MBA Bharathiar University First year Paper 1

Principles of Management and Organisational Behaviour

LESSON

20 ORGANISATIONAL CULTURE

CONTENTS 20.0 Aims and Objectives 20.1 Introduction 20.2 Culture Defined 20.3 Basic Elements of Culture 20.4 Characteristics of Organizational Culture 20.5 Creating and Sustaining Culture 20.5.1 How Organizational Culture Begins? 20.5.2 Sustaining a Culture 20.6 How Employees Learn Culture? 20.7 Successful Organizational Culture 20.7.1 Corporate Culture and Organizational Success 20.7.2 Changing Organizational Culture 20.8 Let us Sum up 20.9 Lesson-end Activity 20.10 Keywords 20.11 Questions for Discussion 20.12 Suggested Readings

20.0 AIMS AND OBJECTIVES After studying this lesson you will be able to: (i)

understand the relation between organisational culture and corporate context.

(ii)

describe contribution of organisational culture to the management of change.

(iii) analyse elements of organisational culture. (iv) review cultural types in organisations.

20.1 INTRODUCTION When we talk about culture, we are typically referring to the pattern of development reflected in a society's system of knowledge, ideology, values, laws, social norms and day-to-day rituals. Accordingly, culture varies from one society to another. The word "culture" has been derived metaphorically from the idea of "cultivation" the process of 326

tilling and developing land. Thus, culture can be considered as a constellation of factors that are learned through our interaction with the environment.

Organisational Culture

20.2 CULTURE DEFINED The organizational culture is a system of shared beliefs and attitudes that develop within an organization and guides the behaviour of its members. There are clear-cut guidelines as to how employees are to behave generally within organization. The employees need to learn how the particular enterprise does things. A few definitions on the term organizational culture are given below:According to Larry Senn, The corporate culture “consists of the norms, values and unwritten rules of conduct of an organization as well as management styles, priorities, beliefs and inter-personal behaviour that prevail. Together they create a climate that influences how well people communicate, plan and make decisions.” Joanne Martin defines cultures in organization in the following words “As individuals come into contact with organizations, they come into contact with dress norms … the organization’s formal rules and procedures, its formal codes of behaviour rituals …. And so on. These elements are some of the manifestations of organizational culture”. Edgar Schein defines organizational culture as “a pattern of basic assumptions – invented, discovered or developed by a given group as it learns to cope with its problems of external adaptation and internal integration – that has worked well enough to be considered valuable and, therefore to be taught to new members as the correct way to perceive, think and fell in relation to those problems”. According to Hersey, Blanchard and Johnson “ Organizational culture is itself a complex phenomenon with many interpretations … organizational culture is shared basic assumptions, or beliefs, about how to cope with the two fundamental problems that all groups and organizations face : survival and adaptation to the external environment and the internal integration and coordination of organizational functioning”. From the above definitions, culture may be considered as the general pattern of behaviour, shared beliefs, and values that organizational members have in common. Culture involves the learning and transmitting of knowledge, beliefs and patterns of behaviour over a period of time. Culture can be inferred from what people say, do, and think within an organizational setting. It often sets tight tone for the organization and establishes implied rules for the way people should behave. It is important to recognize that culture is learned and helps people in their efforts to interact and communicate with others in the society. When placed in a culture where values and beliefs are different, some people have a great deal of difficulty in adjusting.

20.3 BASIC ELEMENTS OF CULTURE From the above definitions it is clear that culture is how an organization has learned to deal with its environment. It is a complex mixture of assumptions, behaviours, myths and other ideas that fit together to define what it means to work in a particular organization. Edgar H Schein suggests that culture exists on three levels: artefacts, espoused values and underlying assumptions. The Figure 20.1 explains the three levels:

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Principles of Management and Organisational Behaviour

ARTIFACTS

ESPOUSED VALUES

BASIC UNDERLYING ASSUMPTIONS

Visible organizational structures and processes (hard to decipher)

Strategies, goals, philosophies (espoused justification)

Unconscious, taken-for-granted beliefs, perceptions, thoughts, and feelings (ultimate source of values)

Source: Edgar H Schein, “Organizational Culture and Leadership” (2nd Edition) Jossey-Bass Publishers, San Francisco (1992) page 17.

Figure 20.1: Schein’s Levels of Culture 1.

Artefacts: According to Schein, Artefacts are the first level of organizational culture. Artefacts are the things that come together to define a culture and reveal what the culture is about to those who pay attention to them. They include products, services, and even behaviour patterns of the members of an organization. Schein has defined Artefacts as things that “one sees, hears, and feels when one encounters a new group with an unfamiliar culture”.

2.

Espoused Values: Espoused values are the second level of organizational culture. Values are things worth doing, or the reasons for doing what we do. Values are the answers to the “why” questions. For examples, why are you reading this book? To know more about Organization Behaviour. Why is that Important? To be a better HR Manager. Why do you need more money? To fulfil my wife’s desire to own a farm house. Such questions go on and on, until you reach the point where you no longer want something for the sake of something else. At this point, we have arrived at a value. Corporations have values, such as size, profitability, or making a quality product. Espoused values are the reasons that we give for doing what we do. Schein argues that most organizational cultures can trace their espoused values back to the founders of the culture.

3.

Basic Assumptions: The third level of organizational culture, are the beliefs that organization members take for granted. Culture prescribes “the right way to do things” at an organization, often through unspoken assumptions.

The influence of the leader on Organization Culture: Managers, especially top managers, create the climate for the enterprise. Their values influence the direction of the firm. Although the tern “value” is used differently, a value can be defined as a fairly permanent belief about what is appropriate and what is not that guides the actions and behaviour of employees in fulfilling the organization’s aims. Values can be thought of as forming an ideology that permeates every day decisions. In many successful companies, value-driven corporate leaders serve as role models, set the standards for performance, motivate employees, make the company special, and are a symbol to the external environment. 328

Organisational Culture

How to Create A Value-based Organization Hatim Tyabji was the founding chairman and CEO of VeriFone, Inc. from 1986 to 1988 when he established Saraide, a highly respected company in the telecommunication industry. At the national meeting of the Academy of Management in Toronto in 2000, Mr. Tyabji shared his experience in creating an organization based on ethical values. On one occasion, it was brought to his attention that manager with excellent performance figures was engaged in malfeasance. Revealing this information, however, would have had a very negative effect on the company’s share price. Instead of hiding this information until the next quarterly reporting, Mr Tyabji after checking carefully the facts, approached the manager who was in charge of a foreign operation, and fired him on the spot. Impressed by this decision, the associates worked especially hard so that the quarterly projection was still achieved. What effect did Mr Tyabji’s decision communicated to the employees of the company? This is a company with a culture in which performance, no matter how impressive, cannot be achieved by unethical behaviour. Source: David A. Whither and Andre L. Delbecq, “Saraide’s Chairman Hatim Tyabji on creating and sustaining a value-based organizational culture”, Academy of Management Executive, November 2000. Pages 32 – 40.

20.4 CHARACTERISTICS OF ORGANIZATIONAL CULTURE Organizational culture has a number of important characteristics. Fred Luthans has given six characteristics which is given below:

Organizational Culture: Important Characteristics Observed behavioral regularities. When organizational participants interact with one another, they use common language, terminology, and rituals related to deference and demeanor. 2. Norms. Standards of behavior exist, including guidelines on how much work to do, which in many organizations come down to “Do not do too much; do not do too little.” 3. Dominant values. There are major values that the organization advocated and expects the participants to share. Typical examples are high product quality, low absenteeism, and high efficiency. 4. Philosophy. There are policies that set forth the organization’s beliefs about how employees and/or customers are to be treated. 5. Rules. There are strict guidelines related to getting along in the organization. Newcomers must learn those “ropes” in order to be accepted as full-fledged members of the group. 6. Organizational climate. This is an overall “feeling” that is conveyed by the physical layout, the way participants interact, and the way members of the organization conduct themselves with customers or other outsiders. Source: Fred Luthans “Organizational Behavior” (9th Eedition) McGraw-Hill International Edition, Boston (2002) page 123. 1.

Check Your Progress 1

1.

Define culture?

2.

What are the basic elements of culture?

3.

Explain the influence of a leader on organisation culture.

4.

Explain the characteristics of Organisational Culture.

20.5 CREATING AND SUSTAINING CULTURE 20.5.1 How Organizational Culture Begins? An organization’s current customs, traditions and general way of doing things are largely due to what it has done before and the degree of success it has had with those endeavours.

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The original source of an organization’s culture usually reflects the vision or mission of the organization’s founders. Because the founders had the original idea, they also may have biases on how to carry out the idea. Their focus might be on aggressiveness or it might be on treating employees as family. The small size of most new organizations helps the founders instil their vision in all organizational members. Organizational cultures can develop in a number of different ways, these steps are explained below:1.

A single person (founder) has an idea for a new enterprise: Some organizational cultures may be the direct, or at least, indirect, result of actions taken by the founders. The founders of an organization traditionally have a major impact on that organization’s early culture. They have a vision of what the organization should be.

2.

Founders’ creation of a core group: The founder brings in one or more other key people and creates a core group that shares a common vision with the founder. The founder’s only hire and keep employees who think and feel the way they do. These employees who form the core group believe that the idea is a good one, is worth the investment of time, money and energy. Sometimes founders create weak cultures, and if the organization is to survive, a new top manager must be installed who will sow the seeds for the necessary strong culture.

3.

Indoctrinate and Socialize: The founding core group begins to act in concert to create an organization by raising funds, obtaining patents, incorporating, locating land, building infrastructure and so on. The core group indoctrinate and socialize employees to their way of thinking and feeling.

4.

Build a Common History: The founders’ own behaviour acts as a role model that encourages employees to identify with them and thereby internalize their beliefs, values, and assumptions. At this point, others are brought into the organization, and a common history begins to be built. When the organization succeeds, the founder’s vision becomes seen as a primary determinant of that success. At this point, the founders’ entire personalities become embedded in the culture of the organization. Most of today’s successful organizations follow the vision of their founders.

20.5.2 Sustaining a Culture Once a culture is in place, there are practices within the organization that act to maintain it by giving employees a set of similar experiences. Sustaining a culture depends on three forces. These forces are explained below: 1.

Selection: The goal of the selection process is to identify and hire individuals who could make the organization successful through their services. Therefore candidates who believe in the values of the organizational have to be selected. Thus, the selection process attempt to ensure a proper match in the hiring of people who have values essentially consistent with those of the organization or at least a good portion of those values cherished by the organization. In this way, the selection process sustains an organization’s culture by selecting those individuals who will fit into the organizations core values.

2.

Top Management: Top management have a important role to play in sustaining the organization’s culture. It is the top management who establish norms that filter down through the organization. It is they through their conduct both implicit and explicit that shows what is desirable. They do this through pay raises, promotions and other rewards.

3.

Socialization: Socialization is the process that adapts employees to the organization’s culture. Organization wants to help new employees adapt to its culture. The adaptation is done through the process of “socialization”. Socialization is made up of three stages: (a)

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The Pre-arrival Stage: This stage encompasses all the learning that occurs before a new member joins the organization. The socialization process covers both the work to be done and the organization. The pre-arrival stage is the

period of learning in the socialization process that occurs before a new employee joins the organization. For example, when students join a business school to pursue their MBA degree, they are socialized to have attitudes and behaviours that business firms want. This is so because the success depends on the degree to which the student has correctly anticipated the expectations and desires of those in the business school. (b)

Encounter Stage: In this stage of the socialization process, the new employee sees what the organization is really like and confronts the possibility that expectations and reality may diverge. In expectations prove to have been more or less accurate, the encounter stage merely provides a reaffirmation of the perceptions gained during the pre-arrival stage. Those employees who fail to learn the essential or pivotal role behaviours risk being labelled as “rebels” and face the risk of expulsion. This further contributes to sustaining the culture.

(c)

Metamorphosis Stage: Metamorphosis stage is the stage in the socialization process in which a new employee changes and adjusts to the job, work group and organization. In this stage relatively long-lasting changes take place. The employee masters the skill required for his or her job, successfully performs his or her new roles, and makes the adjustments to his or her work group’s values and norms. The metamorphosis stage completes the socialization process. The new employee internalizes the norms of the organization and his work groups and understands and accepts the norms of the organization and his work group. The success of this stage have a positive impact on the new employee’s productivity and his commitment to the organization.

Degree to which employees are encouraged to innovative and to take risk

Degree to which employees are expected to exhibit precision, analysis, and attention to detail

Attention to Detail

Organisational Culture

Degree to which managers focus on results or outcomes rather than on how these outcomes are achieved.

High … Low Innovation and Risk-taking

Low…….High

Degree to which organizational decisions and actions emphasize maintaining the status quo

Outcome orientation

ORGANIZATIONAL CULTURE

Low ….High

People orientation

Stability

Low …… High Low ….High

Aggressiveness

Low ….High

Degree to which employees are aggressive and competitive rather than cooperative

Team Orientation

Low ….. High

Degree to which management decisions take into account the effects on people in the organization

Degree to which work is organized around teams rather than individuals

Note: - Strong versus Weak Cultures • Strong Cultures are cultures in which the key values are deeply held and widely shared and have a greater influence on employees than do weak cultures. • The more that employee accept the organization’s key values and the greater their commitment to those values, the stronger the culture is. • Whether an organization’s culture is strong, weak or somewhere in between depends on factors such as (i) the size of the organization (ii) how long it has been around (iii) how much turnover there has been among employees, and (iv) the intensity with which the culture was originated.

Source: Stephen P Robbins and Mary Coulter “Management” (seventh edition) Prentice Hall of India Private Limited, New Delhi (2003) Page 59.

Figure 20.2: Dimensions of Organizational Culture

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20.6 HOW EMPLOYEES LEARN CULTURE? Culture is transmitted to employees in a number of ways. The most significant are stories, rituals, symbols, and language. Stories: Organizational “stories” typically contain a narrative of significant events or people including such things as the organization’s founders, rules breaking, reactions to past mistakes, and so forth. Lavinson and Rosenthal suggest that stories and myths about organization’s heroes are powerful tools to reinforce cultural values throughout the organization and specially in orienting new employees. These stories provide prime examples that people can learn from. Stories and myths are often filtered through a “cultural network” and remind employees as to “why we do things in a certain way”. To help employees learn the culture, organizational stories anchor the present in the past, provide explanations and legitimacy for current practices, and exemplify what is important to the organization. Rituals and Ceremonies: Corporate rituals are repetitive sequences of activates that express and reinforce the values of the organization, what goals are most important, and which people are important and which ones are superfluous. Ceremonies and rituals reflect such activities that are enacted repeatedly on important occasions. Members of the organization who have achieved success are recognized and rewarded on such occasions. For example, awards given to employees on “founders’ day”, Gold medals given to students on graduation day are reflections of culture of that institution. Material / Cultural Symbols: Symbols communicate organizational culture by unspoken messages. When you walk into different businesses, do you get a “feel” for the place – formal, casual, fun, serious, and so forth? These feelings you get demonstrate the power of material symbols in creating an organization’s personality. Material artefacts created by an organization also speak of its cultural orientation and make a statement about the company. These material symbols convey to employees who is important, the degree of equality desired by top management and the kind of behaviour that are expected and appropriate. Examples: - assigned parking space for senior executives in the company premises, large offices given to senior managers, luxury automobiles given to senior or successful officers of the organization. Organizational Heroes: Top Management and prominent leaders of the organization become the role models and a personification of an organization’s culture. Their behaviour and example become a reflection of the organization’s philosophy and helps to mould the behaviour of organizational members. Language: - Many organizations and units within organizations use language as a way to identify members of a culture. By learning this language, members attest to their acceptance of the culture and their willingness to help to preserve it. Managerial Decisions affected by culture: For any organization to grow and prosper, it is important that its mission and its philosophy be respected and adhered to by all members of the organization. Here managers play a significant role in building the culture of the organization. The manager plays continuous attention to maintaining the established standards and send clear signals to all the employees as to what is expected of them. Cultural consistency and strong adherence to cultural values become easy when the mangers themselves play strong role models. Good managers are able to support and reinforce an existing strong culture by being strong role models and by handling situations that may result into cultural deviations. The figure below shows the major areas of a manager’s job are influenced by culture. How the Environment Affects Managers: The environment affects managers

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(i)

Through the degree of environmental uncertainty

(ii)

Through the various stakeholders relationships.

1.

Environmental Uncertainty:-The environmental uncertainty is the degree of change and complexity in an organization’s environment.

Organisational Culture

Degree of Change: - If the components in an organization’s environment changes to a minimum, we call it a stable environment. A stable environment is characterises by l No new technological breakthroughs by current competitors. l No new competitors l Little activity by pressure groups to influence the organization We call it a dynamic environment, if the components in an organization’s environment change frequently. Degree of Complexity: - The degree of complexity refers to the number of components in an organization’s environment and the extent of the knowledge that the organization has about those components. The figure below explains the environmental uncertainty. DEGREE OF CHANGE

SIMPLE

DEGREE OF COMPLEXITY

STABLE

DYNAMIC

CELL 1 Stable and predictable environment

CELL 2 Dynamic and unpredictable environment

Few components in environment

Few components in environment

Components are somewhat similar and remain basically the same

Components are somewhat similar but are in continual process of change Minimal need for sophisticated knowledge of components

Minimal need for sophisticated knowledge of components

CELL 4 Dynamic and unpredictable environment Many components in environment

CELL 3 Stable and predictable environment Many components in environment COMPLEX

Components are not similar to one another and remain basically the same

Components are not similar to one another and are in continual process of change

High need for sophisticated High need for sophisticated knowledge of knowledge of components components

Source: Stephen P Robbins and Mary Coulter "Management" (7th Edition) Prentice Hall of India Private Limited, New Delhi (2003) Page 73.

Figure 20.3: Environmental Uncertainty

Managers try to minimize uncertainty because it is a threat to organization’s effectiveness. Given the choice, managers would prefer to operate in an environment which is simple and stable. However, managers rarely have full control over that choice. Stakeholders Relationship: - Stakeholders are any constituencies in the organization’s external environment that are affected by the organization’s decisions and actions. The figure below identifies the various organizational stakeholders. Employees

Customers

Unions

Shareholders

Social and Political Action Groups

ORGANIZATION

Competitors

Communities Trade and Industry Associations

Suppliers Media

S

S

h

P R bbi

dM

Governments

C

l

“M

” (7th Edi i

)P

i

H ll f I di

Source: Stephen P Robbins and Mary Coulter “Management” (7th Edition) Prentice Hall of India Private Limited, New Delhi (2003) Page 75.

Figure 20.4: Various Organizational Stakeholders

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Principles of Management and Organisational Behaviour

The few of the organizational stakeholders are explained below: l

Stockholders: The shareholders are the persons who provide the funds to the business enterprise. The business should be managed efficiently so as to provide a fair return on the investments of the shareholders. They should be provided with comprehensive reports giving full information about its working. In the same way, the shareholders should also meet the obligations of the business enterprise by supporting the efforts of the business so that continuous development of the enterprise is possible. They should encourage the business to follow a dynamic policy and to plough back profit for the purpose of development and expansion.

l

Customers: Customers’ satisfaction is the ultimate aim of all economic activity. This involves more than the offer of products at the lowest possible price. Adulteration of goods, poor quality, failure to give fair service, misleading advertising etc. are some of the violation by business towards its customers. A business enterprise has positive responsibility towards the consumers of its products. It has to provide quality goods to customers at the right time, right place, and at right price.

l

Employees: Employees should be treated as human beings and their cooperation must be achieved for the realization of the business enterprises goals. The responsibilities of the business enterprises to its employees are – the security of employment with fair wages, equal opportunity for growth and development within the organization, fair promotions, employee welfare, social security and profit sharing. Further, the business enterprise should also provide the employee welfare, social security and profit sharing. Further, the business enterprise should also provide the employees scope for improvement of educational qualification, training and upgrading of skills so that they may get a chance to improve their prospects. Workers are poor and hence they cannot afford to remain without job for a long period. Most of them are ignorant and require advice and guidance from persons who have the genuine interest of the workers at heart. Each worker by himself is unable to fight against the injustice done to him. As such all the economists have recognized the right of the workers to organize themselves. As a group they can settle terms with the employers in a better way. In other words, the workers have been granted the right to bargain collectively. With a view to self-protection and self -help labour has organized itself under employee associations and unions. The associations formed by workers have come to be known as “Trade Unions”.

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l

Suppliers: An important force in the environment of a business enterprise is the suppliers who supply the enterprise with inputs like raw materials and components. The importance of reliable source of supply is indispensable for the smooth functioning of a business enterprise. It is very risky to depend on a single supplier because the problems with that supplier are bound to seriously affect the business organization. Therefore, multiple sources of supply are often helpful. A business organization should deal with the suppliers judiciously. It should try for fair terms and conditions regarding price, quality, delivery of goods and payment. The dealings with the suppliers should be based on integrity and courtesy. The business must create healthy relations with its suppliers.

l

Competitors: A firm’s competitors include not only the other firms that market the same or similar products but also those who compete for the discretionary income of the consumers. Thus, competition among the different business organization should be such that the customer is helped to satisfy his desires and is better of buying the enterprises goods and services.

l

Government: The business enterprise should take responsibility for providing amenities in the locality where it is located. It should pay the taxes to the government

regularly and honestly, so that the funds may be spent by the State for welfare activities. It should take measures to avoid bad effluent, fouling the air and condition of slum and congestion.

Organisational Culture

The business enterprise should extend full support to the Government in implementing its policies and programmes relating to the solving of the national problems such as the unemployment problem, food problem, wide disparity in income levels of the different sections of the society, regional imbalance in the economic development etc. It should also help the Government in the equitable distribution of commodities which are in scarce supply, in controlling prices and inflationary trend in the country and in the implementation of various development schemes of the Government. The business enterprise should realize that it cannot function without the support of the Government. If there is any difference between itself and the Government the same should be settled by mutual exchange of ideas and suggestions and not by restoring to non-cooperation with the Government. From the above discussion, it is clear that the interest of the various Stakeholders interacting with the business enterprise is not identical. They are inflicting conflicting. The owners want highest dividend, the financial institutions want the highest interest, the workers the highest possible wages, the Government wants the highest possible revenue and the consumers want the lowest possible price. It is, therefore, the duty of the business enterprise to bring about a compromise among the interests of various groups. The enterprise is an arbiter among the various groups. It should endeavour to provide a fair dividend to the shareholders, fair pay and working conditions to the workers, good quality products at reasonable prices to the customers. Stakeholders have a stake in or are significantly influenced by what the organization does. In turn, these groups can influence that organization. There are many reasons why managers should care about managing stakeholders’ relationships. Some of the reasons are given below:1.

It can lead to other organizational outcomes such as improved predictability of environmental changes, more successful innovations, greater degree of trust among stakeholders, and greater organizational flexibility to reduce the impact of change.

2.

An organization depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services) and organizations should consider their interests as they make decisions and take actions. Steps in Managing External Stakeholders Relationships:- There are four steps in managing external stakeholder relationships. 1. Identifying who the organization’s stakeholders are. Those external groups that are to influence organizational decisions and be influenced by organizational decisions are stakeholders. 2. Determine that particular interests or concerns these stakeholders might have. For example – l Customers – product quality. l Shareholders – financial issues l Employees – safety/working conditions. 3. Decide how critical each stakeholder is to the organization’s decisions and actions. For example, some stakeholders are more critical to the organization’s decisions and actions than others. 4. Determine what specific approach they should use to manage the external stakeholder relationship. The more critical the stakeholder, the more uncertain the environment.

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20.7 SUCCESSFUL ORGANIZATIONAL CULTURE Research conducted by D.R Denison and A.K Mishra, show that organizational culture is related to organizational success. Organizational culture is a framework that guides day-to-day behaviour and decision making for employees and directs their actions toward completion of organizational goals. Culture is what gives birth to and defines the organizational goals. Culture must be aligned with the other parts of organizational actions, such as planning, organizing, leading, and controlling; indeed, if culture is not aligned with these tasks, then the organization is in for difficult times. The figure below shows that culture based on adaptability, involvement, a clear mission and consistency can help companies achieve higher sales growth, return on assets, profits, quality and employee satisfaction.

ADAPTABILITY

INVOLVEMENT CONSISTENCY

CLEAR MISSION

Source: D.R Denison and A.K Mishra, "Toward a Theory of Organizational Culture and Effectiveness", Organization Science Vol. 6 (1995) Pages 204 - 223.

Figure 20.5: Successful Organizational Cultures

Note:l

Adaptability: is the ability to notice and respond to changes in the organization’s environment.

l

Involvement: In cultures that promote higher levels of employment in decision-making employees feel a greater sense of ownership and responsibility.

l

Clear Mission: Mission is a company’s purpose or reason for existing. In organizational cultures in which there is a clear organizational vision, the organization’s strategic purpose and direction are apparent to everyone in the company.

l

Consistency: In consistent organizational cultures, the company actively defines and teaches organizational values, beliefs and attitudes. Consistent organizational cultures are also called strong cultures, because the core beliefs and widely shared and strongly held.

Organizational cultures are important to a firm’s success for several reasons.

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1.

They give an organizational identity to employees – a defining vision of what the organization represents. When managers are uncertain about their business environments, the vision helps guide the discussions, decisions, and behaviour of the people in the company.

2.

Organizational culture are an important source of stability and continuity to the organization, which provide a sense of security to its members.

3.

Knowledge of the organizational culture helps newer employees interpret what goes on inside the organization, by providing an important context for events that would otherwise seem confusing.

4.

Culture helps to stimulate employee enthusiasm for their tasks by recognizing and rewarding high-producing and creative individuals, thereby identifying them as role models to emulate.

Organisational Culture

Corporate Insights

Culture built around several values Jack Welch, former CEO of General Electric, led that company to an outstanding level of success for more than twenty years. He has been referred to as the “most successful Chief Executive ever”, by many business magazines and corporate observers. He achieved his results by defining, emphasizing, and rewarding a corporate culture built around several valued principles: Removing boundaries that inhibit the flow of ideas. Increasing speed and simplicity by “delayering” the organization. Setting “stretch” goals for employees and rewarding their achievement. Following a “six sigma” program for improving quality and performance. Emphasizing the importance of customer satisfaction. Creating a learning culture that stresses high morals, open exchange of ideas, and high levels of contributions from form each employee. Source: Robert Slater, “Jack “Jack Welch and the GE McGraw New York (1998). - Robert Slater, Welch andway”, the GE way”,Hill, McGraw Hill New York (1998). Source:

Check Your Progress 2

1. How does organisational culture begun? 2. How can we sustain culture? 3. How do employees learn culture?

20.7.1 Corporate Culture and Organizational Success Artefacts, espoused values, and basic assumptions form the basics of understanding organizational culture. Organizational culture is a framework that guides day-to-day behaviour of employees. Culture is what gives birth to and defines the organizational goals. John Kotter and James Heskett, researchers of Harvard Business School, tried to determine which factors make some organizational cultures more successful than others. Fig –20.6

Kotter and Heskett’s Two Levels of Culture Culture in an Organization

Shared Values Invisible

Important concerns and goals that are shared by most of the people in a group, that tend to shape group behavior and that often persist over time even with the changes in group memberships. Examples: - The managers care about customers; executives like long-term debt.

Harder to Change

Group Behavior Norms Visible

Common or pervasive ways of acting that are found in a group and that persist because group members tend to behave in ways that teach these practices (as well as their shared values) to new members, rewarding those that fit in and sanctioning those that do not

Easier to Change

Source: John P Kotter and James L Heskett, "Corporate Culture and Performance" The Free Press, New York (1992) page 5.

Figure 20.6: Corporate Culture and Performance

Kotter ahd Heskett identified two levels of culture. 1. Visible Level: are the behaviour patterns and styles of the employees. 2. Invisible Level: are the shared values and assumptions that are held over a long period of time. Kotter and Heskett, argue that changes in the visible level (i.e., in behaviour patterns and styles) overtime can lead to change in the invisible level (i.e., more deeply held beliefs). The study had four main conclusions:

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1.

Corporate culture can have a significant impact on a firm’s long-term economic performance. 2. Corporate culture will probably be an even more important factor in determining the success or failure of firms in the next decade. 3. Corporate cultures that inhibit strong long-term financial performance are not rare; they develop easily, even in firms that are full of reasonable and intelligent people. 4. Although tough to change, corporate cultures can be made more performance enhancing. The Harvard Researchers, Kotter and Heskett discovered in their research that some corporate cultures are good at adapting to changes and preserving the performance of the organization, while others are not. They distinguished between “adaptive” and “unadaptive” corporate cultures, which is summarized in the figure below:-

CORE VALUES

COMMON BEHAVIOR

ADAPTIVE CORPORATE CULUTRE Most managers care deeply about customers, stockholders, and employees. They also strongly value people and processes that can create useful change (e.g., leadership up and down the management hierarchy) Managers pay close attention to all their constituencies, especially customers, and initiate change when needed to serve their legitimate interests, even if that entails taking some risks

UN-ADAPTIVE CORPORATE CULTURE Most managers care mainly about themselves, their immediate work group or some product (or technology) associated with that work group. They value the orderly and risk-reducing management process much more highly than leadership initiatives Managers tend to behave somewhat insularly, politically and bureaucratically. As a result, they do not change their strategies quickly to adjust to or take advantages of changes in their business environment

Figure 20.7: Adaptive vs Un-adaptive Corporate Cultures

20.7.2 Changing Organizational Culture If organizations are to consciously create and manage their cultures they must be able to take their employees into consideration. There are problems that managers face when they go about the business of changing organizational culture. Changing organizational culture takes patience, vigilance, and a focus on changing the parts of an organizational culture that managers can control: 1.

2.

Behaviours: one way of changing a corporate culture is to use behavioural addition or behavioural substitution to establish new patterns of behaviour among employees. (a)

Behavioural Addition: Behavioural Addition is the process of having managers and employees perform new behaviours that are central to and symbolic of the new organizational culture that a company wants to create.

(b)

Behavioural Substitution: Behavioural substitution is the process of having managers and employees perform new behaviours central to the “new” organizational culture in place of behaviours that were central; to the “old” organizational culture.

Visible Artefacts: Another way in which managers can begin to change corporate culture is to change visible artefacts of their old culture. Visible artefacts are visible signs of an organization’s culture, such as the office design and layout, company dress codes, and company benefits and perks like stock options, personal parking spaces, etc. These need to change keeping the new corporate culture in mind.

20.8 LET US SUM UP

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Corporate cultures are very difficult to change. Consequently, there is no guarantee that behavioursubstitution, behavioural addition or changing visible artefacts will change a company’s organizational culture. Clearly, an open display of top management commitment and support for the new values and beliefs is critically important to enable employees to change.

20.9 LESSON END ACTIVITY

Organisational Culture

Cultural systems may be considered as products of action as well as the conditioning elements of future action. Do You think this is true? Develop an argument to justify your answer.

20.10 KEYWORDS Organisational culture Stakeholders Rituals Symbols

20.11 QUESTIONS FOR DISCUSSION 1.

What is organizational culture?

2.

Describe the seven dimensions of organizational culture.

3.

What is the source of an organization’s culture?

4.

Describe how stories, rituals, material symbols, and language shape an organization’s culture.

5.

Who are stakeholders? What are the reasons for managers to care about managing their relationship?

6.

Describe the four different ways for managers to manage stakeholders’ relationships.

7.

What are the major elements of organizational culture, and where do they come from?

8.

What are the major elements of organizational culture, and where do they come from?

9.

Explain in detail Kottar and Heskette study on organizational culture.

10. How can managers change organizational culture?

20.12 SUGGESTED READINGS Argyris C. (1962) “Interpersonal competence and Organisational Effectiveness”, Irwin, Homewood III Ashburner L. (1990) “Impact of Technological and Organizational Change”, Personnel Review U.K. Bernard M. Bass and Edward C. Ryterband (1979) “Organizational Psychology”, (2nd Ed) Allyn and Bacon, Boston. Boss R.W. (1989) “Organizational development in Health care”, Addison-Wesley Mass; Reading. French W. and Bell C. (1978) “Organisation development”, (2nd Edition) Prentice Hall Englewood Cliffs N.J. George J.M. (1990) “Personality Effect, and Behaviour in Groups”, Journal of Applied Psychology, vol. 75. Marvin D. Dunnette (1976) “Handbook of Industrial and Organizational Psychology”, Rand McNally, Chicago.

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Marvin E. Shaw (1981)“Group Dynamics: The Psychology of Small Group Behavior”, (3rd Edition) McGraw-Hill New, York. Osborne J.E., (1992) “Turning to Teambuilding to Tackle Tough Times”, Supervisory Management May 1992. Howe M.A. (1989) “Using Imagery to Facilitate Organisational Development and Change”, Group and Organization studies. Varney G. H (1989) “Building Productive Teams”, Jossey-Bass, San Francisco. William G. Dyer (1989) “Team Building: A Microcosm of the Past, Present, and Future of O.D”, Academy of Management OD Newsletter, winter 1989. P.G.. Aquinas, “Organizational Behaviour”, Excel Books, New Delhi.

Case – I

Gossip on Dolly!!

Dolly D’Souza was an IV semester MBA student from Aloysius Institute of Management, Mangalore. She was specializing in Marketing and had to do a summer project as part fulfilment of the MBA degree programme. Mr. Rohan Vas is Marketing Manager of Mangalore Chemicals Limited (MCL). Her seniors had told her many stories of Mr. Rohan and the way he was intimately involved with girl students. The grapevine also indicated that Rohan sought relationship with two girls last year and ditched them after sexually abusing them. The manager of the accounting department who is Dolly’s neighbour had warned her to be careful of Mr. Rohan. Dolly was extremely apprehensive to meet Mr. Rohan after hearing all these rumours about him. But she had to get the project done and therefore decided that she will go and discuss the project with him. On the first day she met Mr. Rohan, he was extremely warm and kind to her. He explained things out to her and urged her to come to him any time with questions, problems or concerns. It was three months now and Dolly had found that Mr. Rohan was an extremely warm and kind human being. She was going to thank him for all the help he had extended to her during her summer project. Dolly was pleasantly surprised when Mr. Rohan offered her a job as marketing executive in the company. Dolly was delighted at the offer as she had not got any offer of employment and that her MBA programme was over and she was awaiting results. Dolly thanked Mr. Rohan as she wanted to be independent and not depend on her parents for money moreover and she could save some thing for her marriage expense instead of being a burden on her parents. She was extremely thankful to Mr. Rohan and warmly shook hands with him. Mr. Rohan was extremely warm and told Dolly that he was impressed by her credentials. He also promised to make her permanent within 6 months and an unequalled career progress. Dolly decided that she would keep her relationship with Mr. Rohan strictly businesslike. She would work very hard at her marketing assignments, but would keep the relationship cool and impersonal. After about 4 months at the job, Dolly had become more and more comfortable with her relationship with Mr. Rohan. Mr. Rohan had now started asking her to accompany him for lunch. On several occasions in the past, she had refused but today she had reluctantly agreed. As they were having lunch, Mr. Rohan hinted at the prospects of making her a permanent staff of the company “within 2 months”. Dolly was delighted and Mr. Rohan used this opportunity to touch her on her at inappropriate way. Though Dolly attempted to deal with that by keeping her physical distance and pushing him mildly when he came too close, she was afraid of telling him directly as she could loose the chance of getting conformed on the job. Mr. Rohan had invited her to accompany him on a two-day trip for a presentation of a marketing plan at the ooty branch. Though she wanted to refuse, it was an important 340

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assignment and there were others in the department who would be too willing to go if she dropped out. Though Dolly had her concerns, she decided to go feeling that if Mr. Rohan acted funny, she would point blank tell him that she was totally uninterested in any kind of intimate relationship.

Organisational Culture

After coming back to Mangalore Dolly was shattered as there were rumours in the company that she had an “affair” with Rohan and was projected as a very cheap girl who will go any extent to get a permanent job. Questions: 1.

Are the cultural factors responsible for putting Dolly in the situation that she finds herself in today?

2.

Given the Indian culture what do you predict will happen next. Why?

Case II

Cross-Cultural Management

Bill Evans, Managing Director of English Foods Ltd., Cardiff was very unhappy after he received a call from the Home Office. He was asked to explain about the discrimination, racial intolerance and harassment meted out to his Indian employees. It all started about 3 weeks ago when an Indian employee Mira’s bangle got caught in the machine and cut her wrist. The safety committee then decided that no one will be allowed to bangles, finger rings, earrings, or necklaces at work. The order was passed with immediate effect. Almost all girls Asian, African and English – wore bangles. After the order, the English and African girls had taken the bangles off. However, most of the Asian girls continued to ware bangles even after the ban. The supervisor in the food processing unit, Mr. Jack Straw tried to explain to one of his employees Sheila why she should remove her bangles. The conversation went on as follows:Jack: - Sheila, you must have heard about the accident last week when Mira’s bangle got caught in the machine and she cut her wrist. I am afraid that you will have to take off your bangles. Sheila: - I am sorry, but I cannot take off my bangles; I am a Hindu wife; the bangles are important to my religion. Jack:-There is an order and I am afraid that you will have to take it off. Sheila: - I will have to ask my husband. Jack: - Come on, Sheila, don’t make a fuss. I had to shout at Saroja, and Elena to take off their bangles. Sheila could see that Jack was very angry, so almost in tears, she removed the bangles. That evening, the conversation among the Indian girls was about bangles. Girls from Africa thought that it was a lot of fuss about nothing. However, many of the girls were very worried. After going home Sheila spoke to her husband. Raman Singh was a close friend of the regional race relations employment advisor, Mr. Major and he decided to explain things out to him. Mr Singh explained that “the bangles are not only a mark of marriage but also of the esteem in which a wife is held by her husband. The more the bangles and the greater their value, the higher her esteem and the greater her social standing. The most sentimental part of the whole problem is that women remove their bangle if they are widowed and some fear that the removal of bangles might lead to their husbands, death”. Contd...

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The next week was an anxious time for Sheila. She wore a single bangle every day. Sometimes the supervisor made her take it off. Sheila was sure that she would have to lose her job, and her husband supported her even though her income was needed. After several weeks of consultations with workers unions and supervisors, Mr. Evens decided that the ban on the wearing of bangles and dangling exterior jewellery would have to be enforced. It was however decided to permit the wearing of wedding rings and nose rings. Soon after the ban was imposed, Sheila and her husband attended a meeting held by an organization called the Asian Advisory Committee (AAC). This organization was set up to help members of the Asian Community. Within a few days Sheila’s connection with Mr. Major and the AAC helped her to present her case before the Home Office alleging discrimination regarding race, intolerance and harassment. Mr. Bill Evens, Managing Director, English Foods Ltd was summoned before the select committee of the Home Office where he had lot of explanation to do. Questions:

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1.

If you were Bill Evens, how would you have handled this case?

2.

Do you feel that English Foods Ltd discriminated against its Indian workers? Give reasons.

3.

If you were the MD of English Foods Ltd., how would you explain the matter to the Home Office?