ORGANIZATION CULTURE Objectives: After completing the chapter, the students shall be able to: Define organization culture, explain how it affects employee behavior, and understand its. historical roots, Describe how to create organization culture, Differentiate the ifferent approaches to culture in organizations, |dentify emerging issues in organization culture, and Discuss the important elements of managing the organizational culture. THE NATURE OF ORGANIZATION CULTURE In the early 1980s,, organization culture became a central concern in the study of organizational behavior. Hundreds of researchers began to, work in this area. ‘Numerous books were published important academic journals dedicated entire issues to the discussion of culture, and, almost overnight, organizational behavior textbooks that omitted culture as a topic of study became obsolete. | Interest in organization culture was not limited to academic researchers. Businesses expressed a far more intense interest in culture than in other aspects of organizational behavior. Business Week, Fortune, and other business periodicals published articles that touted culture as the key to an organization’s success and suggested that managers who could manage through their organization’s culture almost certainly would rise to the top. The study of organization culture remains important, although the enthusiasm of the early 1980s has waned somewhat. The assumption is that organization is that organization with a strong culture perform at higher levels than those withoutastrong culture. For example, studies have shown that organizations with strong cultures that are strategically appropriate and that have norms that permit the organization to change actually do perform well. Other studies have shown that different funcional i saa Scanned wth G camscannerunits may require different types of cultures. The research on the impact ot culture on organizational performance is mixed, however, depending on how the research is done and what variables are measured. Many researchers have begun to weave the important aspects of organization culture into their research on more traditional topics. Now there are fewer headline stories in the popular business press about culture and culture management, but organization culture can have powerful effects on organizational performance, as the opening case about Goldman Sachs illustrates. The enormous amount of research on culture completed in the last twenty years has fundamentally altered the way both academics and managers look at organizations, Some of the concepts developed in the analysis of organization culture have become basic parts of the business vocabulary, and the analysis of organization culture is one of the most important specialties in the field of organizational behavior. What is Organization Culture? A surprising aspect of the recent risen interest in organization culture is that the concept, unlike virtually every other concept in the field, has no single widely accepted definition. Indeed, it often appears that authors feel compelled to develop their own definitions, which range from very broad to highly specific. For example, T.E, Deal and A.A. Kennedy define a firm’s culture as “the way we do things around here”. This very broad definition presumably could include the way a firm manufacture its products or create its service, pays its bills, treats its employees, and performs any other organizational operation., More specific definitions include those of E.H. Schein (“the pattern of basic assumption that a given group has invented , discovered, or developed in learning to ‘cope with its problems of external adaptation and internal integration”) and Tom Peters and Robert Waterman (“a dominant and coherent set of shared values y conveyed by such symbolic means as stories, myths, legends, slogans, anecdotes, and fairy tales”) Table 15.1 lists these and other important definitions of organization culture. Despite the apparent diversity of these definitions, a few common attribute emerge. First, all the definitions refer to a set of values held by individuals in an organization, ‘These values define good or acceptable behaviors and bad or unacceptable behavior. In some organizations, for example, it is unacceptable to blame customers when problems arise. Here the value “the customer is always right” tells manager what actions are acceptable (not blaming the customer) and what actions arenot acceptable (blaming the customer). In othier organizations, the dominant, values might support blaming customers for problems, penalizing employee who make mistakes , or treating employees as the organization's most valuable assets. In each case , values help members of an organization understand how they should act. A second attribute common to many of the definition in Table 15.1 is that the values that make up an organization’s culture are often taken for granted, that is, they are basic assumptions made by the firm's employees rather than prescription aah Scanned wth G camscannerwritten ina book or made explicit in a training program . It may be as difficult for an organization to articulate these basic assumptions as it is for people to express their personal beliefs and values. Several authors have argued that organization culture is a powerful influence on individuals in organizations precisely because it is not explicit but instead becomes an implicit part of employees values and beliefs. Some organizations have been able to articulate the key values in their cultures, Some have even written down these values and made them part of formal training procedures, Whole Foods Market stands out from the rest of the supermarket industry. In 2004,, the 160-store chain earned $137 million, while Kroger , the nation’s largest supermarket chain, lost $100 million . Whole Foods has a unique organization culture, described by CEO John Mackey as “a fast-breaking basketball team, We're driving down the court, but we don’t exactly know how the play is going to evolve.” Many experts attribute the differences in performance to its unique organization culture that is democratic, participative, egalitarian, , innovative, team-based, and transparent. Even when organizations can articulate and describe the basic values that make up their cultures, however, the values most strongly affect actions when people in the organization take them for granted. An organization's culture is not likely to influence behavior powerfully when employees must constantly refer to a handbook to remember what the culture is: When the culture becomes part of them - when they can ignore what is written in the book because they already have embraced the values it described - the culture can have an important impact on their actions. The final attribute shared by many of the definitions in Table 15.1 is an emphasis on the symbolic means through which the values in an organization’s culture are communicated, Although, as we noted, companies sometimes could directly describes these values, their meaning is perhaps best communicated to employees through the use of stories, examples, and even what some authors call “myths” or “fairy tales”. Stories typically reflect the important implications of values in an organization's culture. Often they develop a life of their own. As they are told and retold, shaped and reshaped, their relationship to what actually occurred becomes less important than the powerful impact the stories have on the way people behave eyery day. Nike uses a group of technical representatives called “Ekins” (""Nike" spelled backwards) who runa nine-day training sessions for large retailers, telling them stories about “Nikes” history and traditions, such as the stories about CEO Phil Knight selling shoes from the trunk of his car and cofounder Bill Bowerman using the family’s waffle iron to create the first waffle-soled running shoe.” Some organization stories have become famous. AtE Trade, CEO Christos Costakos has done many things that have sirice bécome famous around the company because he did not follow the rules for the typical investment company. To make people move faster, he organized a day of racing in Formula One cars at speeds of around 150 miles per hour, To create a looser atmosphere around the office, he had employees carry around rubber chickens or wear propeller beanies: To bond the employees together, he organized gourmet-cooking classes. The stories of these incidents and others are Scanned wth G camscannered {told to new employees and are spread throughout the company, thus affecting the i behavior ‘of many more people than those who actually took part in each event. i We can use the three common attributes of definitions of culture just discussed to {develop a definition with which most authors probably could agree: Organization } culture is the set of shared values, often taken for granted, that help people in an ganization understand which actions are considered acceptable and which are considered unacceptable. Often these values are communicated through stories and ! other symbolic means, | Historical Foundations Although research on organization culture exploded unto the,scene in the early 980s , the antecedents of this research can be traced to the origins of social science. : Understanding the contributions of other social science disciplines is particularly jportant in the case of organization culture because many of the dilemmas and ‘ debates that continue in this area reflect differences in historical research traditions. TABLE 15.1 ; DEFINITIONS OF ORGANIZATION CULTURE ‘| Definition > Source ‘]*"A belief system shared by an J.C. Spender, “Myths, Recipes and Knowledge-Bases in Organizational Analysis” organization’s members” (Unpublished manuscript, Graduate School of Management, University of California at Los Angeles, 1983,p.2 “Strong widely shared core _| C. O'Really, “Corporations , Cults, and Organizational values” Culture: Lessons from Silicon Valley Firms” (Paper Presented at the Annual Meetingn of the Academy of ‘Management, Dallas, Texas , 1983) p.1 “The way we do things around | T.E. Deal and A.A. Kennedy, Corporate Culture: The Rites here” and Rituals of Corporate Life (Reading, MA Addison- Wesley, 1982) p.4. “The collective programming | G, Hofstede, Culture's Consequences: International of the mind” Differences in Work-Related Values (Beberley Hills, CA: Sage, 1980) p. 25 “Collective understanding” | J. Van Maaner and SR. Barley, “Cultural Organization Fragments of a Theoery” (Paper presented at the Annual Meeting of the Academy of Management; Dallas, Texas, 1983) p.7. “Asset of shared, enduring —_|}.M. Kouzes, D.F. Cadwel, and B.Z. Posner, beliefs communicated through | “Organizational Culture : How itis Created, Maintained, +] avariety of symbolic media, | and Changed” (Presentation at OD Network, National "| creating meaning in people’s | Conference, Los Angeles, October 9, 1983). * * work lives” tthe eeny Scanned wth G camscanner“A set of symbols, ceremonies, | W.G. Duchi, Theory Z How American Business Can Meet and myths that communicates | the Japanese Challenge (Reading, MA Addison-Wesley the underlying values and 1981), p 41, beliefs of that organization to its employees” “A dominant and coherent ‘TJ. Peters and R.H. Waterman, Jr,,In Search of Excellence set of shared values conveyed | Lessons from America’s: Best-Run Companies (New York: by such symbolicmeansas _| Harpes & Row, 1982) p. 103. stories, myths legends, slogans, anecdotes, and fairy tales” “The pattern of basic EH.Schein, “The Role of the Founder in Creating assumptions that a given group | Organizational Culture,” Organizational Dynamics; has invented, discovered, or Summer 1985, p. 14. developed in learning to cope with its problems of external adaptation and internal integration.” Anthropological Contributions, Anthropology is the study of human cultures. Of all the social science disciplines, anthropology is most closely related to the study of culture and cultural. phenomena. Anthropologists seek to understand how the values and beliefs that make up a society’s culture affect the structure and functioning of that society . Many anthropologists believe that to understand the relationship between culture and society, it is necessary to look at a culture from the viewpoint of the people who practice it- from the “native’s point of view.” To reach this level of understanding, anthropologist immerse themselves in the values , symbols, and stories that people in a society use to bring order and meaning to their lives. Anthropologist usually produce book-length descriptions of the values, attitudes, and beliefs that underlie the behaviors of people in one or two cultures. . Whether the culture is that of a large, modern corporation or a primitive tribe in New Guinea or the Philippines, the questions asked are the same. How do people in this culture know what kinds of behavior are acceptable and what kinds are unacceptable? How is this knowledge understood? How is this knowledge communicated to new members? Through intense efforts to produce accurate descriptions, the values and beliefs that underlie actions in an organization become clear. However, these values can be fully understood only in the context of the organization in which they developed. In other words, a description of the values and beliefs of one organization is not transferable to those of other organizations, each culture is unique. Sociological Contributions. ‘Sociology is the study of people in social systems such as organizations and societies. Sociologists have long been interested in the causes and consequences of culture. In studying culture, sociologists have most often focused on informal social structure. Emile Durkheim, an important early. sociologist, argued that the study of myth and ritual is an essential complement to the study of structure and rational behavior in societies. By studying rituals, Durkheim argued, we can understand the most basic values and beliefs of a group of people. Scanned wth G camscannerMany sociological methods and theories have been used in the analysis of organization cultures, Sociologists use systematic interviews, questionnaires, and other quantitative research methods rather than the intensive study and analysis of anthropologists. Practitioners using the sociological approach generally produce a fairly simple typology of cultural attributes and then show how the cultures of a relatively large number of firms can be analyzed with this typology. The major pieces of research on organization culture that later spawned widespread business interest — including Ouchi’s Theory Z, Deal and Kennedy's Corporate Cultures, and Peters and Waterman's In Search of Excellence - used sociological methods . Later in this chapter, ‘we review some of this work in more detail. Social Psychology Contributions, Social psychology is a branch of psychology that includes the study of groups and the influence of social factors on individuals. Although most research on organization culture has used anthropological or sociological methods and approaches, some has borrowed heavily from social psychology. Social psychological theory, with its emphasis on the creation and manipulation of symbols, lends itself naturally to the analysis of organization culture. For example, research in social psychology suggests that people tend to use stories on information about a single event more than they use multiple observations to make judgments. Thus, if your neighbor had trouble with a certain brand of automobile, you will probably conclude that the brand is bad even though the car company can generate reams of statistical data to prove that the situation with your neighbors car was a rarity. E The impact of stories on decision making suggests an important reason that organization culture has such a powerful influence on the people in an organization. Unlike other organizational phenomena, culture is best communicated through stories and examples, and these become the basis that individual in the organization use to make judgments . If a story says that blaming customers is a bad thing to do, then blaming customers is a bad thing to do, This value is communicated much * more effectively through the cultural story than through some statistical analysis of customer satisfaction. Economics Contributions. The influence of economics on the study of organization culture is substantial enough to warrant attention, although ithas been less significant than’ the influence of anthropology and sociology. Economic analysis treats organization culture as one of a variety of tools that managers can use to create some economic advantage to the oiganization. The economics approach attempts to link the cultural attributes of firms with their performance rather than simply describing the cultures of companies as the sociological and anthropological perspectives do. In Theory Z , for example, Ouchi does not just say that Type Z companies differ from other kinds of companies — he asserts that Type’, firms oulperform other firms . When Peters and Waterman say they are in search of excellence , they define “excellence” in part, as consistently high 340 Scanned wth G camscannerfinancial performance. These authors are using cultural explanations of financial success, Researchers disagree about the extent to which culture affects organization | performance. Several authors have investigated the conditions under which | organization culture is linked with superior financial performance, This research suggests that under some relatively narrow conditions, a link between culture and performance may exist. However, the fact that a firm has a culture does not mean it will perform well; indeed, a variety of cultural traits can actually hurt performance.. For example, a firm,could have a culture that includes values such as “customers are too ignorant to be of much help,” employees cannot be trusted,” innovation is not important,” and “quality is too expensive”. The firm would have a strong culture, but the culture might impact its performance. Wallmart, known for its retailing expertise and its culture of respect for individuals, is also becoming known as a company whose culture does not lead to success for women. _ | | _Insome cases the culture of an organization may lead to its success and its downfall | at the same time: Toyota may be a good example. For decades Toyota had been known | for the quality and dependability of its carts and trucks, partially due to its unique | organization culture - the “Toyota way” - which led to lean manufacturing and very | dose relationships with suppliers. However, one of the distinguishing features of the | culture is its secretive nature. Very few outsiders were allowed access to key processes within the company, For several years, some car owners had experienced difficulties | with sticking gas pedals causing their Toyota to suddenly accelerate. The company | dismissed the problem as simply floor mats , pressing against the gas pedals. Toyota | daimed it was working with the National Highway Traffic Safety Administration | (NHTSA) to address the problem - but in fact they were really stalling and not | cooperating . Some have claimed that the secretive nature of its culture, although one reason for its success, may have been the cause of its 2.3 million vehicle recall and the | NHTSA order to Toyota to temporarily stop selling cars. The relationship between | culture and performance depends to some extent at least, on the value expressed in | the organization’s culture. | Culture versus Climate During the past thirty year , since the concept of organization culture has become popular , managers have often asked about the similarities and differences between ‘organization culture and organization climate, Some people, managersand researchers alike, have argued that they are really the same thing, although their research bases are different, as we explain next. . 7 The two concepts are similar in that both are concerned with the overall work atmosphere of an organization. In addition, they both deal with the social context in organization, and both are assumed to affect the behaviors of people who work in organizations. Scanned wth G camscannerThe two concepts differ in several significant ways, however. Much of the study of climate was based in psychology , whereas the study of organization culture was based in anthropology and sociology. Organization climate is based on individual perceptions and is often defined as the recurring patterns of behavior, attitudes , and feelings that characterize life in the organizations and refers to current situations in an organization and the linkages among work groups, employees, and work performance. Climate, therefore, is usually more easily manipulated by management to directly affect the behavior of employees. Organization culture, on the other hand, usually tefers to the historical context within which a situation occurs and the impact of this context on the behavior of employees. Organization culture is generally considered much more difficult to alter in short-run situations because it has been defined over the course of years of history and tradition. The two concepts also differ in their emphases. Organization culture is often described as the means through which people in the organization learn and communicate what is acceptable and unacceptable in an organization - its values and norms. Most descriptions of organization climate do not deal with values and norms. Therefore, descriptions of organization climate are concerned with the current atmosphere in an organization, whereas organization culture is based on the history and traditions of the organization and emphasize values and norms about employee behavior. CREATING THE ORGANIZATION CULTURE To the entrepreneur who starts a business, creating the culture of the company it to customers or clients. However, as the company grows and becomes successful, it usually develops a culture that distinguishes it from other companies and that is one of the reasons for its success. In other words, a company succeeds as a result of what the company does (its strategy), and how the company does it (its culture) . The culture is linked to the strategic values, whether one is starting up a new company or trying to change the culture of an existing company. The process of creating an organization culture is really a process of linking its strategy, as we described in Chapter 17. The process is shown in Table 15.2. TABLE 15.2 Creating Organization Culture Step 1 - Formulate Strategic Values \ Step 2- Develop Cultural Values . i Step 3- Create Vision Step 4- Initiate Implementation Strategies Step 5- Reinforce Cultural Behaviors Establish Values ‘ The first two steps in the process involve establishing values. First, management must determine the strategic values of the organization. Strategic values are the teeny Scanned wth G camscannerbasic beliefs about an organization's environment that shape its strategy. They are developed following an environmental scanning process and strategic analysis that evaluate economic, demographic, public policy, technological, and social trends to identify needs in the marketplace that the organization can meet. Strategic-values, in effect, link the organization with its environment, Deli Computer believed that customers would, if the price was right, buy computer from a catalogue rather than go to computer stores as the conventional wisdom dictated they would. A $6.8 billion business resulted. The second set of required values are the cultural values of the organization. Cultural values are the values employees need to have and to act on for the organization to carry out its strategic values. They should be grounded in the organization's beliefs about how and why the organization can succeed, Organizations. that attempt to develop cultural values that are not linked to their strategic values may, end up with an empty set of values that have litle relationship to their business. In. other words, employees need to value work behaviors that are consistent with and \ support the organization's strategic values, low-cost production, customer service, or technological innovation. Herb Kelleher, former CEO and one of the early leaders of Southeast Airlines, believed that the culture, the “esprit de corps”, was the most. valuable asset of the company. ( Tony Hsieh (pronounced Shay( starting selling shoes online (Zappos.com) in 1999, and booked $1 billion in sales in 2008, but he believes the business is about one thing happiness. He simply wanted to make customers and employees feel really, really good. His strategic values were that he believed shoes could be sold online with free \ shipping and free returns. Zappos now has ten core values that include “Be humble”, “Create fun and a little weirdness,” and “Deliver WOW through service” Hsieh basic cultural value is to make everyone happy. Create Vision After developing its strategic and cultural values, the organization must establish a vision of its direction. The “vision” is a picture of what the organization will be like at some point in the future. It portrays million how the strategic and cultural values will combine to create the future, For example, an insurance company might establish a vision of “protecting the lifestyles of 2 million families by, the year 2020. In effect, it synthesizes both the strategic and cultural values as it communicates a performance | target to employees. The conventional wisdom has been that the vision statement is. written first, but experience suggest that, for the vision to be meaningful, the strategic and cultural values must'be established first. Mr. Hsieh, of Zappos,, envisions big things for his company as long as he can provide a service that makes people happy. He is creating an outsourcing service to handle customer service, selling and shopping for other companies, and has initiated a website to provide training and education for small businesses. Initiate Implementation Strategies The next step, initiating implementation strategies, builds on the values and initiates the action to accomplish the vision. The strategies cover many factors, from Scanned wth G camscannerdeveloping the organization design to recruiting and training employees who share the values and will carry them out. Consider a bank that has the traditional orientation of handling customer loans, deposits, and savings. If the bank changes, placing more emphasis on customer service, it may have to recruit a different type of employee, one who is capable of building relationships. The bank will also, have to commit to serious, long-term training of its current employees to teach them the new service-oriented culture. The strategic and cultural values are the stimuli for the implementation practices. Zappos fully implemented its cultural values in many ways. Zappos hires people who fit the culture, pay them average wages, and provide them lots of training on topics ranging from the initial two-week orientation to’ current business books, how to twitter, public speaking, and financial planning - all intended to help people grow and think and be ready to be a senior leader in the company. Sales from the previous day are on a chart in the lobby of the headquarters building with a computer printout in the hallway showing how many shoes are in the warehouse. Call center reps are left to make decisions on their own, do not read from scripts, do not have their call times recorded , and are encouraged to create personal emotional connections (PEC) with customers. Managers are required to spend 10-20 percent of their time goofing off with the people they manage, and. “hanging out with your people” is highly encouraged. Reinforce Cultural Behaviors The final step is to reinforce the behaviors of employees as they act out the cultural values and implement the organization's strategies. Reinforcement can take many forms.’ First, the formal reward system in the organization must reward desired behaviors in ways that employees value. Second, stories must be told throughout the organization about employees who engaged in behaviors that epitomize the cultural values. Third, the organization must engage in ceremonies and rituals that emphasize employees doing the things that are critical to carrying out the organization’s vision. In effect, the organization must “make a big deal out of employees doing the right things”. For example, if parties aré held only for retirement or to give out longevity and service pins, the employees get the message that retirement and length of service are the only things that matter. On the other hand, holding a ceremony for a group of employees who provided exceptional customer service reinforces desirable employee behavior. Reinforcement practices are the final link between the strategic and cultural values and the creation of the organizational culture. Zappos reinforce the culture every single day as employees come to work happy, leave happy, and often go ‘out with their coworkers and managers after work. It becomes a way of life for them. APPROACHES TO DESCRIBING ORGANIZATION CULTURE < a models discussed in this section provide valuable insights into the dimensions along) which organization cultures vary. No single framework for describing the values'in organization cultures has emerged, however, several frameworks have been \ ahh Scanned wth G camscannerar suggested. Although these frameworks were developed in the 1980s, their ideas about organization culture are still influential today, Some of the “excellent” companies that they described are not as highly lauded today, but the concepts are still in use" in companies all over the world. Managers should evaluate the various parts of the frameworks described and use the parts that fit the strategic and cultural values of their own organizations. The Ouchi Framework One of the first researchers to focus explicitly on analyzing the cultures of a limited group of firms was William G, Ouchi. Ouchi analyzed the organization cultures of three groups of firms, which he characterized a (1) typical US. firms, (2) typical Japanese firms, and (3) Type Z USS firms. . Through his analysis, Ouchi developed a list of seven points on which these three _ types of firms can be compared, He argued that the cultures of typical Japanese firms and Type Z U.S. firms are very different from those of typical U.S. firms , and that these differences explain the success of many Japanese firms and Type Z USS. firms as well as the difficulties faced by typical USS. firms. The seven points of comparison developed by Ouchi are presented in Table 15.3. Commitment to Employees. According to Ouchi, typical Japanese and Type Z U.S. firms shate the cultural value of trying to keep employees. Thus, both types of firms lay off employees only as a last resort. In Japan, the value of “keeping employees on” often takes the form of lifetime employment, although some Japanese companies, reacting to the economic troubles of the past few years, are challenging this value. A person who begins working at some Japanese firms usually has a virtual guarantee that.he.or she will never be fired. In Type Z U.S. companies, this cultural value is manifested in a commitment to what Ouchi called “Long-term employment” . Under the Japanese system of lifetime employment , employees usually cannot be fired. Under the U.S. system, workers and managers can be fired, but only if they are not performing acceptably. Ouchi suggested that typical U‘S. firms do not have the same cultural commitment to employees that Japanese firms and Type Z USS. firms do. In reality, U.S. workers and managers often spend their entire careers in a relatively small number of companies. Still, there is a cultural expectation that if there is a serious downtum in a firm’s fortunes, a change of ownership, or a merger, workers and managers will be let go. For example, when Wells Fargo Bank bought First Interstate Bank in Arizona, it expected to lay off about 400 employees in Arizona and 5,000 in the corporation as a whole. However, eight months after the purchase, Wells Fargo had eliminated over 1,000 employees in Arizona alone and had laid off a total of 10,800 workers. Wells Fargo already had a reputation as a vicious job cutter following takeover and seemed to be living up to it. Scanned wth G camscannerTABLE 15.3 _ The Ouchi Framework Expression in Typical U.S. Companies ‘Cultura COMMITMENT TO Short-term EVALUATION __| Slow and qualitative [Slow and qualitative | Fast and quantitative [CAREERS [Moderately broad _| Narrow [ Explicit and formal DECISION MAKING RESPONSIBILITY ‘CONCERN FOR PEOPLE Individual Individual Individual Hollistic Holistic Narrow * Evaluation. Ouchi observed that in Japanese and Type Z U.S. companies, — appropriate evaluation of workers and managers is thought to take a very long time - up to one ten years ~ and require the use of qualitative as well as quantitative information about performance. For this reason, promotion in these firms is relatively slow, and promotion decisions are made only after interviews with many people who have had contact with the person being evaluated. In typical U.S. firms, on the other hand, the cultural value suggest that evaluation can and should be done rapidly and should emphasize quantitative measures of performance. This value tends to encourage short-terms thinking among workers and managers. Careers. Ouchi next observed that the careers most valued in Japanese and Type Z U.S. firms span multiple functions. In Japan, this value has led to very broad career paths, which may lead to employees gaining experience in six or seven distinct business functions. The career paths in Type Z U.S. firms are somewhat narrower. However , the career path valued in typical U.S. firms is considerable narrower. Ouchi’s research indicated that most U.S. managers performs only one or two different business functions in their entire careers. This narrow career path reflects, according to Ouchi, the value placed on specialization that is part of so may U.S. firms Control. All organizations must exert some level of control to achieve coordinated action. Thus, it is not surprising that firms in the United States, and Japan have developed cultural values related to organizational control and how to manage it. Most Japanese and Type Z USS. firms assume that control is exertised through ™ informal , implicit mechanisms. One of the most powerful of these mechanisms is the organization's culture. In contrast, typical U.S. firms expect guidance to come through explicit directions in the form of job description, delineation of authority, and various rules and procedures, rather than from informal and implicit cultural values. i From a functional perspective, organization culture could be viewed as primarily a means of social control based on shared norms and values. Control comes from ths Scanned wth G camscanner‘knowing that someone who matters is paying close attention to what we do and will tell us if our actions are appropriate or not . In organizations, control can come from formal sources, such as the organization structure or a supervisor, or from social sources, such as the organization structure or a supervisor, or from social sources, such as the organization structure or a supervisor, or from social source such as the organization's culture. In Ouchi’s view, control is based in formal organizational mechanisms ion typical U.S. firms, whereas control in Japanese and Type Z USS, firms is more social in nature and derived from the organization culture's shared norms and values. Decision Making. Japanese and Type Z US. firms have a strong , cultural expectation that decision making occurs in groups, and is based on principles of full information sharing and consensus. In most typical U.S. firms, individual decision making is considered appropriate. Responsibility. Closely linked to the issue of group versus individual decision making are ideas about responsibility. Here, however, the parallels between Japanese firms and Type Z U‘S. firms break down. Ouchi showed that in Japan, strong cultural norms support collective responsibility, that is , the group; as a whole, rather than a single person, isheld responsible for decisions made by the group . In both Type ZUS. firms and typical U.S. firms, individuals expect to take responsibility for decisions. Linking individual responsibility with individual decision making, as typical USS. firms do, is logically consistent. Similarly, group decision making and group responsibility, the situation in Japanese firms, seem to go together. But how do Type Z US. firms combine the cultural values of group decision making and individual responsibility.? Ouchi suggested that the answer to the question depends on a cultural view we have already discussed: slow , qualitative evaluation. The first time a manager uses a group to make a decision, it is not possible to tell whether the outcomes associated with that decision resulted from the manager's influence or from the quality of the group. However, if a manager works with many groups over time, and if these groups consistently do well for the organization, it is likely that the manager's is skilled at getting the most out of the groups. This manager can be held responsible for the outcomes of group decision-making processes. Similarly, managers who consistently fail to work effectively with the groups assigned to them can be held responsible for the lack of results from the group decision-making process. Concern for People. The last cultural value examined by Ouchi deals with a concern for people. Not surprisingly, in Japanese firms and Type Z firms, the cultural value that dominates is a holistic concern for workers and managers. Hollistic concern extends beyond concern for a person simply as a worker or manager to concern about the person's home life, hobbies, personal beliefs, hopes, fears , and aspirations. In typical USS. firms, the concerns for people is a narrow one that focuses on the workplace. A culture that emphasizes a strong coricern for people, rather than one that emphasizes a work or task orientation, can decrease worker tumover. an7 Scanned wth G camscannerThe Peters and Waterman Approach Tam Peters and Robert Waterman, in their best seller In Search of Excellence, focused even more explicitly than Ouchi on the relationship between organization culture and performance. Peters and Waterman chose a sample of highly successful U.S. firms and sought to describe the rhanagement practices that led to their success. Their analysis rapidly turned to the cultural values that led to successful management practices. These “excellent” values are listed in Table 15.4. TABLE 15.4 __ The Peters and Waterman Framework Attitudes of an Excellent Firm 1, Bias for Action 5, Hands-on management 2, Stay close to the customer 6, Stick to the kniting 3. Autonomy and entrepreneuship 7. Simple form, lean staff 4; Productivity through people + 8, Simulataneously loose and high organization 7 Bias for Action. According to Peters and Waterman, successful firms have a bias for action. Managers in these firms are expected to make decisions even if not all the facts are in, Peters and Waterman argued that for many important decisions, all the facts will never be in. ’ Delaying decision making in these situations is the same as never making a decision. Meanwhile, other firms probably will have captured whatever business initiative existed. On average, according to these authors, organization with cultural values that include a bias for action outperform firms without such values. Stay Close to the Customer. Petérs and Waterman believe that firms whose organization cultures value customers over everything else outperform firms without this value. The customer is a source ofa firm’s current and future financial performance. Focusing on the customer, meeting the customer’s needs and pampering the customer when niecessary all lead to superior performance. Autonomy and Entrepreneurship. Peters and Waterman maintained that successful firms fight the lack of innovation and the bureaucracy usually associated with large size, encouraging independent, innovative activities within smaller business segments. Stories often exist in these organizations about the junior engineer who takes a risk and influences major product decision, or of the junior manager, dissatisfied with the slow pace of a product's development, who implements a new and highly successful marketing plan. Productivity Through People. Like Ouchi, Peters and Waterman believe successful firms recognize that their most important assets are their people- both workers and value of the organization culture —a belief that treating people with respect and dignity is not only appropriate but essential to success, 3 Scanned wth G camscannerHands-on Management. Peters and Waterman noted that the firms they studied insisted that senior managers stay in touch with the firms’ essential business. It is an expectation, reflecting a deeply embedded cultural norm, that managers should manage not from behind the closed doors of their offices but by “wandering around ” the plant, the design facility, the research and development department, and so on. Stick to the Knitting. Another cultural value characteristic of excellent firms is their reluctance to engage in business outside their areas of expertise. These firms eject the concept of diversification, the practice of buying and operating businesses in unrelated industries. This notion is currently referred to as relying on the company’s “core competencies” or what the company does best, Simple Form, Lean Staff According to Peters and Waterman, successful firms tend to have few administrative layers and relatively small corporate staff groups. In excellently managed companies, importance is measured not only by the number of people who report to a manager but also by the manager’s impact on the organization’s performance. The cultural values in these firms tell managers that what is important is their staffs performance, rather than its size. Simultaneously Loose and Tight Organization. The final attribute of organization culture identified by Peters and Waterman appears contradictory . How can firms be simultaneously loosely and tightly organized. The resolution of this apparent paradox is found in the firms’ values. These firms are tightly organized because all. their members understand and believe in the firm's values. This common cultural bond is strong glue that holds the firms together. At the same time, however, the firms are loosely organized because they tend to have less’administrative overhead, fewer staff members, and fewer rules and regulations. The result is increased innovation and tisk taking and faster response times. The loose structure is possible only because of the common values held by people in the firm. When employees must make decisions, they can evaluate their options in terms of the organization’s underlying values - whether the options are consistent with a bias for action, service to the customer, and so on. By referring to commonly held values, employees can make their own decisions about what actions to take. In this sense, the tight structure of common cultural values makes possible the loose structure of fewer administrative controls. EMERGING ISSUES IN ORGANIZATION CULTURE As the implementation of organization culture continues, it inevitably changes and’ develops new perspectives. Many new ideas about productive environments build on earlier views such as those of Ouchi, Peters and Waterman, and others. Typical of these approaches are the total quality management movement, worker participation, procedural justice, and team-based management, which were discussed in earlier chapters. Three other movements are briefly discussed in this section innovation, empowerment , and appropriate cultures. Scanned wth G camscanner_ Innovation Innovation is the process of creating and doing new things that are introduced into the marketplace as product, processes, or services. Innovation involves every aspect of the organization's biggest challenges is to bring innovative technology to the needs of the marketplace in the most cost-effective manner possible. Note that innovation does not just involve the technology to create new products true organizational innovation is pervasive throughout the organization, According to Fortune magazine, the most admired organizations are those that are the most innovative, Those companies are innovative in every way — staffing, strategy, research, and business processes. 3M has long been one of those companies, but as the Diversity box on next page shows, even the most liberal-minded organizations can stumble when traditional misconceptions get in the way of progress. : Many risks are associated with being an innovative company. The most basic is the risk that decisions about new technology or innovation will backfire. As research proceeds, and engineers and scientists continue to develop new ideas or solutions to problems, there is always the possibility that innovations will fail to perform as expected. For this reason, organizations commit considerable resources to testing innovations. A second risk is the possibility that a competitor will make decision enabling it to get an innovation to the market first. The marketplace has become a breeding ground for continuous innovation. Types of Innovation. Innovation can be either radical , systems, or incremental. A radical innovation is a major breakthrough that changes or creates whole industries. Examples include xerography which was invented by Chester Carlson in. 1935 and became the hallmark of Xerox Corporation, steam engines, and the internal combustion engine (which paved the way for today’s automobile industry) . System innovation creates a new functionality by assembling parts in new ways. For example, the gasoline engine began as a radical innovation and became a systems innovation when it was combined with bicycle and carriage technology to create automobiles . Incremental innovation continues the technical improvement and extends the applications of radical and systems innovation. There are many more incremental innovations than there are radical and systems innovations. In fact, several incremental innovations are often necessary to make radical and'systems innovations work properly. Incremental innovations force organizations to continuously improve their products and keep abreast or ahead of the competition. New Ventures. New ventures-based on innovations. require entrepreneurship and good management to work. The profile of the entrepreneurs typically includes a need for achievement, a desire to assume responsibility, a willingness to take risks, and a focus on concrete results. Entrepreneurship can occur inside or outside large organizations. Outside entrepreneurship requires all of the complex aspects of the innovation process. Inside entrepreneurship occurs within a system that usually discourages chaotic activity. 350 Scanned wth G camscannerLarge organizations typically, do not accept entrepreneurial types of activities. ‘Thus, for a large organization to be innovative and develop new ventures, it must actively encourage entrepreneurial activity within the organization. This form of activity , often called intrapreneurship, usually is nfost effective when it is a part of everyday life in the organization and occurs throughout the organization rather than in the research and development department alone. Corporate Research. The most common means of developing innovation in the traditional organization is through corporate research, or research and development. Corporate researchis usually set up to supportexisting businesses, provide incremental innovations in the organization’s businesses, and explore potential new technology bases. It often takes place in a laboratory, either on the site of the main corporate facility or some distance away from normal operations. Corporate researchers are responsible for keeping the company’s products and processes technologically advanced. Product life cycles vary a great deal, depending on how fast products became obsolete and whether substitutes for the product are developed. Obviously, if a product becomes obsolete or some other product can be substituted for it, the profits from its sales will decrease . The job of corporate research is to prevent this from happening by keeping the company’s product current. The corporate culture can be instrumental’ in fostering an environment in which creativity and innovation occur. For example, 3M is a company known for its innovation. From 1914 to 1966 its scientists developed masking tape, Scotch tape, Scotchguard fabric protector, and Thinsulate material. The company allowed employees to spend up to 15 percent of their paid time on any projects they chose. By 2001, however, it was taking years for new products to come to market, manufacturing was inefficient, and profits were almost nonexistent. A ‘new CEO, Jim McNertney , was brought onboard and has new initiatives included Six-Sigma quality training, forced performance rankings, and cost efficiency throughout the company. Problems soon arose as along with the costs, innovation was squeezed out of the company. The number of new products on the market slowed even more and by 2005 Mr McNerney left the company, replaced by George Buckley. Mr. Buckley immediately increased the research and development budget by 20 percent, but his most important task is to restore the innovative culture that is the company’s heritage. “Empowerment One of the most popular buzzwords in management today is “empowerment”. Almost every new approach — to quality, meeting the competition, getting more out of employees, productivity enhancement, and corporate turnaround ~ deals with employee empowerment. As we discussed in Chapter 5, empowerment is the process of enabling workers to set their own goals, make decisions, and solve problems within their spheres of responsibility and authority. Fads are often dismissed as meaningless and without substance because they are misused and overused, and the concept of empowerment can likewise be taken too lightly. Scanned wth G camscannerEmpowerment is a simple and complex at the same time. It is simple in that it tells managers to quit bossing people around so much and to let them do their jobs, It is complex in that managers and employees typically are not trained to do that. A employees. In Chapter 5 , we discussed some techniques for utilizing empowerment and conditions in which empowerment can be effective in organizations. Empowerment can be much more than a motivational technique, however, in some organizations it is the cornerstone of an organization’s culture. W.L. Gore & Associates is built around a lattice framework (rather than a hierarchy.) where there are no bosses who tell others what to do. Ideas are championed by sponsors and leaders, and associates can choose what project teams to work on. People are free to experiment and are empowered to commit themselves to projects rather than being assigned to projects. W.L. Gore is extremely successful with this management model, considering that it was founded on these principles in 1958 , has annual sales of 52.1 billion, and 8,000 employees in 45 plants. Empowerment as part of a unique management mode] is no fad. Empowerment can be viewed as liberating employees, but sometimes “empowerment” entails little more than delegating a task to an employee and then watching over the employee too closely. Employees may feel that this type of Participation is superficial and that they are not really making meaningful decisions, The concept of liberating employees suggests that they should be frée to do what they think is best without fear that the boss is standing by to veto or change the work they do. Appropriate Cultures Much of the literature on organization culture has focused on describing the concept of organization culture, linking culture to performance, and then creating an organizational culture. For example, the Peters and Waterman framework described eight attributes that successful firms all had , thé implication being that those same attributes would be desirable in all organizations. But one need only examine a few successful organizations. RobGuffee and Gareth Jones have questioned the idea that there is one best ‘organization culture and instead propose that there are only “appropriate cultures’. After all, flying airplanes and moving people from one place to another at the lowest possible cost is vastly different from writing new software for personal computers. Goffee and Jones suggest that the nature of the value chaion” and the dynamism of the environment are two factors that may determine what type of culture is appropriate for a particular organization. The determining factors may prove to be quite elusive, however, as nobody has been able to successfully copy Southwest Airlines , although many have tried, Much moré research is needed on the prospect of a contingency theory of organization culture. Whole Foods Markets has created a culture that is right for it and quite different from the rest of the commercial food retail industry. Starting with a small natural food store in Austin, Texas, founder and CEO John Mackey studied Japanese management 352 ll Scanned wth G camscannertechniques and created a culture .that is democratic, participative, egalitarian, innovative, team-based, and transparent, It is democratic, in that employees created their “Declaration of Interdependence” and vote on whether or not new employees get tojoin the team. Itis participative in that decisions regarding store design, selection of products that will sell in the local store, and price setting are made by the people who have to implement the decisions, It is egalitarian in that average pay is respectable, no executive can make more than 19 times the average hourly wage, and employees get stock options, 93 percent of which go to nonexecutive personnel. It is innovative in that everyone is encouraged to experiment without asking permission. Store managers can spend up to $100,000 a year to try new ideas. It is team-based because each department is a team with the right to run their area, vote on new members to the team, and be responsible for team profit, to which team pay is tied. It is transparent | because the company releases almost all financial data to everyone in the company _ and everyone knows how their team performed compared to all other teams and how much everyone in the company gets paid. This culture of Whole Foods works for it and is counter to the rest of the industry. In other words , it is appropriate and fits Whole Foods. : MANAGING ORGANIZATION CULTURE ___ The work of Ouchi, Peters, and Waterman, and many others demonstrates two important facts. First, organization cultures differ among firms, second, these different organization cultures can affect a firm's performance. Based on this observations, managers have become more concerned about how to best manage the cultures of their organizations. The three element of managing organization culture are (1) taking advantage of the existing culture, (2) teaching the organization culture, and (3) changing the organization culturé. Taking Advantage of the Existing Culture Most managers are not in a position to create an organization culture, rather , they work in organizations that already have cultural values. For these managers, the central issue in managing culture is how best to use the existing cultural system. It may be easier and faster to alter employee behaviors within the culture in place than it is to change the history, traditions, and values that already exist. To take advantage of an existing cultural system, managers must first be fully aware of the culture's values and what behaviors or actions those values support. Becoming fully aware of an organization’s values usually is not easy, however, It involves more than reading a pamphlet about what the company believes in. Managers must develop a deep understanding of how organizational values operate in the firm ~ an understanding that usually comes only through experience, This understanding , once achieved, can be used to evaluate the performance of others in the firm. Articulating organizational values can be useful in managing others aa Scanned wth G camscannerbehaviors. For example, suppose a subordinates ina firm with a strong cultural value of “sticking to its knitting” develops a business strategy that involves moving into anew industry . Rather than attempting to argue that this business strategy is economically flawed or conceptually weak, the manager who understands the corporate culture can point to the company’s organizational value. “In this firm, we believe in sticking to our knitting.” Senior managers who understand their organization's culture can communicate that understanding to lower-level individuals. Over time, as these lower-leve] managers begin to understand and accept the firm's culture, they will require less direct supervision. Their understanding of corporate values will guide their decision | making. As we saw in our opening vignette, the custodians of the culture at Goldman Sachts ~and the stakeholders who stand to gain the most from its continuing profitability ~ are the partners who run the company. Teaching the Organization Culture: Socialization Socialization is then process through which individuals become social beings. As studied by psychologists, it is the process through which children learn to become adults in a society - how they learn what acceptable and polite behavior is and what is not, how they learn to communicate, how they learn to interact with others, and so on. In complex societies, the socialization process takes many years. Organizational socialization is the process through which employees learn about their organization's culture and pass their knowledge and-understanding on to others. Employees are socialized into organization, just as people are socialized into societies, that is, they come to know over time what is acceptable in the organization and what is not, how to communicate their feelings, and how to interact with others. They learn both through observation and through efforts by managers to communicate this, information to them. Research into the process of socialization indicates that for many employees, socialization programs do not necessarily change their values, but instead they make employees more aware of the difference between personal and organization values and help them develop ways to cope with the differences. A variety of organizational mechanisms can affect the socialization of workers in organizations. Probably the most important are the examples thiat new employees see in the behavior of experienced people. Through observing examples, new employees develop a repertoire of stories they can use to do in this situation. This is not to suggest that formal training , corporate pamphlets, and corporate'statements about organization culture are unimportant in the socialization profess. However, these factors tend to support the socialization process based on people’s.close observations of the actions of others. Scanned wth G camscannerIn some organization, the culture described in pamphlets and presented in formal | training session conflicts with the values of the organization as they are expressed in the actions of its people. For example, a firm may say that employees are its most | important asset but treat employees badly. In this setting, new employees quickly learn that the rhetoric of the pamphlets and formal training sessions has little to do with the real organization culture. Employees who are socialized into this system usually come to accept the actual cultural values rather than those formally espoused. Changing the Organization Culture Much of our discussion to this point has assumed that an organization's culture enhances its performance. When this is the case, learning what an organization’s cultural values are and using those values to help socialize new workers and managers is very important, for such actions help the organization succeed . However, as Ouchi’s and Peters and Waterman’s research indicates, not all firms have cultural values that are consistent with high performance. Ouchi found that Japanese firms and Type Z US. firms have performance-enhancing values. Peters and Waterman identified performance-enhancing values associated with successful companies. By implication, some firms not included in Peters and Waterman’s study must have had performance- reducing values. What should a manager who works in a company with performance- reducing values do? ‘The answer to this question is, of course, that top managers in such firms should try to change their organization's culture. However, this is a difficult thing to. do. Organization culture resists change for all the reasons that it is a powerful influence on behavior ~ it embodies the firm’s basic values, itis often taken for granted, and it is typically most effectively communicated through stories or other symbols. When managers attempt to change organization culture, they are attempting to. change people's basic assumption about what is and is not appropriate behavior in the organization. Changing from a traditional organization to a team-based organization (discussed in Chapter 10) is one example of an organization culture change. Another is the attempt by 3M to change from its low-cost and efficiency culture to return to its root as an innovative culture. Despite these difficulties, some organizations have changed their cultures from performance-reducing to performance-enhancing. This change process is described in more detail in Chapter 18. The earlier section on creating organization culture describes the importance of linking the strategic values and the cultural values in creating a new organization culture. We briefly discuss other important elements of the cultural change process in the following sections. : Managing Symbols. Research suggest that organization culture is understood and communicated through the use of stories and other symbolic media. If this is correct, managers interested in changing cultures should attempt to substitute stories and myths, that support new cultural values for those that support old ones, They can do so by creating situations that give rise to new stories, "a Scanned wth G camscannerSuppose an organization traditionally has held the value “employee opinions are not important” . When management meets in this company, the ideas and opinions of lowest-level people - when discussed at all - are normally rejected as foolish and irrelevant. The stories that support this cultural value tell about subordinate managers who tried to make a constructive point only to have that point lost in personal attack from superiors. An upper-level manager interested in creating a new story, one that shows lower- level managers that their idea re valuable, might ask a subordinate to prepare to lead a discussion in a meeting and follow through by asking the subordinate to take the lead when the topic arises. The subordinate success in the meeting will become a new story, one that may displace some of the many stories suggesting that the opinions of lower-level managers do not matter. . The Difficulty of Change. Changing a firm’s culture is a long and difficult process. A primary problem is that upper-level managers, no matter how dedicated they are to implementing some new cultural values may sometimes inadvertently revert to old patterns of behavior. This happens, for example, when a manager dedicated to implementing the value that lower-level employees ideas are important vehemently attacks a subordinate’s ideas. This mistake generate a story that supports old values and beliefs. After such an incident, lower-level manager may believe that although the boss seems to want employee input and ideas, in fact, nothing could be further from the truth. No matter what the boss says or how consistent his/her behaviors isin the future, some credibility has been lost, and cultural change has been made more difficult. ’ The Stability of Change. The process of changing a firm’s culture starts with a need for change and moves through a transition period in which efforts are made to adopt new values and beliefs, In the long run, a firm that successfully changes its cultures will find that the new values and beliefs are just as stable and influential as the old ones. Value systems tend to be self-reinforcing. Once they are in place, changing them Tequires an enormous effort. Thus, if a firm can change its culture from performance- reducing to performance-enhancing , the new values are likely to remain in place for along time. Scanned wth G camscannerLONG QUIZ 15 _ Date: Grade/Score: J. True or False, Write True if the statement is correct and False if the statement is wrong. 1. Reinforcement of cultural behaviors can take many forms. 2, Strategic values are the values employees need to have and to act on for the organization to carry out its strategic values. 3. Social psychology is the study of people in social systems, 4, The influence of economics on the study of organization culture is not substantial enough to warrant attention. 5. Organizational culture is often described as the means through which people in the organization learn and communicate what is acceptable and unacceptable in an organization. 6. Closely link to the issue of group versus individual decision making are ideas about responsibility. 7. According to Peters and Waterman successful firms have a bias for action. 8. Successful firms tend to have few administrative layers and relatively small corporate staff groups. i 9, Systems innovation is a major breakthrough that changes or creates whole industries. 10, Almost every new approach to quality , meeting the competition, productivity enhancement etc. deals with employee innovation. IL. Fill in the blanks, Write the correct answer on the blank space provided before the number ( 1. It is the process through which individuals become social beings. 2. It is the process of enabling workers to set their own goals, make decisions, and solve problems within their spheres of responsibility and authority. 3. It creates a new functionality by assembling parts ir new ways. » 361 ue Scanned wth G camscanner= 4, It is the process of creating and doing new things that are introduced into the marketplace as products, processes, or services. 5. They are the basic beliefs about ai an organization’s environment that shape its strategy. 6. Itis the set of shared values, often taken for granted, that help people in an organization understand which actions are considered acceptable and which are considered un-acceptable, 7. It is based on individual perceptions and _ is often defined as the recurring patterns of behavior, atitudes, and feelings that characterize life in the organization. 8. It is a major breakthrough that changes or creates whole industries . 9. Actively encouraging entrepreneurial activity within the organization. 10. It is the process through which employees learn about their organization’s culture II. Enumeration Give the five (5) steps in creating organization culture . 1. ys Pen Three (3) emerging issues in the areas of organization cultu) ‘Two (2) types of values 1. Scanned with |\CamScanner