Chapter 13Chapter 13

Organizational CultureOrganizational Culture

Building a ConstructiveBuilding a ConstructiveOrganizational CultureOrganizational Culture

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

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

Many firms are trying to develop cultures that will motivate their Many firms are trying to develop cultures that will motivate their employees and keep them committed to the firm.employees and keep them committed to the firm.

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

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

Functions of Organizational Functions of Organizational CultureCulture

(Figure 13-1)(Figure 13-1)

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 Organizational Culture at

Quad/GraphicsQuad/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.”

• The late Harry Quadracci, who has been called the P. T. Barnum of Printing, described 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 Organizational values are beliefs held are beliefs held by an individual or group that speak to by an individual or group that speak to the actions and ends that the actions and ends that organizations “ought to” or “should” organizations “ought to” or “should” pursue.pursue.

The Importance of ValuesThe Importance of Values

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

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

The HP Way:The HP Way: We have trust and respect for We have trust and respect for

individualsindividuals We focus on a high level of We focus on a high level of

achievement and contributionachievement and contribution We conduct our business with We conduct our business with

uncompromising integrityuncompromising integrity We achieve our common We achieve our common

objectives through teamworkobjectives through teamwork We encourage flexibility and We encourage flexibility and

innovationinnovation

SymbolsSymbols

SymbolsSymbols are things that stand for or are things that stand for or suggest something else.suggest something else.

As examples:As examples: office assignments signal statusoffice assignments signal status dress codes suggest the level of formalitydress codes suggest the level of formality logos can influence customer and logos can influence customer and

employee perceptionsemployee perceptions an action can be symbolic, as in the case an action can be symbolic, as in the case

of the “Lambeau Leap”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 The importance of company symbols to

those outside the firm is seen in a study of those outside the firm is seen in a study of customers’ ratings of 47 firms on things such customers’ ratings of 47 firms on things such as quality and reputation.as quality and reputation.

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

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

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

http://www.landolakes.com/new/ourCompanhttp://www.landolakes.com/new/ourCompany/LandOLakesHistory.cfmy/LandOLakesHistory.cfm

Forms of NarrativesForms of Narratives

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

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

MythsMyths are dramatic, unquestioned narratives are dramatic, unquestioned narratives about imagined events.about imagined events.

SagasSagas describe heroic exploits performed in describe heroic exploits performed in the face of adversity.the face of adversity.

Recurring Story ThemesRecurring Story Themes

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

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

ControlControl. These recognize tensions between . These recognize tensions between members’ desire to control events and their members’ desire to control events and their realization that they can’t always do so. 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 The importance of innovation as a 3M value is supported by a story often repeated throughout the firm concerning transparent tape.often repeated throughout the firm concerning transparent tape.

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

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

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

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

HeroesHeroes

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

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

RitesRites

Rites Rites combine cultural forms into a combine cultural forms into a public performance.public performance.

Some forms of rites include:Some forms of rites include: Rites of PassageRites of Passage (completion of Army (completion of Army

basic training) basic training) Rites of EnhancementRites of Enhancement (awards (awards

ceremony)ceremony) Rites of IntegrationRites of Integration (company (company

Christmas party)Christmas party)

RitualsRituals Rituals Rituals are relatively simple combinations of are relatively simple combinations of

repetitive behaviors, often carried out without much repetitive behaviors, often carried out without much thought, and often brief in duration.thought, and often brief in duration.

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

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

Focus on Management: Herb Focus on Management: Herb KelleherKelleher

of Southwest Airlinesof Southwest Airlines• Herb Kelleher is cofounder, chairman of the

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

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

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

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

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

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

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

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

CeremoniesCeremonies. Service recognition awards, peer recognition awards, . Service recognition awards, peer recognition awards, banquets, and informal recognition parties help boost morale. 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.harley-davidson.com/selector.asp?hog=true

Some Guidelines for Assessing Some Guidelines for Assessing Organizational CultureOrganizational Culture

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

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

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

Guidelines for Assessing Guidelines for Assessing Organizational Culture (Cont.)Organizational Culture (Cont.)

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

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

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

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

Guidelines for Assessing Guidelines for Assessing Organizational Culture Organizational Culture

(Continued)(Continued) Ask, “What sorts of behaviors are expected Ask, “What sorts of behaviors are expected

and rewarded here? What sorts of and rewarded here? What sorts of behaviors are punished?” behaviors are punished?”

Ask people outside the firm what they think Ask people outside the firm what they think of it.of it.

Check magazines, newspapers, and other Check magazines, newspapers, and other sources to get clues about the culture of sources to get clues about the culture of the organization.the organization.

As appropriate, use quantitative measures As appropriate, use quantitative measures of organizational culture.of organizational culture.

Some Guidelines for AssessingSome Guidelines for AssessingOrganizational Culture (Cont.)Organizational Culture (Cont.)

Overall, how salient is culture?Overall, how salient is culture? Do leaders mention culture, values, and heroes in their Do leaders mention culture, values, and heroes in their

messages?messages? Do organizational members talk much about culture and Do organizational members talk much about culture and

its elements?its elements? What primary themes emerge?What primary themes emerge? Are responses consistent across people, levels, and Are responses consistent across people, levels, and

units?units? How does everything fit together?How does everything fit together?

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

SubculturesSubcultures Subcultures are distinctive clusters of ideologies, cultural Subcultures are distinctive clusters of ideologies, cultural

forms, and other practices within the larger culture.forms, and other practices within the larger culture. Subcultures may develop among organization members Subcultures may develop among organization members

with similar training or duties or personal characteristics, with similar training or duties or personal characteristics, frequent interaction, or shared experiences.frequent interaction, or shared experiences.

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

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

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

CounterculturesCountercultures CounterculturesCountercultures are subcultures that are subcultures that

contradict the dominant culture.contradict the dominant culture. Countercultures help clarify the bounds between Countercultures help clarify the bounds between

acceptable and unacceptable behavior.acceptable and unacceptable behavior. Countercultures may arise:Countercultures may arise:

to provide a safe haven for the development of to provide a safe haven for the development of innovative ideas.innovative ideas.

to encourage the questioning of old, and perhaps to encourage the questioning of old, and perhaps outmoded, values.outmoded, values.

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

differing cultures. differing cultures.

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

(Figure 13-2)(Figure 13-2)

PERFORMANCE

PARTICULARCULTURAL

CHARACTERISTICS

“HEALTHY”CULTURE

“STRONG”CULTURE

STRATEGICALLYAPPROPRIATE

CULTURE

Theory ZTheory Z In his book, In his book, Theory ZTheory Z, William Ouchi presented , William Ouchi presented

comparative studies of Japanese and American comparative studies of Japanese and American management techniques.management techniques.

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

The Type Z organization:The Type Z organization: Emphasis on group decision making and consensusEmphasis on group decision making and consensus Long-term employmentLong-term employment Individual achievement and advancementIndividual achievement and advancement

Type A, Type J, and Type Z Type A, Type J, and Type Z Organizations (Figure 13-3)Organizations (Figure 13-3)

CULTURAL VALUE U.S. (TYPE A) JAPAN (TYPE J) U.S. (TYPE Z) Commitment to Employees

Short-term employment

Lifetime employment

Long-term employment

Decision Making Individual Group and consensus Group and consensus Responsibility Individual Collective Individual Evaluation Rapid and quantitative Slow and qualitative Slow and qualitative Control Explicit and formal Implicit and informal Implicit and informal

Career paths Narrow Broad Moderately broad Concern 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 Attributes of Effective Organizational Culture (Peters & Organizational Culture (Peters &

Waterman)Waterman)

EXCELLENCE

BIAS FORACTION

CLOSENESS TOCUSTOMER

SIMULTANEOUSLOOSE-TIGHTPROPERTIES

SIMPLE FORM,LEAN STAFF

STICK TO THEKNITTING

HANDS-ON,VALUE-DRIVEN

PRODUCTIVITYTHROUGHPEOPLE

AUTONOMY ANDENTREPRENEURSHIP

Reactions to In Search of Reactions to In Search of ExcellenceExcellence

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

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

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

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

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

Strong CulturesStrong Cultures Strong culture is variously defined in terms of:Strong culture is variously defined in terms of:

degree to which values and ideologies are widely shared and degree to which values and ideologies are widely shared and clearly ordered in terms of their relative importanceclearly ordered in terms of their relative importance

degree of extremity of values; strength of commitment to valuesdegree of extremity of values; strength of commitment to values It seems simplistic to assume that having a strong culture It seems simplistic to assume that having a strong culture

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

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

Strategically Appropriate CultureStrategically Appropriate Culture

For culture to be effective, it must:For culture to be effective, it must: be distinctivebe distinctive be valuablebe valuable be hard to imitatebe hard to imitate

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

Neurotic Leaders and Their Neurotic Leaders and Their FirmsFirms

(Figure 13-4)(Figure 13-4)EXECUTIVEEXECUTIVE CULTURECULTURE

DramaticDramatic Needs attention,Needs attention, Dependency needs ofDependency needs ofexcitement, feels a excitement, feels a subordinates subordinates

complementcomplement sense of entitlementsense of entitlement “strong leader” “strong leader” tendenciestendencies of chief of chief executiveexecutive

SuspiciousSuspicious Vigilantly preparedVigilantly prepared “Fight or flight” culture,“Fight or flight” culture,to counter attacks to counter attacks including dependency,including dependency,

and personal threatsand personal threats fear of attack, fear of attack, lack of trustlack of trust

DetachedDetached Withdrawn and notWithdrawn and not Lack of warmth or emotions;Lack of warmth or emotions;involved; lacksinvolved; lacks conflicts; conflicts;

jockeying for power;jockeying for power; interest in presentinterest in presentinsecurityinsecurity

or futureor future

Neurotic Leaders and Their FirmsNeurotic Leaders and Their Firms(Figure 13-4) (Cont.)(Figure 13-4) (Cont.)

EXECUTIVEEXECUTIVE CULTURECULTURE

DepressedDepressed Lacks self-esteem,Lacks self-esteem, Lack of initiative; passivity;Lack of initiative; passivity;self-confidence, orself-confidence, or negativity; lack of motivation;negativity; lack of motivation;

initiative; fearsinitiative; fears ignorance of ignorance of markets; markets; success and toleratessuccess and toleratesleadership vacuumleadership vacuum mediocrity or failuremediocrity or failure

CompulsiveCompulsive Tends to dominateTends to dominate Rigid, inward-directed, insular;Rigid, inward-directed, insular;organization fromorganization from subordinates are subordinates are

submissive,submissive, top to bottom; top to bottom; uncreative, uncreative, insecureinsecure dogmatic or obstinate;dogmatic or obstinate;

perfectionistperfectionist

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

Develop aMission

Statement forthe Firm

Develop aMission

Statement forthe Firm

Formulate StrategicObjectives toSupport the

Mission

Formulate StrategicObjectives toSupport the

Mission

Identify the CoreValues and

Operating PrinciplesThat Support the

Mission and StrategicObjectives

Identify the CoreValues and

Operating PrinciplesThat Support the

Mission and StrategicObjectives

Develop FormalMechanisms forCommunicating

the Elements of theCulture to Employees

Develop FormalMechanisms forCommunicating

the Elements of theCulture to Employees

Hire NewEmployees Who

Are Compatible withthe Firm’s Culture

Hire NewEmployees Who

Are Compatible withthe Firm’s Culture

Socialize NewEmployees into theCulture of the Firm

Socialize NewEmployees into theCulture of the Firm

Guidelines for Culture ChangeGuidelines for Culture Change

Understand the current culture.Understand the current culture. Change at the right time.Change at the right time. Value diversity.Value diversity. Understand resistance to culture change.Understand resistance to culture change. Recognize the importance of Recognize the importance of

implementation.implementation. Use appropriate cultural forms.Use appropriate cultural forms. Give it some time.Give it some time.

The Bottom Line: Changing the The Bottom Line: Changing the CultureCulture

of an Organizationof an Organization

Define the Elements of the

New Culture

Define the Elements of the

New Culture

Communicate theNew Culture to

Employees

Communicate theNew Culture to

Employees

Realign theOrganizational

Policies andPractices toSupport theNew Culture

Realign theOrganizational

Policies andPractices toSupport theNew Culture

Use FormalMechanisms toReinforce andTransmit theNew Culture

Use FormalMechanisms toReinforce andTransmit theNew Culture

Replace Managersand Employees

Who Do NotEmbrace theNew Culture

Replace Managersand Employees

Who Do NotEmbrace theNew Culture

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

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