Download Organizational Culture

chapter
10
Organizational
Culture
McGraw-Hill/Irwin
Principles of Management
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Learning Objectives
1. Describe the elements of organizational culture.
2. Discuss the importance of organizational subcultures.
3. List four categories of artifacts through which corporate
culture is deciphered.
4. Discuss the conditions under which cultural strength
improves corporate performance.
5. Identify four strategies to change and strengthen an
organizations culture.
6. Compare and contrast four strategies for merging
organizational cultures.
What is
Organizational Culture?
• Organizational Culture: The values and assumptions
shared within an organization.
• The concept of organizational culture has been around for
decades and started to gain popularity beyond academic
circles in the 1980’s.
• Organizational culture directs everyone in the organization
toward the “right way” of doing things.
• It frames and shapes the decisions that managers and other
employees should make and the actions they should take.
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Google Culture
• Even with rapid growth and expansion, Google continues to
maintain a small company feel
• Everyone wears multiple hats with emphasis on innovation and
commitment to cost containment
• Hiring policy favors ability over experience
• Google headquarters – Googleplex – comprises of recreation
facility (workout, massage rooms, video and other games), snack
rooms
• Most Googlers have high-powered Linux OS workstations on
their desk and three or four staffers share office space with
couches and dogs.
Source: google.com
Organizational Culture
Assumptions, Values, and Artifacts
Artifacts
• Stories/legends.
• Rituals/ceremonies.
• Organizational language.
• Physical structure/décor.
Visible
Shared Values
• Conscious beliefs.
• Evaluate what is good
or bad, right or wrong.
Invisible
Shared assumptions
• Unconscious,
taken-for-granted
perceptions or beliefs.
• Mental models of ideals.
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Shared Values
• Values: Are stable, evaluative beliefs that guide our preferences
for outcomes or courses of action in a variety of situations.
• Shared Values: Values that people within the organization or
work unit have in common and place near the top of their
hierarchy of values.
• Espoused values: Values people say they use and, in many
cases, think they use even if they don’t.
• Enacted Values: Values people actually rely on to guide their
decisions and actions.
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Diversity Objective
at SYSCO
• To create a competitive and innovative business
environment by leveraging the diversity of
thought, experience and people.
• Understanding diversity requires a respect and
appreciation of differences.
Source: sysco.com
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Shared Assumptions
• The deepest element of organizational culture is the shared
assumptions that people carry around in their heads.
• Assumptions: Unconscious perceptions or beliefs that have
worked so well in the past that they are considered the correct way
to think and act toward problems and opportunities.
• These assumptions are so deep that they are taken for granted—
they are obviously good and right for the company that no one
really questioned its underlying assumptions.
• Shared assumptions are the most difficult to change.
Content of
Organizational Culture
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• Organizations differ in their cultural content—that is, the
relative ordering of values and assumptions.
• Some writers and consultants have attempted to classify
organizational cultures into several categories.
• One of these models claims that there are seven corporate
cultures in the world: attention to detail, outcome orientation,
people orientation, team orientation, aggressiveness, stability,
and innovation and risk taking.
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Organizational Subcultures
• Dominant Culture: The values and assumptions shared most
widely by people throughout the organization.
• Organizations have subcultures located throughout their various
divisions, geographic regions, and occupational groups.
• Some subcultures enhance the dominant culture by espousing
parallel assumptions, values, and beliefs.
• Other subcultures are called countercultures because they directly
oppose the organization’s core values.
Deciphering an
Organization’s Culture
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• Artifacts: The observable symbols and signals of an
organization’s culture.
• Some experts suggest that artifacts are the essence of corporate
culture, whereas others view artifacts as symbols or indicators of
culture.
• Discovering an organization’s culture is much like an
anthropological investigation of a new society.
• It involves observing workplace behavior, listening to unique
language in everyday conversations, studying written documents,
and interviewing staff about corporate stories.
Organizational Stories
and Legends
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• Stories and legends about past corporate incidents serve as a
powerful social prescriptions of the way things should (or
should not) be done.
• They also provide human realism to corporate expectations,
individual performance standards, and assumptions about
ideal behaviors and decisions.
• Stories are important artifacts because they personalize the
culture and generate emotions that help people remember
lessons within these stories.
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Rituals and Ceremonies
• Rituals: The programmed routines of daily organizational life
that dramatize the organization’s culture.
• They include how visitors are greeted, how often senior executives
visit subordinates, how people communicate with each other, and
so on.
• Ceremonies: Planned activities conducted specifically for the
benefit of an audience.
• Ceremonies are more formal artifacts than rituals.
Physical Structures
and Decor
• The size, shape, location, and age of building might suggest the
company’s emphasis on teamwork, environmental friendliness,
flexibility, or any other set of values.
• Even if a building doesn’t make much of a statement, there is a
treasure trove of physical artifacts inside.
• Desks, chairs, office space, and wall hangings (or lack of them)
are just a few of the items that might convey cultural meaning.
• Each of these artifacts alone might not say much, but enough of
them together make the company’s culture easier to decipher.
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Is Organizational
Culture Important?
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• Does corporate culture really make a difference? The answer is
yes.
• Various studies indicate that companies with strong cultures are
more likely to be successful, but only under a particular set of
conditions.
• The effect of organizational culture depends partly on its strength.
• Corporate culture strength refers to how widely and deeply
employees hold the company’s dominant values and assumptions.
Strong Corporate Culture
and a Company’s Success
• A strong corporate culture potentially increases the
company’s success by serving three important
functions:
1. Control system
2. Social glue
3. Sense making
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Organizational Culture
Strength and Fit
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• Strong cultures are potentially good for business, but studies have
found only a modestly positive relationship between culture
strength and success.
• A strong organizational culture increases organizational
performance only when the cultural content is appropriate for the
organization’s environment.
• Strong cultures create a greater risk because culture strength
indicates that a greater number of employees will be guided by
those values and assumptions.
Organizational Culture
and Performance
Culture content fits
environment
Moderately strong
culture
Adaptive culture
• Corporate performance
• Ethical conduct
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Corporate Cults and
Suppressing Dissent
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• A second reason why companies with strong cultures aren’t
necessarily more effective is that they become corporate cults
that lock decision makers into mental models and bind them
to new opportunities or unique problems.
• A third consideration is that very strong cultures tend to
suppress dissenting subculture values.
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Adaptive Cultures
•
Adaptive culture: An organizational culture in which
employees focus on the changing needs of customers and other
stakeholders and support initiatives to keep pace with these
changes.
•
Organizational culture experts are starting to piece together the
elements of adaptive cultures:
1. Adaptive cultures have an external focus.
2. Employees pay as much attention to organizational processes as
they do organizational goals.
3. Employees have a strong sense of ownership.
4. Adaptive cultures are proactive and quick.
Organizational Culture
and Business Ethics
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• An organization’s culture influences more than just the
bottom line; it can also potentially influence its ethical
conduct.
• This makes sense because good behavior is driven by ethical
values.
• An organization can guide the conduct of its business by
embedding ethical values in its dominate culture.
• Unfortunately, it seems that every day companies make
headlines for failing to incorporate ethics into their culture.
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Corporate Wrongdoers
• Martha Stewart – served five-months sentence for lying to
government investigators about a suspicious stock sale. Her
company’s sales sunk.
• Tyco International CEO, Dennis Kozlowski – became a poster
boy for excess with $2 million birthday party. Charges –
Stealing $600 million form the company and the shareholders
• Former CEO of Enron, Bernard Ebbers – Charges:
conspiracy, securities fraud, making false regulatory filings,
ring leader in an $11 billion accounting fraud
Source: Business Week, January 10, 2005
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Best Corporate Citizens
Top three corporate citizens from
consumers viewpoint:
1. Wal-Mart
2. McDonald’s
3. Microsoft
Source: Forbes.com, November 28, 2006
Question
Organization wide unethical
behavior’s responsibility
and blame lies with the top
management team and the
culture they have nurtured.
Do you agree? Explain.
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Strategies to Change and
Strengthen Organizational Culture
Actions of founders and leaders
• Symbolize the new culture (or
need for one) through memorable
events.
• Model the new culture through subtle
decisions and actions.
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Culturally consistent rewards
• Reward employees for culturally
consistent behaviors.
• Reward managers who help
employees understand the culture.
Changing and strengthening
organizational culture
Selecting and socializing employees
• Hire people whose values are
consistent with the culture.
• Inform and indoctrinate new staff
about what the culture means.
Aligning artifacts
• Share stories supporting the culture.
• Celebrate goals/milestones to
support the culture.
• Inhabit buildings that reflect the
culture.
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Question
Kevin Ketterman, owner and CEO of Ketterman’s Ketchup
has always preached the gospel of cost containment and
frugality to employees on the shop floor. However, his office
presents the picture of a penthouse filled with marble
bathroom and gold covered faucets and showerheads, very
expensive paintings on the walls, and expensive antique
furniture. Ketterman appears to violate which of these
strategies to strengthen organizational culture?
a.
b.
c.
d.
Inappropriate training of employees
Culturally consistent rewards
Selecting and socializing employees
Aligning artifacts
Managing Organizational
Culture During Mergers
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• Along with changing and strengthening an organization's
culture, managers need to keep a watchful eye on culture
throughout the process of mergers and acquisitions.
• The corporate world is littered with managers that failed or
had a difficult gestation because of clashing organizational
cultures.
• Various studies report that between 60 and 75 percent of all
mergers fail to return a positive investment.
Strategies to Merge Different
Organizational Cultures
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• Assimilation: Acquired company embraces acquiring firm’s
culture.
• Deculturation: Acquiring firm imposes its culture on
unwilling acquired firm.
• Integration: Combining two or more cultures into a new
composite culture.
• Separation: Merging companies remain distinct entities with
minimal exchange of culture or organizational practices.
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Mergers & Acquisitions
• Merger Monday, in November, produced $76 billion in
tie-ups--solidifying 2006 as the biggest merger year on
record.
• So far about $3.5 trillion in transactions have been
announced this year.
• Why so any mergers?: A reasonably strong economy
that is signaling growth, coupled with
moderating inflation.
Source: Forbes.com, November 21, 2006