Chapter 8Chapter 8

Organizational Culture,Empowerment, and Ethics

Humane, Empowering Work Humane, Empowering Work EnvironmentsEnvironments

Humane,Empowering Work

Environment

OrganizationalCulture

Empowerment

Ethics

Building a ConstructiveBuilding a ConstructiveOrganizational CultureOrganizational Culture

• Organizational culture consists of the values, symbols, stories, heroes, and rites that have special meaning for a company’s employees.

• Culture represents the emotional, intangible part of the organization. If structure is the organization’s skeleton, culture is its soul.

• Many firms are now attempting to develop cultures that are helpful in motivating their employees and keeping them committed to the firm.

• 47% of 400 CEOs in North America and Europe said that reshaping culture and related employee behavior took up a great deal of their time and was as important as monitoring financial information.

• A recent study of 200 mergers found incompatible cultures to be the primary cause of failures.

Functions of Organizational CultureFunctions of Organizational Culture(Figure 8-1)(Figure 8-1)

CULTURE

JUSTIFICATIONOF BEHAVIOR

ENHANCEDCOOPERATION

IMPROVEDDECISIONMAKING

ENHANCEDCONTROL

IMPROVEDCOMMUNICATION

ENHANCEDCOMMITMENT

ENCOURAGESHARED

PERCEPTIONS

Elements of Organizational CultureElements of Organizational Culture

OrganizationalCulture

Values

Symbols

Narratives

Heroes

Rites

Rituals

Focus on Management:Focus on Management:Organizational Culture at Quad/GraphicsOrganizational Culture at Quad/Graphics

HARRYQUADRACCI

• Selected as one of the “100 Best Companies to Work for in America,”Quad/Graphics is a remarkable success story.

• The company’s philosophy is “Have fun, make money, and don’t do business with anyone you don’t like.”

• Harry Quadracci, who has been called the P. T. Barnum of Printing, describes the company as a circus, a continuous performance of highly creative and individualistic troupes.

• Employees at Quad/Graphics are empowered, don’t sign time cards, are continually learning, and receive a variety of unique benefits.

Organizational ValuesOrganizational Values

Organizational values are beliefs held by an individual or group that speak to the actions and ends that organizations “ought to” or “should” pursue.

The Importance of ValuesThe Importance of Values

“Every excellent company we studied is clear on what it stands for, and takes the process of value shaping seriously. In fact, we wonder whether it is possible to be an excellent company without clarity on values and without having the right sorts of values.” Peters & Waterman, In Search of Excellence

Focus on Management: Values at Focus on Management: Values at Hewlett-PackardHewlett-Packard

The HP Way:• We have trust and respect for individuals• We focus on a high level of achievement

and contribution• We conduct our business with

uncompromising integrity• We achieve our common objectives

through teamwork• We encourage flexibility and innovation

SymbolsSymbols

• Symbols are things that stand for or suggest something else.

• As examples:– office assignments signal status– dress codes suggest the level of formality– logos can influence customer and employee

perceptions– an action can be symbolic, as in the case of the

“Lambeau Leap”

Some Forms of SymbolsSome Forms of Symbols

A PHYSICAL OBJECT

A UNIFORM

A MASCOT

AN ACTION

Web Wise: The Land O’Lakes LogoWeb Wise: The Land O’Lakes Logo

• The importance of company symbols to those outside the firm is seen in a study of customers’ ratings of 47 firms on things such as quality and reputation.

• 600 customers were asked to rate the firms on the basis of their names, and another 600 were also provided with the company logo.

• The logo had a strong influence on ratings. For example, Motorola’s score rose by 55%.

• Land O’Lakes’ kneeling native American woman logo dropped the company’s rating by 12%.

• http://www.landolakes.com/new/ourCompany/LandOLakesHistory.cfm

Forms of NarrativesForms of Narratives

• Stories dramatize relatively ordinary, everyday events within organizations in order to convey important cultural meanings.

• Legends are more uplifting than stories and portray events that defy explanation by ordinary circumstances.

• Myths are dramatic, unquestioned narratives about imagined events.

• Sagas describe heroic exploits performed in the face of adversity.

Recurring Story ThemesRecurring Story Themes

• Equality. These recognize that members must deal with status inequalities in organizations.

• Security. These recognize that members desire security, but that organizations can threaten their security.

• Control. These recognize tensions between members’ desire to control events and their realization that they can’t always do so.

Focus on Management:Focus on Management:Stories at 3MStories at 3M

• The importance of innovation as a 3M value is supported by a story often repeated throughout the firm concerning transparent tape.

• According to the story, an employee accidentally developed cellophane tape but was unable to get superiors to accept the idea.

• The employee was able to sneak into the corporate boardroom and tape down the board members’ copies of the minutes with the transparent tape.

• The board was impressed enough with the novelty to give it a try, and the product was incredibly successful.

• The story reinforces the importance of innovation and encourages 3M employees who believe in their ideas to never take no as a final answer.

HeroesHeroes

• Heroes are company role models. In their performance of deeds, embodiment of character, and support of the existing organizational culture, they highlight the values a company wishes to reinforce.

• Heroes are the main characters in the stories relayed throughout an organization.

RitesRites

• Rites combine cultural forms into a public performance.

• Some forms of rites include:– Rites of Passage (completion of Army basic

training) – Rites of Enhancement (awards ceremony)– Rites of Integration (company Christmas party)

RitualsRituals

• Rituals are relatively simple combinations of repetitive behaviors, often carried out without much thought, and often brief in duration.

• For example:– how members greet one another– how visitors are met at airports– who eats where and with whom– how a phone conversation should proceed

• Rituals are often more important for their expressive, emotional consequences than for more practical reasons

Focus on Management: Herb KelleherFocus on Management: Herb Kelleherof Southwest Airlinesof Southwest Airlines

• Herb Kelleher is cofounder, chairman of the board, and CEO of Southwest Airlines.

• Under Kelleher’s guidance, Southwest has been remarkably successful. It has been profitable every year since 1973 yet maintains the lowest fares. It is the safest airline in the world and ranks number one in the industry for service, on-time performance, and lowest employee turnover rate.

• Fortune magazine named it the most admired airline and best place to work in the United States.

• Kelleher has created a unique culture at Southwest Airlines through a mix of humor, altruism, concern for others, and straight talk.

Focus on Management:Focus on Management:Culture at Walt Disney CompanyCulture at Walt Disney Company

• Employees -- primarily high school and college students -- are critical to Disney’s success.

• Employees must convey the Disney fantasy and create happiness while carrying out repetitive work at low pay.

• Disney is heavily unionized, with 24 unions at Disneyland alone.

• To deal with this, Disney pays close attention to organizational culture.

Focus on Management:Culture atFocus on Management:Culture atWalt Disney Company (Continued)Walt Disney Company (Continued)

• Selection. Disney’s clean-cut and conservative image attracts the kind of employees it wants. A film shows prospective employees the sort of discipline, grooming, and dress code the company demands.

• Socialization. Cast members participate in an ongoing program that continually reinforces Disney’s values, philosophies, and guest service standards.

• Language. Employees are “cast members” and they are “cast” in “roles.” Cast members work “onstage” or “backstage” and they wear “uniforms.”

• Ceremonies. Service recognition awards, peer recognition awards, banquets, and informal recognition parties help boost morale.

Web Wise: Harley Owners Group Web Wise: Harley Owners Group (HOG)(HOG)

A good example of rites of integration is the “meetings” of Harley-Davidson’s HOG (Harley-Owners Group) chapters, where “the bond is metal” as hundreds of Harley riders hit the road together to help out worthy causes of just “share the awareness.”

http://www.hog.com/home.asp

Some Guidelines for Assessing Some Guidelines for Assessing Organizational CultureOrganizational Culture

• Look around -- what do the headquarters and other buildings look like? How are people dressed? How much interaction is there? Who is talking with whom? How does the place “feel”?

• Ask to see newsletters and other internal documents. What values are emphasized? Who are the “heroes” held up for praise? Are parties, celebrations, or other ceremonies mentioned? What sorts of things are discussed?

• Look at annual reports or other communications to those outside the firm. What “face” is being presented to the world?

Guidelines for Assessing Organizational Guidelines for Assessing Organizational Culture (Continued)Culture (Continued)

• Ask, “Can you tell me anything about what the culture is like here? Are there stories that people here tell about X?”

• Ask, “What values are stressed in X? How are they communicated? How are they reinforced?”

• Ask, “Who is looked up to in X?”• See what you can learn about rites and ceremonies in the

organization. What happens when people accomplish something? Are there “rites of passage” such as promotion ceremonies and retirement parties? Are there regular “get-togethers” such as holiday parties, social events, and company softball games?

Guidelines for Assessing Organizational Guidelines for Assessing Organizational Culture (Continued)Culture (Continued)

• Ask, “What sorts of behaviors are expected and rewarded here? What sorts of behaviors are punished?”

• Ask people outside the firm what they think of it.• Check magazines, newspapers, and other sources to

get clues about the culture of the organization.• As appropriate, use quantitative measures of

organizational culture.

Some Guidelines for Assessing Organizational Some Guidelines for Assessing Organizational Culture (Continued) --Culture (Continued) --

Making Sense of the InformationMaking Sense of the Information• Overall, how salient is culture?

– Do leaders mention culture, values, and heroes in their messages?– Do organizational members talk much about culture and its

elements?• What primary themes emerge?• Are responses consistent across people, levels, and units?• How does everything fit together?

– Are valued behaviors rewarded?– Are symbols, stories, heroes, and ceremonies consistent?

SubculturesSubcultures

• Subcultures are distinctive clusters of ideologies, cultural forms, and other practices within the larger culture.

• Subcultures may develop among members of the organization who have common training or duties, similar personal characteristics, frequent interaction, or shared experiences.

• Subcultures may lead to conflict and misunderstanding.• Potential benefits of subcultures include:

– accomplish certain tasks while permitting the primary culture to present a certain “face” to the world

– provide diversity of views, assumptions, and values– serve as seeds for desired change

CounterculturesCountercultures

• Countercultures are subcultures that contradict the dominant culture.

• Countercultures help clarify the bounds between acceptable and unacceptable behavior.

• Countercultures may arise:– to provide a safe haven for the development of innovative ideas.– to encourage the questioning of old, and perhaps outmoded,

values.– to handle severe, shared employee discontents.– because of mergers or acquisitions of firms with differing

cultures.

Four Views of How OrganizationalFour Views of How OrganizationalCulture Affects PerformanceCulture Affects Performance

PERFORMANCE

PARTICULARCULTURAL

CHARACTERISTICS

“HEALTHY”CULTURE

“STRONG”CULTURE

STRATEGICALLYAPPROPRIATE

CULTURE

Theory ZTheory Z

• In his book, Theory Z, William Ouchi presented comparative studies of Japanese and American management techniques.

• He identified three types of organizations:– Typical Japanese (Type J)– Typical American (Type A)– Ideal Hybrid (Type Z)

• The Type Z organization:– Emphasis on group decision making and consensus– Long-term employment– Individual achievement and advancement

Type A. Type J, and Type Z Type A. Type J, and Type Z Organizations (Figure 8-3)Organizations (Figure 8-3)

CULTURAL VALUE U.S. (TYPE A) JAPAN (TYPE J) U.S. (TYPE Z)Commitment toEmployees Short-term employment Lifetime employment Long-term employmentDecision Making Individual Group and consensus Group and consensusResponsibility Individual Collective IndividualEvaluation Rapid and quantitative Slow and qualitative Slow and qualitativeControl Explicit and formal Implicit and informal Implicit and informalCareer paths Narrow Broad Moderately broadConcern for people Narrow Holistic Holistic

In Search of ExcellenceIn Search of Excellence

• The most popular writing on the relationship between organizational culture and effectiveness was presented by Tom Peters and Robert Waterman in In Search of Excellence.

• Based on their observation of 62 successful firms, including Hewlett-Packard, McDonald’s, Disney Productions, Levi Strauss, and Johnson & Johnson, Peters and Waterman concluded that eight key attributes of the organizational culture contributed to their success.

Attributes of Effective Organizational Attributes of Effective Organizational Culture (Peters & Waterman)Culture (Peters & Waterman)

EXCELLENCE

BIAS FORACTION

CLOSENESS TOCUSTOMER

SIMULTANEOUSLOOSE-TIGHTPROPERTIES

SIMPLE FORM,LEAN STAFF STICK TO THE

KNITTING

HANDS-ON,VALUE-DRIVEN

PRODUCTIVITYTHROUGHPEOPLE

AUTONOMY ANDENTREPRENEURSHIP

Reactions to In Search of ExcellenceReactions to In Search of Excellence

• There have been several challenges to the conclusions of In Search of Excellence.

• Excellence was based on financial performance. Were the firms also successful in terms of social responsibility and social responsibility?

• In the years following publication of In Search of Excellence, several of the “excellent” companies suffered financially.

• One study found no significant performance differences between a subset of the Peters and Waterman “excellent” companies and a set of firms representative of the Fortune 1,000 industrials.

• There were also no differences between the two groups of firms in the extent to which they adhered to the Peters and Waterman attributes of “excellent” companies.

Strong CulturesStrong Cultures

• Strong culture is variously defined in terms of:– degree to which values and ideologies are widely shared and clearly

ordered in terms of their relative importance– degree of extremity of values; strength of commitment to values

• It seems simplistic to assume that having a strong culture would necessarily lead to success. There are certainly some strong cultures that are inconsistent with demands of the environment, and a strong culture may discourage change.

• Having a strong culture may not be enough; it also has to be “right”

Strategically Appropriate CultureStrategically Appropriate Culture

• For culture to be effective, it must:– be distinctive– be valuable– be hard to imitate

• Court ruling: “that there may be instances in which the law might recognize a perceived threat to a ‘corporate culture’ that is shown to be palpable (for lack of a better word), distinctive, and advantageous.”

Neurotic Leaders and Their FirmsNeurotic Leaders and Their Firms(Figure 8-4)(Figure 8-4)

EXECUTIVE CULTUREDramatic Needs attention, Dependency needs of

excitement, feels a subordinates complementsense of entitlement “strong leader” tendencies

of chief executive

Suspicious Vigilantly prepared “Fight or flight” culture,to counter attacks including dependency,and personal threats fear of attack, lack of trust

Detached Withdrawn and not Lack of warmth or emotions;involved; lacks conflicts; jockeying for power;interest in present insecurityor future

Neurotic Leaders and Their Firms Neurotic Leaders and Their Firms (Figure 8-4) (Continued)(Figure 8-4) (Continued)

EXECUTIVE CULTURE

Depressed Lacks self-esteem, Lack of initiative; passivity;self-confidence, or negativity; lack of motivation; initiative; fears ignorance of markets; success and tolerates leadership vacuum mediocrity or failure

Compulsive Tends to dominate Rigid, inward directed, insular;organization from subordinates are submissive, top to bottom; uncreative, insecure dogmatic or obstinate;perfectionist

The Bottom Line: Developing an The Bottom Line: Developing an Effective Organizational CultureEffective Organizational Culture

Develop aMission

Statement forthe Firm

Formulate StrategicObjectives toSupport the

Mission

Identify the CoreValues and

Operating PrinciplesThat Support the

Mission and StrategicObjectives

Develop FormalMechanisms forCommunicating

the Elements of theCulture to Employees

Hire NewEmployees Who

Are Compatible withthe Firm’s Culture

Socialize NewEmployees into theCulture of the Firm

Guidelines for Culture ChangeGuidelines for Culture Change

• Understand the current culture.• Change at the right time.• Value diversity.• Understand resistance to culture change.• Recognize the importance of implementation.• Use appropriate cultural forms.• Give it some time.

The Bottom Line: Changing the CultureThe Bottom Line: Changing the Cultureof an Organizationof an Organization

Define the Elements of the

New Culture

Communicate theNew Culture to

Employees

Realign theOrganizational

Policies andPractices toSupport theNew Culture

Use FormalMechanisms toReinforce andTransmit theNew Culture

Replace Managersand Employees

Who Do NotEmbrace theNew Culture

Evaluate the Cultureof the Firm in Relation to theFirm’s Mission

Empowering OthersEmpowering Others

• To foster a creative and productive environment where employees are motivated to achieve exceptional performance, the organization’s culture needs to empower its employees.

• Empowerment seeks to break the cycle of powerlessness in organizations by giving employees a real sense of control.

• Empowerment gives people in organizations the ability to get things done, often at levels of the hierarchy where the power can be most directly and effectively applied.

“I am the people -- the mob -- the crowd -- the mass.

Do you know that all the great work of the world is done through me?”

Carl Sandburg

PowerlessnessPowerlessness

• Learned helplessnessLearned helplessness is a condition that results from the belief that one’s behaviors simply don’t make a difference. Learned helplessness results in feelings of powerlessnesspowerlessness.

• Causes of powerlessness in organizations include:– rules won’t change– bosses are set in their ways– things have always been done a certain way– the assembly line is relentless

Some Consequences of PowerlessnessSome Consequences of Powerlessness

Powerlessness

Depression

BurnoutSusceptibilityto Illness

AcademicFailure

LoweredSelf-Efficacy

Stages of the Empowerment ProcessStages of the Empowerment Process(From Figure 8-5)(From Figure 8-5)

ConditionsLeading

toPowerless-

ness

STAGE 1

EmpoweringLeadershipPractices

STAGE 2

ProvidingSelf-

EfficacyInformation

STAGE 3

EmpoweringExperience

STAGE 4

BehavioralOutcomes

STAGE 5

Some Conditions Leading to Some Conditions Leading to PowerlessnessPowerlessness

• Organizational factors such as bureaucratic climate

• Autocratic supervision• Rewards that aren’t tied to performance• Routine, simplified jobs

Some Empowering Managerial PracticesSome Empowering Managerial Practices

• Let the people who work for you participate in decision making. They will gain a sense of control over their work lives and will be more enthusiastic about implementing decisions.

• Offer control over work processes, such as the ability to stop the assembly line.

• Tie rewards to performance. Employees naturally feel powerless when they see that their actions don’t directly influence things they care about.

• Express confidence, encouragement, and support. Celebrate “small wins” and provide assurance that obstacles can be overcome.

Sources of Self-Efficacy InformationSources of Self-Efficacy Information

• Enactive attainment. People may gain self-efficacy through actual mastery of a task.

• Vicarious experience. People may gain self-efficacy by seeing that others who are similar can master a task.

• Verbal persuasion. Employees may simply be convinced through words of encouragement and feedback that they can master tasks.

• Emotional arousal. Techniques that create emotional support or foster a supportive environment may reduce the emotional arousal that lowers self-efficacy.

Focus on Management: An Empowering Focus on Management: An Empowering Culture at Saturn Corp.Culture at Saturn Corp.

• Saturn employees at plants in Spring Hill, Tennessee and Wilmington, Delaware don’t punch time clocks.

• Labor and management (all called team members) share the same cafeteria.

• The union gave up rigid work rules, and GM (Saturn’s parent corporation) abandoned most of its rigid hierarchy.

• Saturn employees were grouped into small teams and given responsibility for everything from covering absent members to major production decisions.

• A special team, called Saturn Consulting Services, is available to provide consulting and training expertise to organizations wanting to learn from the Saturn experience.

Focus on Management:Focus on Management:Empowerment at Federal ExpressEmpowerment at Federal Express

• The goal of Fred Smith, chairman and president of Federal Express, was to create a “power environment.” He calls empowerment “the most important element in managing an organization.”

• To create a power environment, Fed Ex has a philosophy that fosters respect for human dignity, ingenuity, and potential.

• Fed Ex has a job-secure environment in which people aren’t afraid to take risks, jobs have been redesigned to increase employee power, and there are many opportunities for promotion from within.

• The company also has many programs and processes designed to empower employees. These include an annual employee attitude survey followed by an action phase to deal with concerns, as well as a process for resolving grievances, an awards program, and others.

The Bottom Line: Empowering The Bottom Line: Empowering EmployeesEmployees

Assess theCurrent Job

Responsibilitiesof Employees

Meet withEmployees and

Educate Them Aboutthe Meaning and

Objectives ofEmpowerment

Involve Employeesin Identifying Waysto Enhance Their

Levels of Authorityand Responsibility

Formalize theBoundaries

of Employees’Authority

Provide GeneralGuidelines to

Help EmployeesUse TheirAuthority

Effectively

ProvideManagerial

Guidance andSupport to

HelpEmployees toBe Successful

Create anOrganizationalCulture That

SupportsEmployee

Empowermentas a Core Value

Encouraging Ethical BehaviorEncouraging Ethical Behavior

• Ethics are principles of morality or conduct.• Business ethics are rules about how businesses and

their employees ought to behave.• Business ethics help to guide an organization’s

efforts and offer a foundation for its culture.• The need for ethical behavior in organizations has

been dramatized by some very visible ethical violations, including kickbacks, bribes, and myriad other forms of corruption.

Global Perspectives: Bribes,Global Perspectives: Bribes,Quanxi, and SokaiyaQuanxi, and Sokaiya

• Bribery in overseas dealings has increased sharply in the last two decades; it has been estimated that bribes paid to acquire large contracts in developing countries now exceed 15% of the contracts’ value.

• Outright bribes and payments for quanxi, or “connections,” total $3 billion to $5 billion in China.

• Japan has been rocked by evidence that corporate leaders have made large payments to yakuza, or gangsters, to secure favors and prevent retribution, including to sokaiya, gangsters who obtain information about illicit corporate activities and threaten to disclose it.

Ethics and Firm PerformanceEthics and Firm Performance

• One recent study found that companies that had an “ethical commitment” -- as evidenced by inclusion of ethics codes in the management reports within annual reports -- had much higher levels of performance than did those without such codes.

• Also, some companies with an “ethical” commitment had higher scores on Fortune reputation ratings.

• Committing specific unethical acts may have disastrous consequences for organizations and their officers.

Whistle BlowingWhistle Blowing

• Whistle blowers are individuals who report to the press, government, or other parties outside the firm illegal or unethical activity within the firm.

• Whistle blowers may find their jobs and careers threatened.• About 35 states now have laws protecting whistle blowers.• The federal False Claims Act allows whistle blowers to sue

government wrongdoers in the name of the United States.• Opponents of whistle blower protection argue that it may be

misused by marginal employees, may result in sidestepping of internal resolution mechanisms, and may lead to “dialing- for-dollars” whistle blowing.

Legal Remedies for Unethical BehaviorLegal Remedies for Unethical Behavior

• One of the earliest legal codes for dealing with unethical behavior was the Code of Hammurabi, consisting of 282 rules outlining all aspects of public involvement.

• Governments are increasingly applying criminal laws to companies and company executives.

• The Foreign Corrupt Practices Act of 1977 was enacted in response to disclosures that American companies were paying bribes to high government officials in foreign countries in an attempt to win contracts and sell products and services.

• The 1991 Sentencing Guidelines for Organizations provide tough sanctions, including jail sentences and fines in the millions of dollars, for those convicted of corporate lawbreaking.

Guidelines for Ethical BehaviorGuidelines for Ethical Behavior

• Be honest, direct, and open in your dealings with others.

• Take ethical stands on difficult issues.• Ask whether your actions respect the rights of others.• Ask whether your actions are just.• Ask how you would feel if the act was done to you.• Use your power in ethical ways.• Apply the sunlight test.

“Always do right. This will gratify some people, and astonish the rest.”

Mark Twain

Encouraging Ethical Behavior in OthersEncouraging Ethical Behavior in Others

• Promote, communicate, and reward ethical behavior as a key value.

• Model ethical behavior in public and private.• Speak out against unethical behavior when you see it.• Communicate expectations regarding ethical behavior,

including through a code of ethics.• Make sure that goals don’t push employees into

unethical behavior; unreasonable goals are often the motivation for lying, cheating, and stealing.

Encouraging Ethical Behavior in OthersEncouraging Ethical Behavior in Others(Continued)(Continued)

• Encourage ethics training.• Give employees ways to voice their ethical

questions and concerns, such as through use of ethics hot lines and ombudsmen.

• Set up internal programs to resolve ethical conflicts.

A Short Code of EthicsA Short Code of Ethics

The Bottom Line: Encouraging EthicalThe Bottom Line: Encouraging EthicalEmployee BehaviorEmployee Behavior

Develop aCode ofEthics

CommunicateStandards for

EthicalBehavior toEmployees

ProvideEthics

Training toEmployees

ModelAppropriate

EthicalBehavior forEmployees

Design andImplement

Policies ThatReward Ethical

EmployeeBehavior

Design and Implement

Policies ThatIdentify

UnethicalBehavior

Enforce aZero-Tolerance

Policy forUnethicalEmployeeBehavior

Establish andMaintain an

OrganizationalCulture That

Values EthicalBehavior