BA105: BA105: Organizational BehaviorOrganizational Behavior

Professor Jim LincolnProfessor Jim Lincoln

Week 6: LectureWeek 6: Lecture

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• Last time: Leadership vision and charisma as OB levers for change

• This week: Analyzing and managing organizational culture

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Class business: exams next week

• Essay (Tuesday, March 2)– You will analyze a case (announced Thursday) that

deals with structure, culture, and leadership• One or more exam questions will guide your analysis

– See p. 2 in the syllabus on how the exam will be evaluated.

– A model exam will be put on the website

• Objective: Thursday, March 4– 25-30 true-false, multiple-choice questions over

required reading, lecture, and discussion material

• I will hold extended office hours on Thursday (3:30-5:30) and Friday (to be announced).

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Class business: Thursday agenda

• Team project proposal due• Mary Kay video• Body Shop case

– What is the culture of the Body Shop and where did it come from?

– How (and how effectively) did TBS manage its culture? – Was the Body Shop’s penchant for modelling itself on the

opposite of standard cosmetic industry practice a matter of core values or smart business strategy?

– Is the story of the Body Shop chiefly one of culture or one of leadership?

• Discuss upcoming exams

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Strategy (diversification; innovation)

Input

Environment(Competition, change)

Resources(munificence)

History (age, conditions at founding)

OutputSystems

Unit

Individual

InformalOrganization

(Culture, leadership, networks, politics)

Tasks (technologies, work flows)

People(ability, skills, motivation, biases)

FormalOrganization

(job titles, departments,

reporting hierarchy, IT & HR systems

Organizational Design

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The nature of culture

Fuzzy, ephemeral, intuitive• “No one can define the HP way. If it weren’t fuzzy,

it would be a rule” (HP Vice President)

– Emotional, charismatic, spiritual • Takes “emotional intelligence” to navigate

– Holistic and enveloping

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The Berkeley Way

“It's invisible but omnipresent. Most know it exists but few can actually define it. Newcomers are perplexed by it. Confronting it head on can be dangerous.”

“The name of this nebulous creature? It's known on campus as "The Berkeley Way" -- an unwritten code of conduct that governs how people go about their business.”

The Berkeleyan, February 16, 2000

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Where did the concept of organization culture come from?

• Discovery of Japanese management in 80’s– William Ouchi: Theory Z.– Peters and Waterman: In Search of Excellence– Richard Pascale and Anthony Athos: The Art of

Japanese Management.– Ezra Vogel: Japan as No. 1.– James Abegglen and George Stalk: Kaisha

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What is culture?• Shared values, norms, beliefs/understandings

– Manifested in:• Ritual, ceremony, tradition

• Folklore, heroes, legends, stories

– Channeled through:• Informal networks

• Logos, slogans, PR, advertising, annual reports, websites

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Southwest Airlines’ Values

Value 1: Work should be fun…it can be play…enjoy it

Value 2: Work is important…don’t spoil it with seriousness

Value 3: People are important…each one makes a difference.

It used to be a business conundrum: “Who comes first? The employees, customers, or shareholders?” That’s never been an issue to me. The employees come first. If they’re happy, satisfied, dedicated, and energetic, they’ll take real good care of the customers. When the customers are happy, they come back. And that make the shareholders happy.”

Herb Kelleher

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Cisco’s core values

• Dedication to customer success

• Innovation and learning

• Partnerships

• Teamwork

• Doing more with less

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Kyocera:“Respect the divine and respect people”

“Our goal is to strive toward both the material and spiritual fulfillment of all employees in the Company, and through this successful fulfillment, serve mankind in its progress and prosperity. We are scientists constantly directing our efforts toward perfecting our technology. But we must not forget that complete process of living requires devotion to humanity as well as to science, to the emotional as with the rational, and to love equally with reason. Just as a family unites in a common bond of support and affection, let us all unite in a bond of love and respect.”

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Is making money a value?

The culture paradox:– An organization whose core values transcend making

money will make the most money

“Profits are to a corporation much like breathing is to life. Breathing is not the goal of life, but without breath, life ends. Similarly, without turning a profit, a corporation, too, will cease to exist.”

Dennis Bakke, CEO, AES Corporation

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Other core organizational values

• Customer service (IBM, Nordstrom)

• Innovation, creativity (3M, Intel, HP)

• Competitiveness, aggressiveness (GE, Motorola, Pepsi)

• Social responsibility (Ben and Jerry’s; Levi’s; The Body Shop; Working Assets)

• Quality (Japanese companies; Ford?)

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Strong vs. weak cultures

– Strong: Consistent, persistent, intense, shared, crystallized, consensual, consequential

– Weak: Vague, fragmented, inconsistent, transitory, politicized, conflictual

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Dimensions of culture strength

Complacent

“country club” culture

Strong, organization-wide culture

Absence of culture

(anomie)

Subcultures

IntensityS

har

ing

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Subcultures

• Around departments, occupations, divisions, demographics

• Source of in-group cohesion, out-group competition, conflict, and politics

• Is the overall organization culture strong enough to subsume subcultures?

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Strong culture companies as cults, tribes, cloisters, churches, the military What do the Branch Davidians and Microsoft have

in common? Give up? Both organizations are cults. No joke. The only difference is one is religious (Davidians), while the other (Microsoft) is corporate. So says David Arnott, author of Corporate Cults: The Insidious Lure of the All-Consuming Organization (AMACOM).

Both are classified as cults because the members

of these organizations are cut off from the real world and are obsessed with achieving the mission of their leaders. For the Davidians, it was the charismatic David Koresh; for Microsoft, it's the world's richest man, Bill Gates.

Bob Weinstein, March 5, 2000

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Apple as tribe

“Apple is a lot like a tribe, with folklore handed down from generation to generation. The question is how can we channel it? We are trying to shift away from folk heroes and individualism in the organization, but we have selected people for this in the past, and we don’t punish that kind of behavior. 

--Apple executive

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The church of IBM"IBM, more than any other big company, has institutionalized its beliefs the way a church does. They are expounded in numerous IBM internal publications to ensure that employees know what's expected of them. And they are reflected in codes of behavior…(S)alespersons wear dark business suits and white shirts; that's no longer a strict regulation but most IBM salesmen continue to dress that way

....the result is a company filled with ardent believers..

The IBM culture is so pervasive that, as one nine-year former employee put it, “leaving the company is like emigrating."

Secrecy is one of IBM's hallmarks. One IBM watcher told Tim, if you understand the Marines, you can understand IBM."

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What does culture do? It provides:

• Motivation and commitment

• Vision and direction

• Coordination and alignment

• Ease of communication

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Engineer-ing

Manufac-turing

Marketing

General Manager

Product A Culture

Culture may align and coordinate functional, product, or regional divisions

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Can culture help the bottom line?

• Lower cost– Fewer formal control systems

• Better quality/productivity/customer service• Culture as branding

– Apple, Southwest, Saturn, Japanese firms

• Culture as sustainable competitive advantage– Hard-to-imitate capabilities

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Culture as Honda’s (Sony’s) competitive advantage and Toyota’s (Matsushita’s) competitive disadvantage

Honda executives say Toyota's aggressive moves don't concern them, arguing that their giant rival will have difficulty emulating Honda's unique culture. "All Toyota is doing is aping us and letting their money talk," says Ken Hashimoto, a senior Honda R&D executive.

Some of Honda's fears are already playing out. Toyota, in spite of its

often-ridiculed "country boy" image, has been proving that it can successfully woo young car buyers, thanks to designers such as Takao Minai. Mr. Minai languished for a long time in Toyota's hierarchical culture but had a sudden leap in responsibilities two years ago. Under Mr. Okuda's guidance, the ponytailed 36-year-old amateur video jockey took charge of developing a dream car for male twentysomethings. Based on a sketch by another young designer, the 11-member team designed a small car shaped like a really clunky box. Toyota dubbed it "bB," short for black Box.

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Are there downsides to strong culture?

• Rigidity/inertia

• Homogeneity

• Overconformity

• Narrowness/intolerance/xenophobia

• Extremism/obsessiveness

• Provincialism/insularity

• Goal displacement; ends-means inversion

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SAS Institute

“Some people say that SAS Institute reeks of paternalism or a plantation mentality in a world otherwise dominated by marketlike labor market transactions. For instance, an article in Forbes stated, “More than one observer calls James Goodnight’s SAS Institute, Inc., “the Stepford software company” after the movie The Stepford Wives. In the movie people were almost robotlike in their behavior, apparently under the control of some outside force. Another article noted “The place can come across as being a bit too perfect, as if working there might mean surrendering some of your personality.”

O’Reilly and Pfeffer: Hidden Value.

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Strong culture spells homogeneity at P&G

Few corporate cultures are as dominant as the "Procter Way." "It's such a strong culture, they really want sameness," says Ms. Beck, who later worked as a brand manager for Dunkin Donuts and as a vice president for Burger King. "The way women think and the way we do business has some inherently different qualities to it," Ms. Beck says. "In retrospect, there was a gender aspect to [P&G's culture] that was not intentional, but was very, very real.“

WSJ, 9/9/98

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“…at one point product features became the religion, not the vision. This drove prices up and closed out individuals (as customers).

--Apple executive

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Enron’s “culture of corruption” or the absence of culture?

The report (by three Enron non-executive directors) into the collapse of Enron, once one of America's top ten public companies, confirmed outsiders' suspicions about how badly the firm was run. The management’s aims, the directors concluded, were to minimise taxes, maximise apparent profits and, in some cases, to line their own pockets. The directors' report was described by Senator Byron Dorgan, who is leading another investigation into the company’s collapse, as “devastating”, adding that “this is almost a culture of corporate corruption.”

--The Economist, 2/12/02

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The critique of 1950’s corporate culture: Overconformity and alienation

• William H. Whyte’s The Organization Man

(Doubleday, 1956)

• The Man in the Gray Flannel Suit

(20th Century Fox, 1956)

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The Organization Man(A)s more and more lives have been encompassed by the organization

way of life, the pressures for an accompanying ideological shift have been mounting. The pressures of the group, the frustrations of individual creativity, the anonymity of achievement: are these defects to struggle against--or are they virtues in disguise? The organization man seeks a redemption of his place on earth--a faith that will satisfy him that what he must endure has a deeper meaning than appears on the surface. He needs, in short, something that will do for him what the Protestant Ethic did once. And slowly, almost imperceptibly, a body of thought has been coalescing that does that.

(I)t could be called an organization ethic, or a bureaucratic ethic; more than anything else it rationalizes the organization's demands for fealty and gives those who offer it wholeheartedly a sense of dedication in doing so--in extremis, you might say, it converts what would seem in other times a bill of no rights into a restatement of individualism.

But there is a real moral imperative behind it, and whether one inclines to its beliefs or not he must acknowledge that this moral basis, not mere expediency, is the source of its power. Nor is it simply an opiate for those who must work in big organizations. The search for a secular faith that it represents can be found throughout our society--and among those who swear they would never set foot in a corporation or a government bureau.

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Managing & changing culture:

Step I: Study it • Be culturally savvy (vs. clueless): pay attention

• Do a culture audit:– Find key informants

• oral histories with tribal elders• map genealogies• learn folklore

– Be a “fly on the wall”• Ethnography & participant observation

– Study texts• Annual reports, websites, advertising

– Do value surveys

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Step II: understand its causes • Leader/founder

– Family ownership• Long history

– P&G• Society

– Asia/Europe• Region

– Northern California/Manhattan/South– Small town vs. big city

• Amana, Cummins, Corning, Chase, Citibank

• Product– Apple, Coke

• Industry– High tech/railroads/investment banking

• Structure – Functional/divisional; mechanistic/organic

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Apple’s product-driven culture

“Here’s the most interesting thing about our culture-- we are what we make. I’ve never seen an organization where the personality of the organization is so intertwined with the personality of the product--individualistic, pure, uncompromised, ahead of everyone else, so elegant it can’t fail. We are the Macintosh here.”

Apple Marketing Manager

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Step III: Align/realign the organization

– People– Formal organization

• Structure

• Information/incentive systems

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Aligning people

• Selection and socialization (buy or make)

• First, selection:– Select for fit or “misfit” to the culture

• Intensive screening

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Selection at Microsoft

In 1999, the average age of the more than 31,000 Microsoft employees was only 34, and raw intelligence matters more than judgment or experience in determining who gets hired. Craig Mundie, senior vice president for consumer strategy, described Microsoft "as a company full of a lot of high IQ people who have relatively no experience."

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Selection at Apple

Sculley came to a company renowned for its exciting and countercultural work environment, where employees often wore T-shirts that proclaimed “working 90 hours a week and loving it.” Sculley described apple as “the Ellis Island of American business because it intentionally attracted the dissidents who wouldn’t fit into corporate America.”

Harvard Business School Press

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Selecting for “bad fit” at HP(Wall Street Journal interview with former CEO Lew Platt)

WSJ: Did you feel constrained running a company that had legendary founders and a culture enshrined in a book?

Platt: A little bit. There were certain constraints. There were certain traditions they wanted upheld.

WSJ: Give me an example.Platt: They were very conservative -- heavy investment in R&D, little debt. I was

asked not to question those things.WSJ: Ms. Fiorina is a woman, a nonengineer and an outsider -- all firsts for H-P.

What should we read into that?Platt: They wanted someone who could bring change, someone with a higher

visibility. Most H-P people are pretty low-key. David [Packard] and Bill [Hewlett] were that way. I'm that way. Carly comes in without some of those constraints. She will question some of the thinking that I, as a 33-year employee, couldn't.

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Aligning people

• Socialization– Focus on firm-specific values and tacit skills– Invest heavily in training, including OJT– Mentoring– Participation– Rites of passage

• “Humiliating-inducing experiences”

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Selection and socialization at P&G

Job candidates must pass a battery of tests measuring aptitude and leadership skills. Once hired, employees are schooled in all things Procter, even attending training seminars known as P&G College. Memos, written in a distinct P&G style, are valued over meetings. Employees are expected to have facts and data at their fingertips -- opinions and intuition are frowned upon.

Juelene Beck, who worked as P&G beverage brand assistant

from 1984 to 1986, says supervisors once questioned whether a trendy haircut and suit were "appropriate" for P&G. During performance reviews, she says, she was asked why she preferred sailing to socializing with co-workers.

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Cultural integration of acquisitions through mentoring at Cisco

“Cisco’s acquisition identification process emphasizes cultural compatibility…Cultural integration includes the use of integration teams who explain and model Cisco’s values, the holding of orientation sessions, and the assignment of ‘buddies.” The buddy system involves pairing each new employee with a seasoned Cisco veteran of equal stature and similar job responsibility. The buddy offers personalized attention better suited to conveying the Cisco values and culture.”

O’Reilly and Pfeffer, Hidden Value

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Hell Camp: Extreme resocialization

“Founded nine years ago in the foothills of Mt. Fuji, Hell Camp claims to have subjected some 100,000 Japanese salarymen to 13 days of speed drills, speechifying and hazing rituals. Its main message-- “100 liters of sweat; 100 liters of tears” was designed to counteract a growing fear among Japan’s corporate and government elite that the nation’s workers are becoming too “Americanized”, too soft. The school’s solution, for nearly $3000 a pop: to crush the individual ego with mindless and humiliating exercises and then rebuild it with a modern version of the Samurai code of selfless servitude called bushido.”

“Japanese-style camp for managers is lost in translation in U. S.: Hazing rituals and obeisance don’t make it in Malibu even among freeloaders. WSJ, March 1, 1988.

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(Re)Align the organization

– Structure• Divisional/functional/matrix

• Mechanistic/organic

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Ford: Changing culture by restructuring

Since the hard-charging 51-year-old executive took over in January (1999), he has picked up the whole organization by the lapels and shaken it. His goal? To reinvent the 96-year-old industrial giant as a nimble, growth-oriented consumer powerhouse for the 21st century, when a handful of auto giants will battle across the globe.

That's why Nasser has declared war on Ford's stodgy, overly analytic culture. In its place, he envisions a company in which executives run independent units--cut loose from a stifling bureaucracy and held far more accountable for success and failure. And with a consumer focus at the heart of his retooled Ford, he's banking on a future in which designers, engineers, and marketers someday will do a far better job of anticipating the wants and needs of car buyers.

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Carly Fiorina’s culture-structure realignment at HP

Most dramatically, she launched a plan to consolidate H-P's 83 businesses into only 12. She also aligned the reduced number of divisions into two "front-end" groups that would focus on customer activities, such as marketing and sales, and two "back-end" organizations devoted strictly to designing and making computer and printer products.

Old-time H-P executives were shocked. "I was a deer caught in the headlights when she described the front and back end," says Carolyn Ticknor, who now presides over the merged printer unit. Several of these executives protested that employees weren't ready for a major reorganization.

Some executives fretted that managers wouldn't wield "real" authority if they couldn't control both product development and marketing. "It took some of the glory, if you wish, out of the job," says Mr. Perez, the departed executive.

Consternation rippled through the ranks. Managers who had long aspired to run their own autonomous units, known as P&Ls, short for profit & loss, suddenly saw most of those jobs disappear.

WSJ, 8/22/2000

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Changing the symbolism of structure

• Southwest– People Department– Culture Committee

• Executive ranks at Chumbo Corp.– Grand Pooh-Bah– Web Goddess– Director of Something

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(Re)align the organization

– HR systems• Career design• Long-term employment• Job rotation• Compensation design

– Reward group & long-term performance– Reward conformity with core values

» Innovators head new product divisions at 3M and HP

– Maintain equity, keep inequality low

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Aligning rewards at Cisco

“Chambers is adamant about rewards being tied to customer satisfaction. He ties the compensation of all managers to measures of customer satisfaction– really listening to the customer. “We are the only company of anywhere near this size that does it.”

O’Reilly and Pfeffer: Hidden Value

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Excessive culture-HR alignment at Penney’s

To alter such deep-bred customer perceptions (that Penney’s clothes are unfashionable) would require a feat of Herculean proportions, but Penney's, with a notoriously insular corporate culture, is averse to itinerant, superhero types. Of the company's top managers above the senior vice president level, only two have not spent their entire careers there.

"The norm is to be there your whole career, several are even second generation," said Lucille Klein, who left as fashion director of Penney's women's division three years ago, but still consults with the company. "It leads to tunnel vision, like the Penney's way of doing things is the only way."

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Culture takeaways

• Culture is an extremely powerful force in every organization– It can lead to either success or to failure

• Culture may be “soft” but it can be managed and changed– It does take time, commitment, and consistency