Organizational Culture McGraw-Hill/Irwin Principles of Management © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. 10 chapter
Describe the elements of organizational culture. Discuss the importance of organizational subcultures. List four categories of artifacts through which corporate culture is deciphered. Discuss the conditions under which cultural strength improves corporate performance. Identify four strategies to change and strengthen an organizations culture. Compare and contrast four strategies for merging organizational cultures. Learning Objectives
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. What is Organizational 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. Google Culture 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.
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. Shared Values
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. Diversity Objective at SYSCO Source: sysco.com
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. Shared Assumptions
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. Content of Organizational Culture
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. Organizational Subcultures
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. Deciphering an Organization’s Culture
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. Organizational Stories and Legends
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. Rituals and Ceremonies
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. Physical Structures and Decor
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. Is Organizational Culture Important?
A strong corporate culture potentially increases the company’s success by serving three important functions: Control system Social glue Sense making Strong Corporate Culture and a Company’s Success
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 Strength and Fit
Organizational Culture and Performance Culture content fits environment Moderately strong culture • Corporate performance • Ethical conduct Adaptive culture
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. Corporate Cults and Suppressing Dissent
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: Adaptive cultures have an external focus. Employees pay as much attention to organizational processes as they do organizational goals. Employees have a strong sense of ownership. Adaptive cultures are proactive and quick. Adaptive Cultures
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. Organizational Culture and Business Ethics
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 Corporate Wrongdoers Source: Business Week, January 10, 2005
Top three corporate citizens from consumers viewpoint: Wal-Mart McDonald’s Microsoft Best Corporate Citizens 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.
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. • 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.
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? Inappropriate training of employees Culturally consistent rewards Selecting and socializing employees Aligning artifacts Question
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. Managing Organizational Culture During Mergers
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. Strategies to Merge Different Organizational Cultures
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. Mergers & Acquisitions Source: Forbes.com, November 21, 2006