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CHAPTER 4Organizational Culture

Learning Objectives

After studying this chapter, you should be able to:

LO4-1 List and discuss the four sources of organizational culture.

LO4-2 Discuss the characteristics and types of organizational culture.

LO4-3 Discuss the importance of organizational culture.

LO4-4 Describe how to manage organizational culture.

LO4-5 Explain how managers both create and are influenced by organizational culture.

A1

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knew that the hospital was understaffed, under-resourced, inefficient, and needed further enhancements to its facilities. “We were delivering the best medical care, but unfortunately, that did not translate into the best patient care,” believed Dr. Maher Soubra, a pediatric surgeon and director of clinical services at AUBMC.

After examination of various reports, close observation of operations, and analysis of patients’ complaints and feedback, AUBMC launched its 2020 Vision. This is a 10-year plan that was set out by Dr. Sayegh and the management team to bring their service to new and advanced levels of excellence along six main pathways, including the recruitment of highly specialized and talented faculty. The main goal of this vision is for AUBMC to become a patient-centered hospital and research and learning institution.1

In 2009, when almost half of the hospital beds were not in operation and a $7,000,000 debt loomed over the American University of Beirut Medical Center (AUBMC), it became clear that it needed a new leader.

Reports had been showing that employees were not satisfied, and patients were complaining about staff attitudes and bad service quality. Employees were careless about the success of the center and this attitude was reflected in patient experience. Doctors and nurses were not taking their jobs seriously; they were not always responding to their pagers, not properly collaborating, and sometimes canceling patients’ appointments without giving any reason, and not even informing them.

Dr. Mohamed Sayegh joined AUB in 2009 as Dean of the School of Medicine and Vice-President of Medical Affairs (AUBMC is a part of AUB). He knew that decisions had to be taken immediately in order to overcome these problems. Coming from Harvard, not only had Dr. Sayegh wanted to keep AUBMC as the leading healthcare institution in Lebanon and in the region, he also aspired to bring it in line with top North American standards. Although it already had highly skilled doctors and nurses, Dr. Sayegh

A MANAGER’S CHALLENGEDr. Mohamed Sayegh Transforms AUBMC’s Culture

AUBMC is a leading regional medical center located in Beirut, Lebanon, which has more than 3,000 employees and is the only institution in the Middle East with four international accreditations, from Joint Commission International (JCI), Magnet®, the College of American Pathologists (CAP), and the Accreditation Council for Graduate Medical Education.

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Dr. Mohamed Sayegh stated that this approach not only demonstrated the high standards of the medical center to its patients, but also the finest working conditions for its staff.

AUBMC has witnessed an amazing change in the culture of the organization, which has displayed excellent healthcare service quality ever since 2010. The new culture is being reflected in every patient’s experience, and they are noticing a better environment both inside and outside the medical center. Every patient now has one unique file that contains all their medical history and is automatically updated in all departments when any AUBMC doctor or nurse fills in new information. Moreover, slogans such as “Where Our Lives Are Dedicated to Yours” are communicated on all social media platforms of the hospital.

Cultural change is a difficult endeavor for any organization, especially for a large one like AUBMC. The success of this cultural change program is clearly due to the eight factors that were established at the beginning of the project, which included engagement of employees, a culture of inclusion and accountability, as well as teamwork and collaboration. This clearly shows that the influence of managers on organizational culture develops over time. AUBMC was not lacking in medical talent but in the proper organization of operations and motivation of employees. Dr. Sayegh and his team were able to deploy appropriate values and principles, which were key factors that allowed them to create the new culture of AUBMC and move closer to their 2020 Vision.

Dr. Sayegh and his team decided to start with an aggressive recruitment strategy and a restructuring of the hierarchy in the hospital, because they noticed that every entity considered itself a separate unit, which resulted in inefficiencies and duplication of information and functions. Chief medical officer, Dr. Adnan Tahir, believed that “it’s all about teamwork and collaboration.” They had to improve communication and cooperation between different departments, as well as emphasize initiative by giving the opportunity to the skilled front-liners of the hospital to participate in the decision-making process and come up with solutions.2

They wanted to create a culture where employees would be able to give necessary time and effort in order to create a better patient experience. So the AUBMC management team developed and communicated the goals and values of the organization to the department heads and staff, created a code of conduct and policies, and highlighted the importance of these. Respect, integrity, teamwork and collaboration, accountability, stewardship and diversity were the six core values visibly displayed in both English and Arabic on AUBMC walls.

Additionally, AUBMC invested in training and development programs, especially in team-building sessions to eliminate the tension between staff members and create a sense of belonging to the organization. “The emphasis was on getting the staff to cherish the institution and its assets and maintain the same values they had at home,” said Dr. Sayegh when he noticed a high level of waste in the hospital because of the staff’s negligent attitude toward the hospital’s equipment. He then motivated employees by adding new career rankings, especially for the nurses, who had been complaining about having the same career grade for years. He also launched the “Award and Reward” program, honoring those with a good performance record and who have served AUBMC for many years. New performance appraisal software was also implemented to follow up on employee performance; this facilitated the reward process, and the fair allocation of employees’ salaries and bonuses. Furthermore, new uniforms were designed for around 300 front-line staff by Reem Acra, a world-renowned fashion designer who has dressed famous celebrities worldwide.

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As the story of AUBMC suggests, becoming a successful company is not easy and requires a lot of effort. Plans need to be designed and then implemented, and concrete actions need to be taken to make these plans a reality. All these initiatives to improve the compet-

itive position of the company are the consequences of a vision set by the owners of the firm and/or its top managers. These actions contribute to shaping the culture of the organization, defined as “the way things are done” in the business. A specific vision, employee diversity, and a mix of resources, policies, and plans, among other things, make the company’s culture unique in comparison with other organizational cultures, including those of competing firms. In this chapter, we study organizational culture, the sources and the types of organizational culture, the importance of organizational culture, and how to manage organizational culture. By the end of this chapter, you will understand how organizational culture impacts the management of organizations.

In managing organizational culture, some important questions that arise are as follows. Where does organizational culture come from? Why do different companies have differ-ent cultures? Why might a culture that for many years helped an organization achieve its goals suddenly harm the organization?

Organizational culture is shaped by the interaction of four main factors: the personal and professional characteristics of people within the organization; organizational ethics; the nature of the employment relationship; and the design of its organizational structure (see Figure 4.1). These factors work together to produce different cultures in different organizations, and cause changes in culture over time.

Characteristics of Organizational MembersThe ultimate source of organizational culture is the people who make up the organization. If you want to know why organizational cultures differ, look at how the characteristics of their members differ. Organiza-tions A, B, and C develop distinctly different cultures because they attract, select, and retain people who have different values, personalities, and ethics.3 People may be attracted to an organization whose values match theirs; similarly, an organization selects people who share its values. Over time, people who do not fit in leave. The result is that people inside the organization become more similar, the values of the organization become more pronounced and clear-cut, and the culture becomes distinct from those of similar organizations.4

Overview

LO4-1 List and discuss the four sources of organizational culture.

Where Does Organizational Culture Come

From?

Characteristicsof organizational

members

Organizationalstructure

Organizationalculture

The employmentrelationship

Organizationalethics

Figure 4.1Sources of an organization’s culture

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The fact that an organization’s members become similar over time, and come to share the same values, may actually hinder their ability to adapt and respond to changes in the environment.5 This happens when the organization’s values and norms become so strong and promote so much cohesiveness in members’ attitudes that the members begin to misperceive the environment, as did Ford’s top managers.6 Companies such as Ford, Emirates, SABIC, and NBAD need a strong set of values that emphasize innovation and hard work; they also need to be careful that their success does not lead members to believe their company is the best in the business. Companies frequently make this mistake. One famous example is the CEO of Digital Equipment, who in the 1990s laughed off the potential threat posed by PCs to his powerful minicomputers, claiming, “Per-sonal computers are just toys.” This company no longer exists.

Organizational EthicsThe managers of an organization can set out purposely to develop specific cultural values and norms to con-trol how its members behave. One important class of values in this category stems from organizational ethics, which are the moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with one another and with people outside the organization. Ethical values rest on principles stressing the importance of treating organizational stakeholders fairly and equitably. Managers and employees are constantly making choices about the right, or ethical, thing to do; and to help them make ethi-cal decisions, top managers purposefully implant ethical values into an organization’s culture.7 Consequently ethical values, and the rules and norms that embody them, become an integral part of an organization’s cul-ture, and determine how its members will manage situations and make decisions. At the Emirates Group, great value is placed on corporate citizenship and social responsibility, and the belief that business ethics are inte-gral to continued success.8 Issues related to ethics will be discussed in more detail in the next chapter.

The Employment RelationshipA third factor shaping organizational culture is the nature of the employment relationship a company estab-lishes with its employees via its human resource policies and practices. Recall from Chapter 1 our discussion of the changing relationship between organizations and their employees due to the growth of outsourcing and employment of contingent workers. Like a company’s hiring, promotion, and layoff policies, human resource policies, along with pay and benefits, can influence how hard employees will work to achieve the organization’s goals, how attached they will be to the organization, and whether they will buy in to its values and norms.9 As we discuss in Chapter 12, an organization’s human resource policies are a good indicator of the values in its culture concerning its responsibilities to employees. Consider the effects of a company’s promotion policy, for example: a company with a policy of promoting from within will fill higher-level posi-tions with employees who already work for the organization. On the other hand, a company with a policy of promotion from outside will fill its open positions with qualified outsiders. What does this say about each organization’s culture?

Promoting from within will bolster strong values and norms that build loyalty, align employees’ goals with those of the organization, and encourage employees to work hard to advance within the organization. If employees see no prospect of being promoted from within, they are likely to look for better opportunities elsewhere. Cultural values and norms result in self-interested behavior, and cooperation and cohesiveness fall. The tech sector has gone through great turmoil in recent years: more than 2 million US tech employees lost their jobs during the 2000s because of outsourcing and the recession. Apple, HP, and IBM—known for their strong employee-oriented values that emphasized long-term employment and respect for employees—were among the many companies forced to lay off employees, and their cultures have changed as a result. To rebuild their cultures, and make their remaining employees feel like “owners,” many companies have pay policies that reward superior performance with bonuses and stock options.10 For example, Southwest Air-lines and Google have established company-wide stock option systems that encourage their employees to be innovative and responsive to customers. Dubai Properties Group (DPG), a member of Dubai Holding, fosters a culture of collaborative learning. Employees are its greatest asset. The outcome of the knowledge transfer initiative will have a profound impact on DPG competitiveness and productivity through better leveraging of knowledge. The company empowers recently qualified employees to spearhead new projects and leverage the expertise of professionals with DPG to drive the business forward.

Organizational StructureWe have seen how the values and norms that shape employee work attitudes and behaviors derive from an organization’s people, ethics, and HRM policies. A fourth source of cultural values comes from the organi-zation’s structure. Different kinds of structure give rise to different kinds of culture; so, to create a certain

organizational ethics The moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with one another and with people outside the organization.

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culture, managers often need to design a particular type of structure. Tall and highly centralized structures give rise to totally different sets of norms, rules, and cultural values than do structures that are flat and decentralized. In a tall, centralized organization people have little personal autonomy, and norms that focus on being cautious, obeying authority and respecting traditions emerge because predictability and stability are desired goals. In a flat, decentralized structure people have more freedom to choose and control their own activities, and norms that focus on being creative and courageous and taking risks appear, giving rise to a culture in which innovation and flexibility are desired goals.

Whether a company is centralized or decentralized also leads to the development of different kinds of cul-tural values. By decentralizing authority and empowering employees, an organization can establish values that encourage and reward creativity or innovation. In doing this, an organization signals to employees that it is okay to be innovative and do things their own way—as long as their actions are consistent with the good of the organization. Conversely, in some organizations it is important that employees do not make decisions on their own and that their actions be open to the scrutiny of superiors. In cases like this, centralization can be used to create cultural values that reinforce obedience and accountability. For example, in nuclear power plants, values that promote stability, predictability, and obedience to authority are deliberately fostered to prevent disasters.11 Through norms and rules, employees are taught the importance of behaving consistently and honestly, and they learn that sharing information with supervisors, especially information about mis-takes or errors, is the only acceptable form of behavior.12

An organization that seeks to manage and change its culture must take a hard look at all four factors that shape culture: the characteristics of its members; its ethical values; its human resource policies; and its orga-nizational structure. However, changing a culture can be difficult because of the way these factors interact and affect one another.13 Often a major reorganization is necessary for a cultural change to occur.

Organizational culture is a system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Organizational culture reflects employees’ and managers’ views about how things get done in the organization. Culture gives meaning to actions and procedures within an organization, and may be considered as the glue that holds organizational members together and what keeps them focused without deviating from the achievement of organizational goals. The culture specific to each firm affects how employees feel and act, as well as the type of employee hired and retained by the company.

There are three aspects of an organization’s culture; the most obvious is visible culture or the aspects of organizational culture that one can hear, see, or feel. For instance, the dress code conveying order and homogeneity of organizational culture, the furniture or office layout saying something about the values of competitiveness and aggressiveness versus consensus and harmony promoted by the culture, assigned park-ing spots according to rank, or cafeteria policies are a few rules and dimensions through which an observer can sense, feel, and assess the culture of an organization. The visible aspects of the culture represent the first aspects—mostly superficial—that we see, hear, or feel when we first interact with a culture.

The signs of a visible culture make it possible to study dominant cultural characteristics such as whether the organization is competitive or values harmony, formal or informal, hierarchical or egalitarian, liberal or conservative. For instance, firms where managers use an open-door policy, or management by wandering around, tend to value informal communication and the empowerment of employees, and to decentralize deci-sion making.

At a deeper level, espoused values are not readily observed but instead are the ways in which managers and employees explain and justify actions and decisions. Espoused values are those values that are expressed on behalf of an organization or that are expressed as explanations for policies or actions. Managers might explain that major layoffs or restructuring are a response to the economic crisis and decrease in sales vol-umes; they might argue that the adoption of a structure that values formal communication and respect of hierarchy, rank, and seniority was promoted for the sake of keeping the company’s activities under control and avoiding deviation from the objective. An innovative culture or a customer-responsive culture might be promoted to maintain the company’s competitive advantage, compete more effectively against other firms in the industry, or adjust to a changing market, or the changing needs and demands of customers.

Managers might not, however, give the real reason behind their actions. For instance, they might not say that massive layoffs or restructuring are driven by profit maximization only and not justified by a drop in demand or difficult financial situation. They might not tell the truth about why promotions and salary increases were given to some employees and not to others, arguing that they were distributed based on merit while in reality they were assigned and given based on personal relationships and friendships. Usually, if a gap exists between the espoused values as highlighted by managers in their discourse and how they are

Characteristics of Organizational

Culture

LO4-2 Discuss the characteristics and types of organizational culture.

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managed in reality, employees will rapidly find out and will quickly spot the hypocrisy of the culture. Manag-ers who are not honest about why actions were taken may create an organizational culture that encourages dishonesty and cynicism, and is characterized by a lack of ethical behavior, as managers who are supposed to lead by example, act as role models, and set an example for the rest of the company are not playing their role. This will eventually translate into poor firm performance because trust between employees and man-agers is missing and because employees will most probably deviate from the culture as it is not enforced by managers. For Naguib Sawiris, executive chairman of Orascom Telecom Holding, “The value of sticking to principles and not giving people what they thought they could get by threats, extortion, or blackmail is just enormous.” Ibrahim Dabdoub from National Bank of Kuwait says, succinctly, “You can’t be a crook and a leader at the same time.” In the Middle East, loyalty is important. Loyalty to networks, to the tribe, and to an ethnic or religious group, continues to play a key role in the region. Although westerners tend to view this trait with a degree of cynicism, for most leaders in the region, “wasta” gives them a feeling of trust in their business dealings. It is the underpinning for the culture of “my word is my bond.”

Espoused values may vary substantially across organizations and reflect the importance of the role played by managers in conveying the values that shape employee attitudes toward work and expected behaviors. Espoused values are generally consciously and explicitly communicated. At the center of organizational culture are core values that are widely shared, operate unconsciously, and are considered fundamental to the culture and non-negotiable. In some organizations, a basic assumption might be that the stability and commitment of the workforce are critical for success. Consequently, employees are valued, rewarded for goal achievement, treated fairly, and empowered and encouraged to contribute to decisions. The opposite would be that the stability and commitment of employees are not critical for the company’s success. This will translate into more formal controls, no established reward systems, low motivation, no delegation of author-ity, lack of empowerment, and centralization of decision making. Employees are seen as commodities and an expense that should be minimized. They are easily replaceable and are a means through which the company reaches its ends. There will be detailed standard operating procedures and rules detailing what employees can do and what they cannot do, and managers believe that it is their duty to prevent deviations from the norms and to emphasize rigor, order, respect for the hierarchy, and formality. A climate of suspicion, sabotage, and whistleblowing will flourish in the organization as employees will tend to see their colleagues as enemies they are competing against and not as collaborators. Negative competition will be encouraged, leading to a lack of harmony within the firm. In the Arab world, some of the values promoted by organizational culture are specific to the local culture. For example, Mohammed Alshaya, executive chairman of Kuwait-based M.H. Alshaya Co., the retail division of the Alshaya Group of companies, like his father before him, will not enter into ventures that involve selling alcohol or tobacco. He says, “We shy away from many opportunities that we don’t feel fit with our culture.”

Management Insight highlights the values used by the Qatar Museums Authority (QMA).

It’s Another Exciting Day at Work

The Qatar Museums Authority (QMA) was founded in late 2005 as a successor to the National Council for Culture, Heritage and the Arts. The QMA’s purpose is to manage the resources of all museums in the State of Qatar, to develop cultural institutions such as museums and galleries, and to provide an effective system for collecting, protecting, preserving, and interpreting historic sites, monuments, and artifacts. In 2007 a new managerial team headed by Mr. Abdullah Al-Najjar was appointed. The new leadership thought that the QMA’s aims would not be achieved unless a new organizational culture was developed. As Mr. Al-Najjar phrased it, “We want our employees to wake up in the morning and say, ‘I’m going to QMA today because it’ll be another exciting day.’” To build this vision, the leadership team introduced a new set of values. Seven core values were identified, as follows: Passionate: Inspire others, love our work; Empowering: Enable leadership and responsibility; Collaborative: Work as a team with colleagues and partners; Creative: Harness our talent for invention and innovation; Professional: Excellence and efficiency in all we do; Ethical: Firm adherence to ethical standards; and Communicative: Accessible and transparent in our interactions.

Management Insight

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To support the implementation of these values, the organization went through a reorganization process. One outcome of this process was the empowerment of the human capital department to act as an agent for change. With full support from the leadership team, the traditional elec-tronic attendance monitoring system was dropped. Employees’ work became task driven rather than time driven. Tasks and projects were performed and completed in teams. Improvements were also introduced in the workplace. A new health and fitness center, a nursery, and a prayer room were opened on campus. Employees were also encouraged to take breaks and join their colleagues for coffee, breakfast, or lunch in the stylish new cafeteria, to discuss off-work topics. The leadership team also joins the various departments over breakfast once a month to encourage open communication. Recently, the QMA has provided its employees with health insurance cover and shopping discount cards. The Chief Human Capital Officer summarizes all of this in a few words: “You look after our business and we look after you.”14

The Qatar National Museum in Doha.

The basic underlying cultural assumptions create the lenses through which people perceive and interpret events. For instance, production line employees engaging in a conversation on the job might be perceived as an attempt to goof off and relax while on the job, which will decrease worker productivity and lead to a drop in performance. Employees are perceived as trying to take advantage of the culture and exploit any loopholes. In other companies, this conversation might indicate employee commitment to improving work processes, and their desire to promote collaborative work, and to find better ways to do the work as the shar-ing of ideas and communication on issues related to how to perform the job and improve work processes was done through this conversation. Positive or negative interpretation of employee actions depends on these cultural assumptions, and their impact on perceptions and interpretations of events.

Dimensions of Organizational CultureResearch indicates that there are seven dimensions that describe organizational culture.15 Each of the seven dimensions ranges from low to high, meaning that it is not a characteristic of the culture (low rating) or is a characteristic of the culture (high rating). Characterizing the organizational culture by using these dimen-sions gives a description of the underlying values used and promoted in the company.

1. Attention to detail: the degree to which employees are expected to exhibit precision, analysis, and atten-tion to detail. In industries necessitating precision and craftsmanship, attention to detail is essential to reach organizational goals. For instance, in companies such as Louis Vuitton or Hermès, the brand name is built on such values, which are communicated to employees and perpetuated through socialization and training programs. At Qatar Foundation, the diversified nature of the business requires creativity and risk taking to achieve goals. Leadership plays a proactive role in this regard by promoting a culture of trust where employees can use their individual talents to the fullest.16

2. Innovation and risk-taking: the degree to which employees are encouraged to be innovative and to take risks. The culture of financial institutions such as Citibank and JPMorgan is based on risk-taking. Traders are encouraged to take calculated risks when trading stocks and currencies for the benefit of the bank.

3. Stability: the degree to which organizational decisions and actions emphasize maintaining the status quo. The culture of Toyota emphasizes stability and conservatism. Even during their worst crises, the managers preferred to keep employees and looked for other ways to solve the crisis instead of resorting to major layoffs.

4. Aggressiveness: the degree to which employees are aggressive and competitive rather than cooperative. At Kanoo Group, a culture based on employee cooperation and teamwork is promoted. In most US corpo-rations, competition between teams, divisions, and units is used to fuel productivity and performance.

5. Team orientation: the degree to which work is organized around teams rather than individuals. Qatar Airways seeks team-oriented candidates to fill its cabin crew positions. The same cultural dimension is present at Emirates.

6. People orientation: the degree to which management decisions take in to account the effects on peo-ple in the organization. For instance, continuous learning and development is one of the core values of

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NBAD’s corporate culture since it enables the staff to contribute effectively to developing innovative, efficient, and secure products and services to allow customers to enjoy the most convenient banking experience. Investing in career development will ultimately support the achievement of business strat-egies through staff commitment and engagement, increased retention rates, and the enhancement of intellectual assets.17

7. Outcome orientation: the degree to which the managers focus on results or outcomes rather than on how these outcomes are achieved. At the Emirates Group, great value is placed on corporate citizenship and social responsibility, and business ethics are integral to continued success. Each member of staff’s commitment toward ongoing improvement combines to maintain the competitive edge of the operation in global markets. At Emirates, managers believe that employees are their greatest asset, and their con-tribution to the staggering pace at which the company grows cannot be underestimated.18

Strong, Adaptive Cultures versus Weak, Inert CulturesMany researchers and managers believe that employees of some organizations go out of their way to help the organization because it has a strong and cohesive organizational culture—an adaptive culture that controls employee attitudes and behaviors. Adaptive cultures are those whose values and norms help an organization to build momentum, and to grow and change as needed to achieve its goals and be effective. By contrast, inert cultures are those whose values and norms fail to motivate or inspire employees; they lead to stagnation and, often, failure over time. What leads to a strong adaptive culture or one that is inert and hard to change?

Researchers have found that organizations with strong adaptive cultures, like 3M, UPS, Microsoft, and IBM, invest in their employees. They demonstrate their commitment to their members by, for example, empha-sizing the long-term nature of the employment relationship and trying to avoid layoffs. These companies develop long-term career paths for their employees, and spend a lot of money on training and development to increase employees’ value to the organization. In these ways, terminal and instrumental values pertaining to the worth of human resources encourage the development of supportive work attitudes and behaviors.

In adaptive cultures employees often receive rewards linked directly to their performance and to the per-formance of the company as a whole. Sometimes employee stock ownership plans (ESOPs) are developed in which workers as a group are allowed to buy a significant percentage of their company’s stock. Workers who are owners of the company have an additional incentive to develop skills that allow them to perform highly and search actively for ways to improve quality, efficiency, and performance. At Dell, for example, employ-ees may still buy Dell stock at a steep 15 percent discount, and this will allow them to build a sizable stake in the company over time if its performance recovers.

Some organizations, however, develop cultures with values that do not include protecting and increasing the worth of their human resources as a major goal. Their employment practices are based on short-term employment according to the needs of the organization, and on minimal investment in employees who per-form simple, routine tasks. Moreover, employees are not often rewarded on the basis of their performance, and thus have little incentive to improve their skills or otherwise invest in the organization to help it achieve goals. If a company has an inert culture, poor working relationships frequently develop between the organi-zation and its employees, and instrumental values of non-cooperation, laziness and loafing, and work norms of output restriction are common.

Moreover, an adaptive culture develops an emphasis on entrepreneurship and respect for the employee, and allows the use of organizational structures, such as the cross-functional team structure, that empower employees to make decisions and motivate them to succeed. By contrast, in an inert culture, employees are content to be told what to do and have little incentive or motivation to perform beyond minimum work requirements. As you might expect, the emphasis is on close supervision and hierarchical authority, which results in a culture that makes it difficult to adapt to a changing environment.

GlaxoSmithKline (GSK), the prescription drug maker, is a good example of a company with an adaptive culture. Much of GSK’s success can be attributed to its ability to recruit the best research scientists because its adaptive culture nurtures scientists, and emphasizes values and norms of innovation. Scientists are given great freedom to pursue intriguing ideas even if the commercial payoff is questionable. Moreover, research-ers are inspired to think of their work as a quest to alleviate human disease and suffering worldwide, and GSK has a reputation as an ethical company whose values put people above profits.

Although the experience of GSK suggests that organizational culture can give rise to managerial actions that ultimately benefit the organization, this is not always the case. The cultures of some organizations become dys-functional, encouraging managerial actions that harm the organization and discouraging actions that might improve performance.19 For example, Sunflower Electric Power, an electricity generation and transmission

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cooperative, almost went bankrupt in the early 2000s. A committee of inquiry set up to find the source of the problem put the blame on Sunflower’s CEO, deciding that he had created an abusive culture based on fear and blame that encouraged managers to fight over and protect their turf—an inert culture. The CEO was fired, and a new CEO was appointed to change the cooperative’s culture, which he found hard to do because his top managers were so used to the old values and norms. With the help of consultants, he changed the val-ues and norms to emphasize cooperation, teamwork, and respect for others—which involved firing many top managers. Clearly, managers can influence how their organizational culture develops over time.

Cultural Uniformity versus HeterogeneityOrganizations vary in the extent to which a uniform culture is promoted throughout the company. In some large corporations, different subcultures might be found in the different branches and subsidiaries. This indi-cates managers in the company’s headquarters allow the different branches or divisions to develop their own values and guiding principles as long as the major core values in the branches are the same as those used at headquarters. This cultural flexibility is justified by a need for each division to create its own identity, or by differences in goals and nature of activities. The dominant culture is emphasized throughout the firm but with some variations in some divisions and branches. In 2009, Etisalat received an award at the 3rd Middle East Customer Care Excellence Awards, organized by the Middle East Excellence Awards Institute. Etisalat won this award for its strong corporate culture and dedication to providing quality customer service. New employees in the company are immediately integrated into Etisalat’s quality culture, thanks to the clear and structured processes they follow. These processes help managers to review and augment these systems, to ensure staff perform at consistently high levels. Etisalat has been named Best Operator in the Middle East five times in the last three years and was recently named Best International Carrier in the world at the World Communications Awards.20

Neither uniformity nor heterogeneity is good or bad in a company. When cultural heterogeneity is promoted, branches and divisions are given flexibility and freedom to adjust the company’s strategy and make it fit with the contingencies that are specific to the division or branch. Because of the specificities of these contingencies or product lines or production processes, cultural flexibility is needed to allow for a customer-responsive and innovation-driven culture.

Culture versus FormalizationOrganizational culture might substitute for formal systems of control and decision making such as organi-zational structure, rules, procedures, policies, and direct supervision. When the values are widely supported by employees, compliance, predictability and consistency would be much easier to obtain. All employees understand the values that guide their actions in the company, and trust between employees, commitment to the goals, and loyalty to the firm reduce the need for written documentation, formal rules, and SOPs, as well as for monitoring and formal control mechanisms. When employees trust one another, and are reliable and responsible, the need for these mechanisms decreases. For instance, CAD GULF LLC is a team-based organi-zation focused on the roles and competencies of its people. Throughout the years, the company has been able to gather some of the best people in the industry, hone their skills and cross-train them in other aspects of the business. The result is a synergistic group living in a culture of excellence, professionalism, teamwork, and customer orientation.21

National versus Organizational CultureA national culture can guide behaviors. For example, Arabs tend to be more collectivistic, while Americans are more individualistic. Teamwork with reward systems geared toward group performance might experi-ence more success in Arab countries than in the US. The culture of the organization will be influenced not only by the national culture but also by regional influences, and ethnic and religious backgrounds and beliefs. Moreover, national cultures have a stronger impact on social interactions than organizational cultures. For example, when two companies are brought together in a merger, differences in national cultures are a stron-ger predictor of negative outcomes in terms of stress, negative attitudes, and resistance to cooperation than are differences in organizational cultures.22

By embracing diversity, and through employee selection and socialization, organizations keep the best of the national culture and align it with the values supported by the founders’ and top managers’ vision. Some multinational companies deliberately attempt to create a culture that values diversity to fuel innovation and creativity, and increase the company’s capacity to quickly adjust to changes in the environment and to ever-evolving customer needs. For instance, the fear of losing face in the Arab world is a significant restraint

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on creating new businesses. It tempers any desire that talented graduates might have to become entrepre-neurs, steering them instead to the relative safety of an established family firm or a well-paid government job. This regional reticence is also, in part, a function of the culture’s continuing respect for age. Young people are less likely than in the West to go against the wishes of their parents, and their parents’ views are almost cer-tain to be more conservative than their own. This dynamic also plays out powerfully in family firms, where three generations may be working side by side. All will defer to the eldest, who in general will be one of the least inclined to take a gamble on a new business. What’s more, as one leader puts it, “In the Arab world almost everything is politicized,” and governments are rarely encouraging to new business.23

An increasing number of typologies are being used to identify various kinds of culture. Classifying the type of culture in an organization can be helpful if the culture fits with the strategies of the firm or if some adjustments are needed to make them more aligned. The control mechanisms, reward systems, and other procedures and standards are impacted by the type of culture and its characteristics. For instance, the adoption of formal or infor-mal control mechanisms can be linked to the nature or type of culture emphasized in the organization. The type of culture has implications for how employees should be managed

and which candidates should be hired.Cultural elements and their relationships within an organization create a pattern that is a unique part of

that organization, creating an organization’s culture. Several types of organizational culture can be described, namely, bureaucratic culture, clan culture, entrepreneurial culture, and market culture. They are discussed here and summarized in Table 4.1.

• Bureaucratic culture: This type of organization values rules, hierarchical coordination, formalization, and standard operating procedures; with the long-term concerns being efficiency, predictability, and sta-bility. Managers within a bureaucratic organization are good coordinators, organizers, and enforcers of rules and procedures that are clearly defined. The tasks, responsibilities, and authority for all the organi-zation’s employees are also clearly stated. For example, most municipalities and government institutions have bureaucratic cultures, which can hinder their effectiveness and efficiency. The focus of attention of this organization is internal, and the formal control is stable. McDonald’s promotes a bureaucratic culture throughout the organization as the company follows standard operating procedures, and needs to emphasize homogeneity, coordination of activities, and control of work sequences. Setting routines to be followed by all McDonald’s restaurants is essential for success. The need for coordination, routinized work processes, formality, and respect of the chain of command outweighs the need for flexibility and informality. This is why a bureaucratic culture fits McDonald’s vision and strategy.

• Clan culture: Attributes of this type of organization are tradition, loyalty, teamwork, personal commit-ment, and self-management. The organization focuses its attention internally, yet its formal control is flexible. The members of this organization recognize an obligation that is beyond their job descriptions, with the understanding that their contributions to the organization may exceed their contractual agree-ments. Employees identify that their long-term commitment to their organization, in the form of loyalty, is in exchange for the organization’s long-term commitment to the employee, in the form of security. Unity from this culture type is created through a long and thorough socialization process, where long-term clan members serve as mentors and role models for newer members. There is also strong peer pressure to adhere to important norms within the organization, and an environment is created in which few depart-ments are left completely free from normative pressures, which may generate innovation and risk-taking behavior. The success of this type of organization is assumed to depend on teamwork, participation, and consensus decision making, as well as employee sensitivity to customers and concern for people. According to Mishal Kanoo from Kanoo Group, the Arab business is not just run by the family, it is run for the family. A leader’s success is not judged merely by financial results, but also by the sense of responsi-bility and commitment he gives to the family as a whole. The measure of commercial success lies more in retaining a strong family business culture and providing ongoing security for the family than it does in simply making profits.24

Clan culture means working together with an emphasis on concern for people. A good example of a col-laborative culture or clan is Health Matrix, a company based in the Middle East, which provides innovative IT solutions for the growing healthcare market. Managers recognize that the company is only as good as its people, which is why they invest in top talent. According to the company’s website, its goal has always been to share its success by attracting, developing, and retaining top talent in the healthcare IT industry,

Types of Organizational

Culture

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Table 4.1Organizational culture typology

Type Characteristics Formal control orientation and forms of attention

Example

Bureaucratic culture

• Rules, hierarchical coordination, formalization, and standard operat-ing procedures

• Long-term concerns are efficiency, predictability, and stability

• Managers are good coordinators, organizers, and enforcers of clearly defined rules and procedures

• Stable control and internal attention

McDonald’s

Clan culture • Tradition, loyalty, teamwork, personal commitment, and self-management

• Employee contribution exceeds contractual agreements

• Long-term commitment through a long and thorough socialization process

• Strong peer pressure to adhere to important norms

• Flexible control and internal attention

Health Matrix

Entrepreneurial culture

• High levels of risk taking, dynamism, and creativity

• Commitment to experimentation and innovation

• Individual initiative, flexibility, and freedom are encouraged and rewarded

• Reacts quickly to change and creates it

• Flexible control and external attention

Group Chalhoub

Market culture • Achievement of measurable and demanding agreed-upon goals

• Contractual relationship between the employee and the organization

• Concerns for competitiveness and productivity

• Increased levels of performance are rewarded through increased compensation

• Stable control and external attention

General Electric

and employees experience the company’s commitment and dedication to the team. Health Matrix thrives in a highly collaborative culture of innovation and teamwork. The company respects relationships with co- workers, customers, owners, agents, suppliers, the community, and the environment, and provides employ-ees with a safe and fulfilling environment as well as an opportunity to grow and learn.25

Leaders in the Arab world think of hiring people for life, of treating employees as an extension of their family. This puts a different angle on their ideas about fostering teams. Mohammed Alshaya says the key is “to treat people as you would like to be treated.” Mishal Kanoo believes in what he calls “consultative leader-ship.” This is “the ability to negotiate with people so that they buy into your ideas. You won’t get 100 percent of what you want, but 80 percent is not a bad goal to aim for.”26

• Entrepreneurial culture: This cultural form is characterized by high levels of risk taking, dynamism, and creativity. Employees are committed to experimentation, innovation, and being at the leading edge. This organizational culture type reacts quickly to change, as well as creates it due to the fact that indi-vidual initiative, flexibility, and freedom promoting growth are encouraged and rewarded. Effectiveness within this organization means providing new and unique products and rapid growth. The organization focuses its attention externally, and formal control orientation is flexible in order to foster innovation and change. For instance, Group Chalhoub is guided by the philosophy of being “Committed to Excel-lence.” With the aim of optimizing the performance of brands, providing quality service and offering a stimulating work environment, the group cultivates the core values of Excellence, Respect and Entre-preneurial Spirit.27 Google develops innovative Web tools, taking advantage of entrepreneurial software engineers, and cutting-edge processes and technologies. Its ability to quickly develop new services and

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capture market share has made it a leader in the marketplace, and has forced competitors to catch up and revise their strategies.

• Market culture: The achievement of measurable and demanding goals, especially those that are finance- and market-based, are characteristic of this type of organizational culture. In this organization, the rela-tionship between employee and organization is contractual, where the obligation of each is agreed in advance; therefore the formal control orientation is quite stable. This is because the employee is respon-sible for an agreed level of performance, with the organization exchanging this for an agreed level of remuneration and reward in return. Competitiveness and a profit-gaining orientation therefore exist throughout this organization because increased levels of performance from the employee are rewarded through increased compensation from the organization. Market cultures are concerned with competitive-ness and productivity through an emphasis on partnerships and positioning. General Electric, under the leadership of former CEO Jack Welch, is a good example of a market culture. He famously announced that if the business’s divisions were not first or second in their markets then, simply, they would be sold. Its corporate culture was (and still largely is) highly competitive, where performance results speak louder than process.28

Organizational culture can be critical in determining the performance of the firm, and its capacity to compete effectively in the marketplace and maintain and strengthen its competitive advantage. While culture may seem more of a concept than something that is physically real, the potential harm or potential benefit for the business might be real and careful attention is needed to properly manage organizational culture. Studies show that

loyalty and commitment to the goals of the company are the result of an effective and positive organizational culture more than pay and benefits. Culture might also differentiate firms in the labor market and make some companies more attractive than others to job seekers. For instance, Qatar Airways—which was ranked among the top 100 best companies to work for in the Middle East—benefits from a competitive advantage that very few other companies in the industry have. With its organizational culture that focuses on creating an environment that nurtures employee skills, emphasizes collaboration and teamwork, values participation, the delegation of authority, and empowerment of employees, along with promoting a work environment where diversity is valued and supported, the company is able to attract talented job candidates and to recruit the best employees, which gives the company a competitive edge against rivals. Organizational culture can help managers achieve objectives in several ways. It helps create favorable conditions that facilitate the achievement of organizational goals. Each of the following aspects highlights how organizational culture can help or hinder the achievement of organizational objectives.

Employee Self-managementTo direct and help employees achieve organizational goals, managers define jobs with job descriptions, cre-ate a structure and hierarchy to establish a chain of command and line of authority, dedicate resources to departments and units, and develop work schedules. While these mechanisms and actions guide employee actions, the company’s goals will be achieved only when employees decide to behave in the way the com-pany desires.

Organizational culture can induce employees to behave in a particular way without close supervision or formal control mechanisms. When employees support the organizational culture and feel part of it, they tend to conform to it as their own values match those promoted by the culture of the organization. Conversely, failure to comply with cultural norms generates social pressure to conform as the group will look down on those who do not conform with the norms and values emphasized by the culture; thus the employee will either adjust and align his or her behaviors and attitudes with the cultural expectations or face peer pressure, which might lead to the departure of the employee when there is no willingness and readiness to conform. Much of this process through which the culture directs the actions and attitudes of employees occurs infor-mally and in an unspecified manner.

StabilityCulture provides a sense of continuity in the midst of rapid change and intense competition. In industries operating in dynamic environments such as the high-technology industry, culture ensures predictability, security, and comfort. Organizational culture ensures that employees can effectively adjust to the changing

The Importance of Culture

LO4-3 Discuss the importance of organizational culture.

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conditions in the environment, and feel that they are in control and on track to achieve the goals of the organization and are confident that the company’s strategies will lead to success. The stress caused by fierce competition in the marketplace, by the rapid adjustments and updates of product lines and services as they become quickly obsolete, by the need to continuously innovate and create new work routines or new prod-ucts and services, can be controlled and alleviated through organizational culture.

SocializationOrganizational culture subtly teaches employees the values of the organization. The process of internalizing or taking organizational values as one’s own is called socialization. Socialization is a three-stage process. The first stage, pre-arrival, consists of the values, attitudes, biases, and expectations the employee brings to the organization when first hired. These values are influenced by the background of the employee, their prior experiences, and the environment they lived in previously. The values of newcomers say something about their way of doing things as learned from their culture and past experiences. Organizations try to select can-didates that are most likely to fit in to the company’s culture. Even if the firm hires the right candidate whose values fit within those promoted by the business, they still have to learn the culture of the organization and adjust if there is a gap between their own values and those of the company.

When the employee joins the company and starts working in their new position, they reach the encounter stage. At this point, the individual begins to compare their expectations about the firm’s culture with the real-ity of the expectations set by the firm. For instance, the employee might have their own perception of what being punctual and on time to work means, while the company has a very strict attendance policy. There is a mismatch, in this case, between employee values as concretely translated into practice and the values pro-moted by the culture of the organization. When there is a gap between cultural expectations and reality, the employee has to adjust to the culture of the organization during the metamorphosis stage. Training programs are designed to help employees adjust their values to firm expectations.

An organization can choose from among formal or informal, individual or collective, fixed or variable, serial or random, and investiture or divestiture socialization. Not all employees adjust successfully to the requirements of the culture and, when the company fails to socialize employees, the employee might decide to leave the company and join another that supports the same values they are supporting, or the company might decide to terminate the employee’s employment if the gap prevents them from reaching organizational goals. While companies must maintain and strengthen their cultures through proper socialization, they also have to value employee diversity, and promote an environment that nurtures employee skills and talents, and where employees can capitalize on their own values and cultural background. This might also bring value to the company and help it strengthen its competitive position in the marketplace.

Implementation of the Organizational StrategyOrganizational strategy may support the achievement of the goals and the vision of the firm by supporting the implementation of the firm’s strategies and desired changes in the strategy in case actual strategies are revised or changed. Organizational culture helps create the needed commitment to organizational goals. For high performance, firm strategy and culture must be aligned and, ideally, must reinforce each other. Any change in the culture must be reflected in the strategy, and vice versa. The shared values and norms make it easier for employees to support the company’s strategy.

Negative CultureWhile the company’s culture may support the company’s strategy and help with goal achievement, it might also lead to negative outcomes. For instance, a culture that is too strong and fully entrenched into one model and one set of values and norms, which are constantly emphasized as being the best, might lack the capacity to adjust if change is needed to improve performance, strengthen a competitive advantage, or even guar-antee survival. A closed and inflexible culture might diminish the firm’s capacity to adjust to the different forces in the environment and make any strategy revision very difficult to set and to implement. At the other extreme, when the values and norms are not constantly emphasized and reinforced, the company fails to achieve its goals as employees will show little support and commitment to organizational goals. When the values are not deeply held by employees and reinforced by managers, following the vision of the company becomes difficult and so would be the implementation of strategies to convey the vision. Each employee or group of employees will have their own interpretation of the company’s values and norms, which leads to inconsistent actions that prevent the company from reaching its goals. A too strong or too weak culture may harm performance and goal achievement.

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The culture of an organization evolves gradually over time. It starts with the founders of the company, and is influenced by their beliefs and philosophy. Their vision for the company is usually reflected in the initial set of values and norms they develop for the firm. These beliefs and values are then transmitted to a group of close associates, and different mechanisms are then set (e.g., training programs) to further transmit them to a larger number of employees as the company grows in size. Managers have to act as role models and lead the process of transmission and enforcement of cultural values to fellow employees.

A variety of techniques and elements maintain and reinforce culture over time. Some may be deliberately imposed by management, such as cultural symbols, rituals, and the choice of company heroes that embody the firm’s values. Others may be largely unconscious processes such as the use of stories, language, and employee perception of the company’s leadership style.

Professor Geert Hofstede developed a so-called “cultural onion” (Figure 4.2) in which all layers except the inner one (national values) can be learned through organizational practices.29 We will review each of these organizational practices next.

Cultural SymbolsCultural symbols are the icons and objects that communicate organizational values such as flags, uniforms, or other logos. Management uses these to create a sense of belonging and identity, and to convey and sustain shared meanings among employees. For example, holding classes for female students and classes for male students at the University of Sharjah symbolizes religious beliefs used as the guiding values of the organiza-tional culture at that university.

Company HeroesOrganizations communicate their values to employees by identifying individuals whose deeds best reflect what the organization believes in so that other people and employees can reproduce their behavior, and can use these “heroes” as an inspiration to guide their own attitudes and actions in the workplace. For instance, the Al Fardan name has been strongly associated with pearl trading in the Arabian Gulf for more than a century. The owners and managers of the group still see in its founder, Mr. Ibrahim Al Fardan—a renowned pearl expert and trader—a hero who still guides the vision and strategy of the group. In 1954 the chairman of the Group, Mr. Hassan Ibrahim Al Fardan, started the first establishment as the Al Fardan Jewellery showroom in the UAE.30

Rituals and CeremoniesOrganizations plan events and ceremonies to offer employees, or other stakeholders, the opportunity to share cultural meanings. At the American University of Sharjah and American University of Beirut, graduation

Managing Cultural

Processes

LO4-4 Describe how to manage organizational culture.

Values

Nationalculture

Organizationalculture

Rituals

Practices

Heroes

Symbols

Figure 4.2Hofstede’s “cultural onion”

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ceremonies at the end of every teaching year convey the values and beliefs of the institution and delineate the use of the American model of higher education in these two universities.

StoriesOrganizational culture is sustained by the nar-ratives and legends that capture the organiza-tion’s values and beliefs. For instance, Dubai history highlights the role of HH Sheikh Ahmed bin Saeed Al Maktoum, who has been at the forefront of Dubai’s remarkable economic development for more than 25 years and who was appointed chairman of Dubai World in December 2010. Under his leadership, Dubai World has entered a new phase of growth in line with Dubai’s economic development. HH Sheikh Ahmed has been a highly successful corporate leader since 1985, when he was appointed pres-ident of the Dubai Department of Civil Aviation and chairman of the newly launched Emirates

Airline. The phenomenal growth of Dubai’s aviation industry under his stewardship is testimony to HH Sheikh Ahmed’s grand vision and foresight. He is now the chairman and chief executive of Emirates Airline and Group.31

An interesting example of using stories to build common culture is American University of Beirut’s (AUB) initiative called “Couples,” which was launched—among other activities—to commemorate the 150th anni-versary of this institution. Many people, including the current AUB President, who met their spouses at AUB as early as 1928, posted their family pictures on a specially dedicated website.32

LanguageThe language employed by managers is used to convey company values, and promotes both positive and neg-ative values. For example, the language used at Abu Dhabi Investment Authority differs from the language used at Dubai School of Government. The visions, missions, strategies, and objectives of the two institutions are different, so is the language used to convey cultural values and beliefs. Firms often use slogans to reflect their values and make stakeholders aware of the culture of the firm. The slogan for Abu Dhabi Commercial Bank (ADCB) is “Our Knowledge. Your Future.” The theme used by the American University of Beirut to cel-ebrate its 150th anniversary was “We make history,” illustrated by the major achievements of this university that transformed the Lebanon educational landscape and the community at large.

LeadershipEmployee actions are influenced by how leaders behave in the organization. Effective leaders set a vision for the organization that employees will commit to and try to achieve. Leaders are also role models for employ-ees. They provide a daily example of how to articulate the values in practice, and emphasize the important values that employees have to follow. All the leaders interviewed for the “Business Leadership in the Arab World” report emphasized the importance of following their moral compass. “As a leader, you are being chal-lenged every day with issues that cut across your value system,” says Loay Nazer, the founder in 1991 of Nazer Group, a holding company that has made a diverse range of entrepreneurial investments in Saudi Ara-bia and abroad. “To establish leadership you have to have a pre-defined value system.”33

Organizational Policies and Decision MakingPerformance appraisals, budgets, new plans, and other policies and decisions clearly communicate company values and therefore the company’s culture. The control mechanisms and the criteria used to measure perfor-mance reflect the values promoted by organizational culture.

Employees learn what the company truly values when change is required in times of crisis. The need for restructuring, downsizing of company activities, and to plan revisions will be handled in accordance with the most important values supported by the organization. The conservative and stable culture used at Toyota

Graduation ceremony at the American University of Beirut.

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A Caring Culture: Path Solutions, KuwaitPath Solutions, founded in 1992, is a Kuwaiti-based company that specializes in selling integrated software solutions in the Islamic finance industry, across the GCC and other global capital mar-kets. The founder, Mohammad Kateeb, firmly believes that the value of his employees lies in their expertise and determination to perform at their best. At Path Solutions, there is a culture of inte-gration and empowerment amongst employees through an on-the-job learning experience, along with top-notch training programs that strengthen employee qualifications and the quality of their service.34

Path Solutions, through its four career development centers in Kuwait, Beirut, Cairo, and Kerala, has created a culture that nurtures advancement and professional actualization. One of its cultural values is its “open door policy,” where employees’ opinions are valued regardless of their expe-rience or background. It also incorporates a mentor program where employees can develop their skills and receive insights to reach their goals.35 Path Solutions also considers the work–study balance employees must have when pursuing higher degrees in their education, and provides com-petitive salaries for its highly skilled workers.36

Management Insight

was emphasized when the company faced major crises throughout its history but refused to adopt a massive layoff strategy. Toyota’s culture values seniority, and creates loyalty and commitment to the company’s goals and vision.

Cultural values are communicated by the ways in which employees are rewarded. In top-tier research universities, promotions and salary increases are tied to research productivity and quality of faculty publica-tions, while teaching universities reward faculties based on their course evaluations and on other indicators of their teaching performance.

While all members of an organization can contribute to developing and maintaining organizational culture, managers play a particularly important part in influencing orga-nizational culture37 because of their multiple and important roles (see Chapter 1). How managers create culture is most vividly evident in start-ups of new companies. Entrepre-neurs who start their own companies are typically also the start-ups’ top managers until the companies grow and become profitable. Often referred to as the firms’ founders, these managers literally create their organizations’ cultures.

The founders’ personal characteristics play an important role in the creation of organizational culture. Benjamin Schneider, a well-known management researcher, developed a model that helps to explain the role that founders’ personal characteristics play in determining organizational culture.38 His model, called the attraction–selection–attrition (ASA) framework, posits that, when founders hire employees for their new ventures, they tend to be attracted to and choose employees whose personalities are similar to their own.39 These similar employees are more likely to stay with the organization. Although employees who are dissimilar in personality might be hired, they are more likely to leave the organization over time.40 As a result of these attraction, selection, and attrition processes, people in the organization tend to have similar person-alities, and the typical or dominant personality profile of organizational members determines and shapes organizational culture.41

For example, when David Kelley became interested in engineering and product design challenges in the late 1970s, he realized that who he was as a person meant he would not be happy working in a typical corpo-rate environment. Kelley is high on openness to experience, driven to go where his interests take him, and not content to follow others’ directives. Kelley recognized that he needed to start his own business, and with the help of other Stanford-schooled engineers and design experts, IDEO was born.42

From the start, IDEO’s culture has embodied Kelley’s spirited, freewheeling approach to work and design—from colorful and informal work spaces to an emphasis on networking and communicating with as many people as possible to understand a design problem. No project or problem is too big or too small for IDEO; the

Culture and Managerial Processes

attraction–selection–attrition (ASA) framework A model that explains how personality may influence organizational culture.

LO4-5 Explain how managers both create and are influenced by organizational culture.

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company designed the Apple Lisa computer and mouse (the precursor of the Mac) and the Palm, as well as the Crest Neat Squeeze toothpaste dispenser and the Racer’s Edge water bottle.43 Kelley hates rules, job titles, big corner offices, and all the other trappings of large traditional organizations that stifle creativity. Employ-ees who are attracted to, selected by, and remain with IDEO value creativity and innovation, and embrace one of IDEO’s mottos: “Fail often to succeed sooner.”44

Although ASA processes are most evident in small firms such as IDEO, they also can operate in large companies.45 According to the ASA model, this is a naturally occurring phenomenon to the extent that man-agers and new hires are free to make the kinds of choices the model specifies. However, while people tend to get along well with others who are similar to themselves, too much similarity in an organization can impair organizational effectiveness. That is, similar people tend to view conditions and events in similar ways and thus can be resistant to change. Moreover, organizations benefit from a diversity of perspectives rather than similarity in perspectives (see Chapter 6). At IDEO, Kelley recognized early on how important it is to take advantage of the diverse talents and perspectives that people with different personalities, backgrounds, experiences, and education can bring to a design team. Hence IDEO’s design teams include not only engi-neers but others who might have a unique insight into a problem, such as anthropologists, communications experts, doctors, and users of a product. When new employees are hired at IDEO, they meet many employees who have different backgrounds and characteristics; the focus is not on hiring someone who will fit in but, rather, on hiring someone who has something to offer and can “wow” different kinds of people with his or her insights.46

While founders and managers play a critical role in developing, maintaining, and communicating orga-nizational culture, this same culture shapes and controls the behavior of all employees, including manag-ers themselves. For example, culture influences how managers perform their four main functions: planning, organizing, leading, and controlling. As we consider these functions, we continue to distinguish between top managers who create organizational values and norms that encourage creative, innovative behavior and top managers who encourage a conservative, cautious approach by their subordinates. We noted earlier that both kinds of values and norms can be appropriate depending on the situation and type of organization.

Planning Top managers in an organization with an innovative culture are likely to encourage lower-level managers to participate in the planning process and develop a flexible approach to planning. They are likely to be willing to listen to new ideas and to take risks involving the development of new products. In contrast, top managers in an organization with conservative values are likely to emphasize formal top-down planning. Suggestions from lower-level managers are likely to be subjected to a formal review process, which can significantly slow decision making. Although this deliberate approach may improve the quality of decision making in a nuclear power plant, it can have unintended consequences. In the past, at conservative IBM, the planning process became so formalized that managers spent most of their time assembling complex slide shows and overheads to defend their current positions rather than thinking about what they should do to keep IBM abreast of the changes taking place in the computer industry. When former CEO Lou Gerstner took over, he used every means at his disposal to abolish this culture, even building a brand-new campus-style headquarters to change managers’ mind-sets. IBM’s culture is undergoing further changes initiated by its current CEO, Samuel Palmisano.47

Organizing What kinds of organizing will managers in innovative and in conservative cultures encour-age? Valuing creativity, managers in innovative cultures are likely to try to create an organic structure—one that is flat, with few levels in the hierarchy, and one in which authority is decentralized so employees are encouraged to work together to solve ongoing problems. A product team structure may be suitable for an organization with an innovative culture. In contrast, managers in a conservative culture are likely to create a well-defined hierarchy of authority and establish clear reporting relationships so employees know exactly whom to report to and how to react to any problems that arise.

Leading In an innovative culture, managers are likely to lead by example, encouraging employees to take risks and experiment. They are supportive regardless of whether employees succeed or fail. In contrast, man-agers in a conservative culture are likely to use management by objectives and to constantly monitor subor-dinates’ progress toward goals, overseeing their every move. We examine leadership in detail in Chapter 14 when we consider the leadership styles that managers can adopt to influence and shape employee behavior.

Controlling The ways in which managers evaluate, and take actions to improve, performance differ depending on whether the organizational culture emphasizes formality and caution or innovation and change. Managers who want to encourage risk taking, creativity, and innovation recognize that there are multiple potential paths to success, and that failure must be accepted for creativity to thrive. Thus they are less con-cerned about employees’ performing their jobs in a specific, predetermined manner and in strict adherence to preset goals, and more concerned about employees’ being flexible and taking the initiative to come up with ideas for improving performance. Managers in innovative cultures are also more concerned about long-term performance than short-term targets because they recognize that real innovation entails much uncertainty,

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which necessitates flexibility. In contrast, managers in cultures that emphasize caution and maintenance of the status quo often set specific, difficult goals for employees, frequently monitor progress toward these goals, and develop a clear set of rules that employees are expected to adhere to.

The values and norms of an organization’s culture strongly affect the way managers perform their man-agement functions. The extent to which managers buy in to the values and norms of their organization shapes their view of the world, and their actions and decisions in particular circumstances. In turn, the actions that managers take can have an impact on the performance of the organization. Thus organizational culture, man-agerial action, and organizational performance are all linked together.

HOW TO SHAPE ORGANIZATIONAL CULTURE Organizational culture is shaped by the interaction of four main factors: the personal and professional characteristics of people within the organization; organizational ethics; the nature of the employment relationship; and the design of its organizational structure. These factors work together to produce different cultures in different organizations and cause changes in culture over time.

CHARACTERISTICS OF ORGANIZATIONAL CULTURE Organizational culture is a system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Organizational culture reflects employees’ and managers’ views about how things get done in the organization. Culture gives meaning to actions and procedures within an organization and may be considered as the glue that holds organizational members together and what keeps them focused without deviating from the achievement of organizational goals. The culture specific to each firm affects how employees feel and act, as well as the type of employee hired and retained by the company.

THE IMPORTANCE OF CULTURE Organizational culture can be critical in determining the performance of the firm and its capacity to compete effectively in the marketplace, and maintain and strengthen its com-petitive advantage. While culture may seem more of a concept than something that is physically real, the potential harm or potential benefit to the business might be real, and careful attention is needed to prop-erly manage organizational culture. The culture can support employee self-management, increase stability, smoothen the socialization process, and facilitate the implementation of the organizational strategy.

MANAGING CULTURAL PROCESSES The culture of an organization evolves gradually over time. It starts with the founders of the company, and is influenced by their beliefs and philosophy. A variety of techniques and elements maintain and reinforce culture over time. Some may be deliberately imposed by management, such as cultural symbols, rituals, and the choice of company heroes that embody the firm’s values. Others may be largely unconscious processes, such as the use of stories, language, and employee perception of the company’s leadership style.

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Summary and Review

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Management in ActionTopics for Analysis and Action

Discussion 1. How does organizational culture emerge? [LO4-1]

2. How do managers select the characteristics and dimensions to include in the culture? [LO4-2]

3. Discuss the different types of culture that could possibly be implemented in a firm. Explain how managers select one type over the others, and analyze the factors that explain their choice. [LO4-2]

4. Why is culture so needed in a firm? How does it help the firm reach a good level of performance? [LO4-3]

5. How can organizational culture be managed through artifacts? Provide examples of these artifacts, and discuss how they can be used to maintain and strengthen the culture. [LO4-4]

Action 6. Interview a manager and identify the type of organizational

culture that her or his organization has implemented. Why is the organization using this type of culture? Do you think other types might be more appropriate? Which one(s)? Explain. [LO4-2]

7. Interview some employees of an organization, and ask them about the organization’s values and norms, the typical characteristics of employees, the organization’s ethical values, cultural dimensions, and the artifacts. Using this information, try to describe the organization’s culture and the way this affects how people and groups behave. [LO4-1, 4-2, 4-4]

8. Go to an upscale clothing store in your neighborhood, and then go to a clothing store that is definitely not upscale. Observe the behavior of employees in each store, as well as each store’s environment. In what ways are the organizational cultures in each store similar? In what ways are they different? [LO4-5]

A3

Building Management SkillsUnderstanding Organizational Culture [LO4-1, 4-2, 4-4]

Think of an organization with which you are familiar, perhaps one you have worked for, such as a store, restaurant, bank, office, or school. Then answer the following questions.

1. Describe the dimensions of its organizational culture. Were innovation and risk taking part of these dimensions? Be specific.

2. How did this organizational culture emerge?

3. What role did organizational culture play in guaranteeing the stability and performance of the company?

4. Different artifacts are used to manage organizational culture and perpetuate it. These artifacts include language, symbols, stories, heroes, rituals, and ceremonies. How were these artifacts used in the organization to maintain and manage organizational culture?

5. Can you think of any additional action that the managers could take to reinforce organizational culture or to change it?

6. Was the culture bureaucratic, clan-oriented, entrepreneurial, or more market-driven? Explain.

7. What made the company’s managers decide to adopt one specific type of culture instead of another? Explain.

8. How did the internal and the external environments of the firm influence organizational culture? Provide specific examples.

9. What advice would you give to the company’s managers to help them improve the culture of their firm?

A2

Managing Ethically [LO4-1, 4-2]

Suppose an organization has just recruited a new management team and started laying off many of its middle managers. The

new top managers decided to terminate the employment of all managers who disagree with the cultural change that the new top managers want to introduce. They want to move from a bureau-cratic culture, characterized by centralized decision making and low employee empowerment, to a more entrepreneurial culture empha-sizing more decentralized decision making and more employee empowerment. The new managers believe that all those who dis-agree with their vision have to leave the company. Some high-per-forming middle managers who have spent most of their careers in the company have been laid off. Think of the ethical issues involved in designing a hierarchy, and discuss the following issues.

Questions 1. Do you think managers can decide to lay off high-performing

employees just because they disagree with their vision? Explain what you would have done if you were part of the new management team appointed in this company.

2. Some people argue that employees who have worked for an organization for many years have a claim on the organization at least as strong as that of its stakeholders. What do you think of the ethics of this position—can employees claim to “own” their jobs if they have contributed significantly to the organization’s past success?

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Small Group Breakout Exercise [LO4-1, 4-2, 4-3]

Leena’s JewelryForm groups of three or four people, and appoint one member as the spokesperson who will communicate your findings to the class when called on by the instructor. Then discuss the following scenario.

Leena’s Jewelry sells and services high-end jewelry and luxury watches. Over the years, the company has developed a good

reputation for the quality of its products and for its excellent cus-tomer service. However, the store was run as a small business and the owner Leena Munajed never thought of designing formal plans, of setting a formal structure, or devising a long-term vision for the company. While her experience in the field (as she worked in a jewelry store when she was a student) helped her succeed in the field, her lack of management skills prevented her from expanding the business rapidly. The deepening economic crisis and the fierce competition faced from more established jewelry stores are threat-ening the expansion and long-term survival of Leena’s Jewelry. You are a team of local consultants whom Leena has called in to advise

her as she tries to learn about how to manage her business. She asked you to help her answer the following questions.

1. How can she build an organizational culture and how does she pick the right one?

2. How can she improve effectiveness and efficiency by picking the right culture for her firm?

3. Leena wants to expand to one of the neighboring GCC countries. She thinks that expanding could help generate more revenues and profits. She is asking you to help her figure out whether the culture of the new branch should be similar or different from the original one, and the advantages and disadvantages of having dissimilar cultures in the different branches.

A3

Exploring the World Wide Web [LO4-1, 4-2]

Go to the website of the Emirates Group (www.theemiratesgroup.com). Click on “Our Vision and Values.” Explore the values pro-

moted by the group.

1. What values are promoted by the Emirates Group? How do you think promoting these values has helped the group be successful?

2. Browse the group’s website and identify the type of organizational culture used. Is it the best culture to use? Is there any other alternative culture that could be used by the Emirates Group? Explain.

A2

Be the Manager [LO4-1, 4-2, 4-3, 4-4, 4-5]

You have been hired as a middle manager in a large multi-branch furniture store. The company is seeking to expand internation-

ally and is in the process of selecting foreign suppliers to lower its dependence on local suppliers and diversify its supply sources. The company’s top managers have delegated their powers to you and charged you to negotiate and to sign on their behalf the contracts with the new suppliers. The top managers briefed you on how cru-cial these contracts are to secure the firm’s expansion and asked you not to disappoint them, even when sealing the deal requires bribery and bending the rules. The company promotes a clan-ori-ented and ethical culture, and managers do their best to act as role models for the rest of the employees. Bribing and acting unethically are not part of the values you personally support. However, you

know how important these deals are for your company and for your future career in the company.

1. How do you think you should act—follow the guidelines that were given by your bosses, or follow your own values and beliefs? Why?

2. Do you think the culture should reflect the values and beliefs of the top managers? Are there inconsistencies between the way cultural values are outlined and the way the top managers act?

3. If top managers keep differentiating between written values and actions, the company will most probably fail in the long run. What cultural changes do you suggest to make the values more aligned with the actions?

A2

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