INTERNATIONAL UNIVERSITY COLLEGE Sofia

Coursework in People & Organisations

Statement of originality I, the undersigned, declare that this coursework is my own original work.

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Programme: Lecturer:

Master of Business Administration Prof.

TABLE OF CONTENTS
1. Introduction

2. Organisational Culture and Leadership Style..3 2.1 Definitions.3 2.2 Organisational Culture and Leadership Style in

Ford....3 2.3. Outcomes....4 3. Company Culture vs. National Culture..3 3.1 Background..11 3.2 Ford's company culture compared to USA national culture 3.3 Conclusions

4. Values. Change of Values in Companies

4.1 Definitions..11 4.2 Old values in Ford 4.3 New values in Ford. Ways of implementation. 4.4 Outcomes 5. Reasons for Organisational Culture Change 5.1 5.2 Factors affecting organisational culture Reasons for Ford's organisational culture change.

Mechanism for realization of such change.

6. Conclusions

LIST OF TABLES AND FIGURES

TABLE

1.

Culture

dimension

scores

for

10

countries..3 FIGURE 1. Leadership styles

1. Introduction Organisational culture, national culture and leadership are all topics ancient different that exist when and But have been under discussion ever since have been fought because of many no matter what the reasons were each times wars

reasons.

country and people had their culture and needed their leaders. Some countries' leaders were stronger and better than others, so they won more battles and joined more territory to their countries making them wealthier and more prosperous. In contemporary times wars are fought by companies over market shares, better products and so on. Different companies have been shaping their organisational cultures for years striving to achieve different goals through them. This paper have the goal of describing the old organisational culture and leadership style of Ford, what resulted from them, old values, how the need for their change came and how this change was implemented. 2. Organisational Culture, Leadership and Leadership Style 2.1 Definitions Organisational culture can be defined as the set of shared values, beliefs, and norms that influences the way employees think, feel, and behave toward each other and toward people outside the organization.
Source: Understanding and managing organisational behavior, Pearson(2012)

Another important aspect of this paper and of organisational culture is organization structure, which is defined as the pattern of relationships among positions in the organization and among members of the organization.

Source: Essentials of Organisational Behaviour, Prentice Hall(2006), 1st edition

Leadership

is

described

as

combination

between

exerting

influence over other members of a group or organization and helping a group or organization achieve its goals. Combining these two key characteristics, we can define leadership as the capability of an individual to exercise influence and control over other members to help a group or organization achieve its goals.
Source: Understanding and managing organizational behavior, Pearson(2012)

In

order

to

see

the

problems needs: lines

in

Ford

through to

the

different decision leading

models of leadership we have to focus on some very important qualities making, every leader adapting of change, and maintaining open communication

others to the completion of goals.

Leadership

style

is

also very important to be identified

in

Ford's case as it turns out to be the main reason for hindering of company development. Leadership style is defined as the way in which the functions of leadership are carried out, the way in which the manager typically behaves towards members of the group
Source: Management and organisational behaviour, Pearson(2007), 8th edition

We can classify William Ford III's, the company's managers, the new CEO's leadership styles in order to see

and their

contribution to the company. One classification of leadership style is: The authoritarian (or autocratic) style is where the focus of power is with the manager and all interactions within the group move towards the manager; The democratic style is where the focus of power is more with the group as a whole and there is greater interaction within the group; A laissez-faire that (genuine) style is where the manager on observes members of the group are working well

their own. In the figure below leadership styles are explained in terms of control over decisions.

Fig 1. Leadership styles

Another

very

important

aspect

into

Ford's

case

is

the

way

decisions were made. The Vroom and Yetton model describes the different ways in which leaders can make decisions and guides leaders in determining the extent to which subordinates should participate in decision making. This model defines 4 decision making styles, which vary in the extent to which subordinates participate in making the decision: Autocratic: The leader makes the decision without input from subordinates

Consultative: Subordinates have some input, but the leader makes the decision Group: The group makes the decision; the leader is just another group member. Delegated: the leader makes subordinates solely responsible for making the decision.
Source: Understanding and managing organizational behavior, Pearson(2012)

2.2 Organisational Culture and Leadership Style in Ford Nowadays, nearly half of executive teams lack the information they need to manage effectively because employees withhold vital input out of fear that doing otherwise will reflect poorly on them. This restricted information flow can cripple a company's ability to identify and respond to internal and external threats. A recent survey by the Corporate Executive Board of more than 400,000 employees across various industries reveals that companies that break down two by key a barriers to honest margin. feedback not only reduce fraud and misconduct, but also deliver peer-beating shareholder returns substantial (Griffin, Bradley 2010) Ford, as each contemporary company, aims at delivering its

customers satisfaction through innovative products and by doing so the company could reach another aim realization of profit. But according to the case the actual situation was different. It turns out that instead of divisions managers working together to achieve company goals everyone worked for himself or herself by keeping emphasize information for on a secret. and flat meetings Such actions company and high contradict culture low level and to that of definitions bureaucracy. intentionally modern healthy stood with

teamwork, Instead, avoiding

structure

leaders

above

followers, other

subordinates

division

managers.

The

reason

for

this

was

that

managers

believed they can avoid taking the blame for decreasing sales. Such actions by management could not it any way result into improved products, satisfied customers or profit. They naturally led to decreased sales because of car design and quality issues. The major problem was the leadership style adopted by top managers they used the authoritarian style where subordinates did not participate into decision making, so that information on actual problems could remain a well-kept secret. 2.3 Outcomes In result of discrepancies between company goals and company culture Ford declared a $13 billion loss in 2006. At this point William Ford III realized he was an ineffective leader who can't motivate people to pursue company goals and started looking for an inside change instead of blaming outside factors for the company's problems. 3. Company Culture vs. National Culture 3.1 Background The influence of and culture growing national or corporate in on organisations national diversity todays

businesses makes culture an important factor. Hofstedes study of IBM has highlighted some important facts about culture that impact on organisational performance. National culture and company culture are important topics in business. belief National culture and refers to the general attitudes, a systems, values, traditions, that characterise

nation. Company culture is the pattern of arrangement, material or behaviour which has been adopted by a society - company, group, or team - as the accepted way of solving problems.

Company culture can be defined as the beliefs and behaviours that determine how a company's employees and management interact and shared handle and enduring outside meaning, business National culture and values, transactions. is a set of that beliefs (http://www.investopedia.com).

characterize national, ethnic, or other groups and orient their behaviour (Mulholland 1991). A by positive a clear corporate culture typically includes several are key most elements. It is fostered not merely by a mission statement, but corporate vision. Corporate visions effective when clearly communicated by leaders. Hofstede postulated that a national culture can be defined in five dimensions. I would point out four of them as I think they are in greater importance to Ford's case. These dimensions, as explained below, form the foundation to the discussion on the impact of national culture on company cultures:

Individualism Hofstede

vs

collectivism. individualism

The

dimension

that

called

versus

collectivism

focuses on the values that govern the relationship between individuals and groups. In countries where individualism countries strong,

prevails,

values

of

individual values of and

achievement, freedom and competition are stressed. In where and the collectivism importance prevails, of group harmony, cohesiveness, and consensus agreement between individuals is stressed. Power distance. Hofstede used power distance to refer to the degree to which a country accepts the fact that in differences their in its citizens Countries physical that and allow intellectual capabilities give rise to inequalities well-being. are very

cooperation

inequalities to persist or increase are said to have high power distance. Professionally successful workers in high-power-distance countries amass wealth and pass it on to their children. In these countries, inequalities increase over time; the gap between rich and poor, with all the attendant political and social consequences, countries that grows very the large. In contrast, of large dislike development

inequality gaps between their citizens are said to have low power distance.

Achievement versus nurturing orientation. Countries that are achievement oriented value assertiveness, performance, success, and competition and are results oriented. Countries that are nurturing oriented value the quality of life, warm personal relationships, and service and care for the weak.

Long-term

versus

short-term

orientation.

The

last

dimension that Hofstede identified concerns whether citizens of a country have a long- or a short-term orientation include toward and life and work. A A long-term short-term orientation is likely to be the result of values that thrift persistence. orientation is likely to be the result of values that express a concern for maintaining personal stability or happiness and for living in the present.
Source: Understanding and managing organizational behavior, Pearson(2012)

3.2

Ford's

company

culture

compared

to

USA

national

culture

In

order

to

describe

the

impact

of

USA

national

culture

on

Ford's company culture, I will guide my argument by Hofstedes four dimensions of national culture discussed above. Table 1: Culture Dimension Scores for 10 Countries

Source: Geert Hofstede, Gert Jan Hofstede, Michael Minkov, "Cultures and Organizations, Software of the Mind", McGrawHill 2010, 3rd edition

I included Table 1 in this part of my work in order to compare Ford's organisational culture to USA national culture's characteristics according to Hofstede's research: USA scores low on Power Distance meaning that in general inequalities in companies do not exist. But the situation in Ford not was different: allowed employees to ask for were kept aside with from their important for the company's development information. They were even meetings superiors. This created problems in the company on all levels since Ford is a genuine American brand and it is

supposed to be a symbol of American values but on the inside it turned out it was not.

USA scores high on Achievement Orientation meaning that all efforts a person makes are oriented towards achieving better results. On the contrary, leaders in Ford focused on increasing their power and protecting of their corporate empires. This might be resulting from the high score of USA on Individualism but individualism pointed into such direction was not useful for the achievement of corporate goals, which should always be the most important when working in an organisation.

USA

scores are

low

on

Long-term on their

Orientation present

meaning then

that their

people

focused

rather

future. The top managers in Ford were focused on keeping their jobs at the moment by hiding the real problems and didn't think about the threatened company future. 3.3 Conclusion The conclusion I can draw from the topics discussed above Hofstede's research on national culture and the particular case of Ford's company culture is that companies should be aware of the national cultures of the countries they operate in but even more important is to direct culture's particularities in a positive directions. That appeared to be wrong in Ford Individualism was pointed towards achieving personal goals and not company goals. Power Distance, which is uncommon in USA was used to shape most of the managers' leadership style. 4. Values. Change of Values in Companies

4.1 people

Definitions to determine which types of behaviors, events,

Values are general criteria, standards, or guiding principles use situations, and outcomes are desirable or undesirable. There are two kinds of values - terminal and instrumental: A terminal value is a desired end state or outcome that people seek to achieve. Organizations might adopt any of the following as terminal values, or guiding principles: quality, An responsibility, value of is innovativeness, a desired that mode excellence, or type of economy, morality, and profitability. instrumental Modes behavior. being behavior and organizations being advocate being

include working hard, respecting traditions and authority, conservative cautious, frugal, creative and courageous, being honest, taking risks, and maintaining high standards.
Source: Understanding and managing organizational behavior, Pearson(2012)

Corporate values should be: Personified within the business from the top down Considered more important than making profits The cornerstone of corporate culture Reflected in all you do and your employees should

willingly embrace them (Edwards A. 2012) 4.2 Old values in Ford Nowadays Alan Mulally writes: At todays Ford Motor Company, we are truly driving and change. In the the past few years, under the we have restructured challenging revitalized Company extremely global

economic

conditions.

Throughout

recession, we never lost sight of the environmental and social goals that are key elements of our business strategy. Indeed,

our

focus

on

those

goals

was

an

important

factor

in

our

financial recovery. By delivering cars that are greener, safer and smarter, we enhanced our competitiveness and built stronger relationships with our customers. But the in situation Ford's norms their share, culture and led
(http://corporate.ford.com/)

before him was different: The values and the managers was all to Ford of its different than

divisions and functions to believe that the best way to maintain jobs, salaries, status of hoard, rather information. Instead employees working

together managers were high and hardly reachable. That led to problems in communication, poor decision making and at the end to inability of the company to reach its goals: quality, innovation, profitability. 4.3 New values in Ford. Ways of implementation. When William Ford III realized the problems in the company were serious and that he as a leader is a part of them, he decided to look for a change from inside. He hired Alan Mulally who could get a picture of the company as an outsider. This turned out to be the right action as most of the top managers in Ford used to look for problems outside of them and outside of the company. Mulally issued a direct the value order that the to managers build of every of its division should share with every other Ford division detailed information information about to a costs of incurred sharing each thus vehicles. The new CEO wanted to change the value of hiding information, making communication easier, which led to pointing out real problems and looking for their solutions. He also insisted that each of the heads of Ford's vehicle divisions should attend a weekly (rather than a monthly) meeting to openly share and discuss the problems each of the divisions faced. He also told them to bring

different

subordinate

with

them

to

each

meeting

so

that

eventually all managers in the hierarchy would learn about the problems each division had tried to hide. By changing this, Mulally managers looked from for a change in to the leadership style by of top authoritarian democratic style making

followers a part of the problems' solution. He also aimed at changing the tall hierarchy that was built, so that Ford became a modern, flat structure with less bureaucracy. 4.4 Outcomes The final outcome of changing values was that Ford accomplished its goals of being profitable, quality driven and innovative. Mulally achieved this through creating culture based on norms that emphasized cooperation both within and among divisions. 5. Reasons for Organisational Culture Change 5.1 Factors affecting organisational culture Here are some of the factors affecting the organisational culture: People working in the organization are the most important factor that can lead to change. The employees contribute to the culture of the company through their personalities, interests, perception of the world and point of view. Nature of business also affects the culture the

organisation. All companies depend on external factors like demand and supply, markets, etc. When these factors change, companies also have to change their organisational culture.

As mentioned above culture of organisation is shaped by its goals and objectives.

The

leaders

and

their

leadership

style

are

of

great

importance to the organisational culture and its change.

5.2

What

made

the

change

in

Ford's

organisational

culture

possible

Fig. 2 The infrastructure of every organization

Changing organisational culture is probably the toughest task a company might start as its culture was formed over years of interaction between owner, managers and employees. Ford's and old organisational Top managers culture adopted formed his for a reason. style It and probably matched the style of William Ford III or previous CEOs founders. management since managers tend to hire people similar to them, the old,

inefficient

organisational

culture

was

reinforced

by

new

employees too. The loss of more than $13 billion in 2006 triggered a process of culture change started by William Ford III with the hiring of Alan Mulally. What happened of was William and saw Ford the III understood in the current as an culture Ford problems himself

ineffective leader and in his top managers hiding information about the real problems the company had. Hiring Alan Mulally was a wise decision as he could understand Ford's old organisational culture as an outsider. Then, by analysing old values and changing them with concrete actions, he helped the company change its organisational culture, so that it can lead to success. 6. Conclusions The general and conclusions from the culture, that can be made from the arguments particular leadership case of Ford values, is that style, national above

organisational

culture are all vital to each company's development. Companies should closely monitor the environment they work in and adapt when changes occur. The most valuable asset companies have is their workforce regardless of position in the company, gender, age, etc. This is so because employees perception of the world, way of thinking, behaviour towards others related in one way or another to the company shape a company's organisational culture. In Ford's case, it turned out that actual values shared in the company led to an ineffective leadership style and finally to serious deviations from the goals set by owners and founders.

The solution came when leaders took a deeper look into company culture and decided to go through the tough process of change of values and leadership style.

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