified by using the six dimensions as put forward by Sanders and Neuijen in their models.

The practices at ALDI will be weighed to come to a conclusion about its place in these dimensions.
Process-oriented versus results-oriented
In the book of Brandes it does not get clear exactly what the employees think of their work; if they see it as dull and they take no risk, or if they see it as a job with a lot of challenges. What Brandes emphasizes on the other hand, that in the end the customers well-being is the final goal, and that the company is very customer-oriented, hints at a result-orientation.. Ways to get to this, to get things cheaper and better, are practical and made with common sense, so that in the end the customer can benefit of this. This is essentially a orientation to results, and as stated before, a company that is oriented at results will have better performance than a company that doesn’t put attention on what is necessary. Brandes also puts forward that this culture of ALDI is a reason for its success. Therefore, ALDI can be said to be very results oriented.
Proces-oriented Results-oriented
Not clear how employees experience their job Customers well-being as final goal Practical solutions

Common sense



Employee-oriented versus job-oriented

This is a dimension in which the ALDI is a kind of dubious. On the one hand, it is stated that employees are given the ability of job enrichment, which could mean that the company cares about their workers. On the other hand, it is necessary for them to do their job well; people with the right kind of cultural attitude are preferred above other people, and discipline is a characteristic of employees that is rewarded, more than the people themselves.

Also, the fact that outside the job the company does not offer people much more, and the fact that labour unions and other workers councils are regularly arguing with ALDI, shows that ALDI cares more about the jobs people do and how they do it than about the people themselves. More attention is paid to the principles of ALDI and how to act them out the best than about how the people are doing; ALDI is rather much job oriented.

Employee-oriented Job-oriented

Ability of job enrichment Right cultural attitude is preferred

Discipline is rewarded

No contacts external to the job

Problems with labour unions and councils


Professional versus parochial

The distinctive corporate culture at ALDI makes it hard to feel as an outsider to the company. Either you are in or you are out, may be one of the thoughts that come to mind when thinking about working here. As examples show, people are trained from within, not from without, because people from within have the right mindset to make the company successful. Also, if you are an employee of the ALDI, it means that you are part of a “special” group of people in a special company. People feel quite attached to the company in some way, even if they are not very happy with it. In this sense, ALDI culture is quite parochial; people are not only drawn for the qualities they have; they also need to be part of the special culture at ALDI.

ALDI is more parochial than professional.

Professional Parochial

Distinctive culture

Training from within

Attachment to the company




Open system versus closed system

ALDI company is in essence a closed system, as already shown in the preface leading to this paper. The whole fact that there has been so few information about it is why this paper is begun. Furthermore, it is shown that few people come into the company, and the people that do come in must have a special way of thinking to connect to the culture that is already present. ALDI is a company that is not easy to work in, so it is very closed.



Open system Closed system

Little information about the company

“Fit” to the culture is required

Tight control versus loose control

As stated before, one of the founders of ALDI, Theo Albrecht, is a man of very much control. This control also can be seen by the monthly checks made by managers on employees, and the strong culture in which orders and policies are given trough in a clear but very pushing way.

On the other hand, the principle of simplicity takes care for not gaining too much on control of employees, rejecting statistics and such, as to make sure that things do net get too complex.

However, the strong culture still stands, but it is not pulled into the extreme.




Tight control Loose control

The “hero” Theo Albrecht Simplicity preferred to control

Monthly checks
Pragmatic versus normative
This probably is the most difficult dimension to put ALDI in. On the one hand, ALDI always wants to service the customer and is very pragmatic in this way; common sense, learning by doing, trial and error and experimenting all are meant to practically be there for the customer.

On the other hand, there is a strong will to adhere to principles, especially if these have “proven” themselves in the years. Examples can be given in which an important decision was postponed and not practiced because the managers held unto the principles and the traditions in the company, while for the customer in the end the decision had made a lot of sense and for the company too. ALDI wants to be practical in its customer orientation, but still has a tendency to rules.



Pragmatic Normative

Service to the customer first Adherence to principles

Experimenting Traditions

Part III

Putting practice in theory: ALDIs culture according to Sanders & Neuijen

Conclusion

Using the description of ALDIs culture by Brandes, there has been made a profile of the company that can be stated as following:


ALDI is very results oriented

ALDI is rather much job oriented

ALDI is more parochial than professional

ALDI is a totally closed system

ALDI is a company with a tight control

ALDI is pragmatic in its ideals but still has a tendency to rules


These results may be used by other researchers in the management theories or researchers of the ALDI company to put its culture in a more scientific context and to make a short but relevant statement about how the culture of ALDI works. One of the most interesting areas of research is the relation between an organizations culture and its success; exactly the most important claim that Brandes made in his book: that ALDIs culture is the biggest reason for its (financial) success.

Strong culture versus weak culture

One last characteristic as put forward by Sanders & Neuijen is the distinction of the culture in a strong one or a weak one.

According to the information Brandes has given, the organizational culture of ALDI can be characterised as strong. The conclusion that ALDI is a closed system, shows that it is not easy to join the ALDI as a new employee; they always must have a certain way of thinking that corresponds to the way ALDI does its business. The organizational culture is one of the greatest barriers for people that do not totally fit into it. This is the best argument to characterise ALDIs corporate culture as a strong one. Also the parochial way the company functions for its employees is an indication that a strong culture exists.

Heterogeneity in the culture therefore is not likely; people that differ too much in ways of thinking will not truly connect to ALDIs culture and therefore be likely to stop working there, or be fired. ALDIs culture is strong and homogeneous. If there exist important subcultures in the ALDI is not clear, but also not very likely with such a strong culture and as closed a system as ALDI has.




Discussion

This research does have its flaws. At first, it has only one source, and that is the book of Brandes. Second, Brandes cannot really be thought of as a independent actor in the whole. He has worked for years at ALDI, as he said about employees and culture it is therefore likely that he loved his job and certainly had the right characteristics for it, so that minor or worse things about the ALDI culture are not presented here.

And as third, this book is written about the success of ALDI, so that it is clear that the text is not really impartial.
The solution to this problem however, is not easy. It is very hard to find any information about ALDI, in libraries, magazines or on the internet, and even harder to find information about its corporate “secrets”; the way it works, its procedures, and in the end also its culture.

It is the very reason that this paper is written.


This paper has been an attempt to let go of the partial parts of the text, to sum up the most important parts of ALDIs corporate culture, and to put them in the context of a scientific theory on organizational culture. It gives interested people, researchers and scientist a handle to look at ALDI at a new or other way; but the question if the paper is impartial and objective enough has to be answered by those reading it and comparing their own opinions about the book or ALDI as a company with it.

The author had the ideal of an objective classification of ALDIs culture, and to his opinion this has succeeded.


References
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