UGBA105: UGBA105: Organizational BehaviorOrganizational Behavior

Professor Jim LincolnProfessor Jim Lincoln

Week 5: LectureWeek 5: Lecture

Managing Organizational CultureManaging Organizational Culture

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

• This week: Analyzing and managing organizational culture

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Strategy (diversification; innovation)

Input

Environment(Competition, change)

Resources(munificence)

History (age, conditions at founding)

OutputSystems

Unit

Individual

InformalOrganization

(Culture, leadership, networks, politics)

Tasks (technologies, work flows)

People(ability, skills, motivation, biases)

FormalOrganization

(job titles, departments,

reporting hierarchy, IT & HR systems

Where does culture fit in? Where does culture fit in?

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Where did the idea of Where did the idea of “organization culture” come from?“organization culture” come from? (1) The critique of 1950’s corporate culture: (1) The critique of 1950’s corporate culture:

Overconformity and alienationOverconformity and alienation

• William H. Whyte’s The Organization Man

(Doubleday, 1956)

• The Man in the Gray Flannel Suit

(20th Century Fox, 1956)

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(2) Then in the late 70’s came…(2) Then in the late 70’s came…

– William Ouchi: Theory Z (1981)

– Tom Peters and Robert Waterman: In Search of Excellence (1979)

– Richard Pascale and Anthony Athos: The Art of Japanese Management (1983)

– Ezra Vogel: Japan as No. 1 (1985)

– James Abegglen and George Stalk: Kaisha (1985)

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What’s the nature of culture?What’s the nature of culture?“It's invisible but omnipresent. Most know it exists but few can actually define it. Newcomers are perplexed by it. Confronting it head on can be dangerous.”

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

The Berkeleyan, February 16, 2000

“No one can define the HP way. If it weren’t fuzzy, it would be a rule” (HP Vice President)

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What are the components of What are the components of culture?culture?

(1)

(2)

(3)

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Is making Is making $$ a value? a value?

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Southwest Airlines: Southwest Airlines: work and people work and people

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

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

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

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

Herb Kelleher

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Saturn: “Putting people first”Saturn: “Putting people first”

“Saturn was created with one simple idea: to put people first. With the mission to create a different kind of car company — one dedicated to finding new ways for people to work together to design, build and sell cars — Saturn has earned a reputation for superior customer satisfaction.”

Saturn website

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Other examples of core values?Other examples of core values?

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““Respect the divine and respect people”Respect the divine and respect people” “Our goal is to strive toward both the material and spiritual fulfillment of all employees in the Company, and through this successful fulfillment, serve mankind in its progress and prosperity.

We are scientists constantly directing our efforts toward perfecting our technology. But we must not forget that the complete process of living requires devotion to humanity as well as to science, to the emotional as with the rational, and to love equally with reason.

Just as a family unites in a common bond of support and affection, let us all unite in a bond of love and respect.”

What about foreign companies?What about foreign companies?

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Examples of norms and beliefs Examples of norms and beliefs

• HP: “Manage by wandering around”• 3M: “Thou shalt not kill a new product idea”• P&G: “Employees are expected to have facts and data at their

fingertips -- opinions and intuition are frowned upon.”• “(S)alespersons wear dark business suits and white shirts;

that's no longer a strict regulation but most IBM salesmen continue to dress that way”

• Apple: “Do you want to sell sugar water to children for the rest of your life or do you want to change the world?”

• Xerox is a copier company

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So cultures vary in So cultures vary in contentcontent. . They also vary in They also vary in strengthstrength

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

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

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Dimensions of culture strengthDimensions of culture strength

Complacent

“country club” culture

Strong, organization-wide culture

Absence of culture

(anomie)

Subcultures

IntensityS

har

ing

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What about subcultures?What about subcultures?

• Where do they grow?

• What do they do?

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Strong culture companies as Strong culture companies as social institutions social institutions

"IBM, more than any other big company, has institutionalized its beliefs the way a church does. They are expounded in numerous IBM internal publications..”

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

Bob Weinstein, March 5, 2000

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What do the Branch Davidians and Microsoft have in common? Give up? Both organizations are cults.

So says David Arnott, author of Corporate Cults: The Insidious Lure of the All-Consuming Organization (AMACOM).

Both are classified as cults because the members of

these organizations are cut off from the real world and are obsessed with achieving the mission of their leaders.

Bob Weinstein, March 5, 2000

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

--Apple executive

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What are the upsides to a What are the upsides to a strong culture?strong culture?

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Apple’s product-driven cultureApple’s product-driven culture

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

Apple Marketing Manager

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All of which help the bottom lineAll of which help the bottom line

• Lower cost– Fewer formal control systems

• Better quality/productivity/customer service

• Culture as branding– Apple, Southwest, Saturn, Japanese firms

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Culture as competitive strategy Culture as competitive strategy

Culture as a “core competence”

““Sustainable competitive advantage” demands hard-to-Sustainable competitive advantage” demands hard-to-imitate capabilitiesimitate capabilities

“Honda executives say Toyota's aggressive moves don't concern them, arguing that their giant rival will have difficulty emulating Honda's unique culture”

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What are the downsides to a strong culture?What are the downsides to a strong culture?

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Uniformity as SAS Institute Uniformity as SAS Institute (A)n article in Forbes stated, “More than one observer calls James Goodnight’s SAS Institute, Inc., “the Stepford software company” after the movie The Stepford Wives.

In the movie people were almost robotlike in their behavior, apparently under the control of some outside force.

Another article noted “The place can come across as being a bit too perfect, as if working there might mean surrendering some of your personality.”

O’Reilly and Pfeffer: Hidden Value.

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Strong culture low diversity Strong culture low diversity at P&Gat P&G

Few corporate cultures are as dominant as the "Procter Way." "It's such a strong culture, they really want sameness."

"The way women think and the way we do business has some inherently different qualities to it," Ms. Beck says.

"In retrospect, there was a gender aspect to [P&G's culture] that was not intentional, but was very, very real.“

WSJ, 9/9/98

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Tunnel vision at AppleTunnel vision at Apple

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

--Apple executive

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Enron’s “culture of corruption”Enron’s “culture of corruption”The report (by three Enron non-executive directors) confirmed …outsiders' suspicions about how badly the (Enron) was run.

The management’s aims, the directors concluded, were to minimise taxes, maximise apparent profits and…to line their own pockets.

Senator Byron Dorgan (commented): “this is almost a culture of corporate corruption.”

--The Economist, 2/12/02

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Managing & changing culture:Managing & changing culture:

Step I: describe itStep I: describe it

• Be culturally savvy (vs. clueless): pay attention

• Do a culture audit: study the signs of culture– Interview key informants – Be a “fly on the wall”– Study texts– Do value surveys

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Signs of culture: HeroesSigns of culture: Heroes

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CeremoniesCeremonies

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Contests, sports, recreational activitiesContests, sports, recreational activities

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Office partiesOffice parties

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Logos and symbolsLogos and symbols

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Language and jargonLanguage and jargon

• Southwest– People Department– Culture Committee

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

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Peoplesoft’s people-lingoPeoplesoft’s people-lingoEven by the standards of Silicon Valley, PeopleSoft is famous for an aggressively informal and sensitive corporate culture. Its staff routinely worked 70-hour weeks, but for more than the stock options. There was a payoff in PeopleSoft's in-house jokes and clubby code words -- in company lingo, employees are "PeoplePeople," they feast on company-funded "PeopleSnacks," (bought at the “Peoplestore”), which causes them to gain "PeoplePounds." Employees gave birth to "PeopleBabies."

WSJ May 5, 1999

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Chorus from the IBM Rally Song: “Chorus from the IBM Rally Song: “EVER ONWARDEVER ONWARD””

EVER ONWARD – EVER ONWARD That’s the spirit that has brought us fameWe’re big but bigger we will be, We can’t fail for all can seeThat to serve humanity has been our aim!Our products now are known in every zone,Our reputation sparkles like a gem!We’ve fought our way through- and newFields we’re sure to conquer, tooFor the EVER ONWARD IBM

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Step II: Step II: Figure out where it comes fromFigure out where it comes from

• Leader/founder

• History

• Society

• Region/place

• Product

• Industry

• Structure

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Step III: Align/realign the Step III: Align/realign the organizationorganization

– Change the people

– Change the formal organization.

– Change the informal organization

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Aligning people Aligning people

• Selection:– Select for fit (or misfit) to the culture

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

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Selection at MicrosoftSelection at Microsoft

In 1999, the average age of the more than 31,000 Microsoft employees was only 34, and raw intelligence matters more than judgment or experience in determining who gets hired.

Craig Mundie, senior vice president for consumer strategy, described Microsoft "as a company full of a lot of high IQ people who have relatively no experience."

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Selection at AppleSelection at Apple

(John) Sculley came to a company renowned for its exciting and countercultural work environment, where employees often wore T-shirts that proclaimed “working 90 hours a week and loving it.”

Sculley described Apple as “the Ellis Island of American business because it intentionally attracted the dissidents who wouldn’t fit into corporate America.”

Harvard Business School Press

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Selection and socialization at P&GSelection and socialization at P&G

Job candidates must pass a battery of tests measuring aptitude and leadership skills. Once hired, employees are schooled in all things Procter, even attending training seminars known as P&G College.

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(Re)Align the formal organization(Re)Align the formal organization

– Formal structure• From divisional to functional (HP)

• From functional to divisional (Ford)

– HR practice• Long-term employment

• Compensation design

– Accounting systems

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Aligning rewards at CiscoAligning rewards at Cisco

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

O’Reilly and Pfeffer: Hidden Value

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Culture takeawaysCulture takeaways

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

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

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Class business: Wednesday agendaClass business: Wednesday agenda

Mary Kay videoBody Shop case

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

– How did TBS manage its culture? – Did the Body Shop’s business model directly

reflect its core values? Or was it just smart business strategy?