Culture

What is culture?

"A system of shared backgrounds, norms, values, or beliefs among members of a group."

Why Does Unethical Behavior Occur?

*1. LAPSES IN INDIVIDUAL ETHICS * individuals learn how to behave ethically as they mature. People learn right from wrong from family members, friends, religious institu- tions, schools, professional associations, and other organizations. *2. RUTHLESS PURSUIT OF SELF-INTEREST * Suppose you will be promoted to vice president of your company if you can secure a $100 million contract, but to get the contract, you must bribe the contractor with $1 million. Your career and future will probably be assured if you perform this act. "What harm will it do?" you ask yourself. Bribery is com- mon; if you don't pay the million dollars, you are certain that someone else will. So what do you do? Research suggests that people who believe they have the most at stake are the ones most likely to act unethically. *3. OUTSIDE PRESSURE* Many studies have found that the likelihood of unethical or criminal behavior increases when people feel outside pressure to perform.

Adaptive Cultures versus Inert Cultures

*Adaptive cultures* are those whose values and norms help an organization build momentum, grow, and change as needed to achieve its goals and be effective. *Inert cultures* are those that lead to values and norms that fail to motivate or inspire employees; they lead to stagnation and often failure over time. *What leads to an adaptive or inert culture?* Researchers have found that organizations with strong adaptive cultures like Whirlpool, GE, Toyota, Google, and IBM in- vest in their employees. They adopt human resource practices that demonstrate their commitment to their employees by, for example, emphasizing the long-term nature of the employment relationship and trying to avoid layoffs. These companies develop long-term career paths for their employees and invest heavily in training and development to make them more valuable to the organization. In adaptive cultures, employees often receive rewards linked directly to their performance and to the performance of the company as a whole. Sometimes, employee stock-ownership plans are developed. In an ESOP, workers as a group are allowed to buy a significant percentage of their company's stock. Workers who are owners of the company have an incentive to develop skills improving their performance levels. Dell employees are able to buy Dell stock at a steep (15 percent) discount and build a sizable stake in the com- pany over time, Southwest Airlines employees own over 20 percent of their company's stock. In a company with an inert culture and poor relationships with its employees, instrumental values of noncooperation, laziness, and output restriction typically develop. Employees accept being told what to do because they are not motivated to perform beyond minimum job requirements. No long-term value established for employees.

Ways to Create an Ethical Culture

*First,* an organization can encourage peo- ple to act ethically by putting in place incentives for ethical behavior and disincentives to punish those who behave unethically. company's top managers—the people who have the ultimate responsibility for ensuring an organization behaves ethically—must be proactive in establishing the company's ethical position. Managers create an ethical culture by making a personal com- mitment to uphold ethical values and transmit them to subordinates. *Second*, organizations can design an organizational structure that reduces the incentives for people to behave unethically. The creation of authority relationships and rules that promote ethical behavior and punish unethical acts, for example, will encourage members to behave in a socially responsible way. The federal government, for example, has a set of uniform standards of conduct for executive branch employees to follow. These standards cover ethical issues like giving and re- ceiving gifts, impartially assigning work to government contractors, and avoiding conflicts of inter- est when it comes to one's financial matters and outside work activities. These regulations cover five million federal workers. *Third,* an organization can develop fair and equitable human resource procedures toward the management of its diverse employees. This signals workers that they can expect to be treated in an ethical way, that they are working for an ethical organization, and that they should behave in a like manner. *Fourth,* organizations can put procedures into place giving subordinates access to upper-level managers to voice their concerns about unethical organizational behaviors they might observe. Ten percent of Fortune 500 companies now employ ethics officers. An ethics of- ficer is a manager responsible for training employees about ethical conduct and investigating claims of unethical behavior. Ethics committees within the organization can then make formal judgments depending on the officer's findings.

Levels of Culture

1. *Shared assumptions* - "Basic beliefs about human beings and translates into basic beliefs about employee's." Deepest level. Hardest to see and hardest to change. People are lazy, selfish, hence employee's are. These assumptions guide managers. Systems are put in place based on these assumptions. Self-reinforcing. If you treat them like children, they'll act like it. 2. *Cultural Values* - Feelings assumptions and beliefs about what is normal, rational, valuable. 3. *Shared Behaviors* - corresponds with organizational norms. 4. *Cultural Symbols* - "words, pictures, gestures, attire - How people dress, talk, greet one another. Where corporate HQ is, logo, layouts." Most superficial level. Easiest to change. Easy to see, but sometimes hard to interpret. You must know the culture (way people dress) some VP's will not hire people if they are under or overdressed. Fit in with culture. GE video and building with talk show host.

Four factors that shape culture

1. The characteristics of its members (particularly the founder) 2. Ethical values 3. Human resource policies 4. Organizational structure.

Organizational culture is shaped by the interaction of four main factors:

1. the *personal and professional characteristics of people within the organization*(founders etc) 2. organizational *ethics* 3. The nature of the *employment relationship* 4. The *design* of its organizational structure Ex: Google - innovative values Walmart - Frugal values.

TERMINAL VALUES

A desired end state or outcome that people seek to achieve. Organizations might adopt any of the following as terminal values, or guiding principles: quality, responsibility, innovativeness, excellence, economy, morality, and profitability. Ex. Southwest Airline's excellent customer service.

INSTRUMENTAL VALUE

A desired mode or type of behavior that people seek to follow. Modes of behavior that organizations advocate include working hard, respecting traditions and authority, being conservative and cautious, being frugal, being creative and courageous, being honest, taking risks, and maintaining high standards. instrumental values help the organization achieve its terminal values. Ex: Value Line had professional workers leave because of the hostile atmosphere produced by "economical values" and work ruled that demeaned employees. Clean desk check, sign in and sign out, etc.

The Employment Relationship

A third factor shaping organizational culture is the nature of the employment relationship a com- pany establishes with its employees via its human resource policies and practices. Human resource practices—such as an organization's hiring, promotion, layoff, and pay and benefits policies—influence employee motivation whether or not they will work hard or buy into its values and norms Promoting from within also helps a company retain its highest- performing employees. If employees see no prospect of promotion from within, they are likely to begin searching for new opportunities elsewhere. As a result, values and norms emerge that en- courage employee turnover, employees come to believe they have a "temporary" relationship with their companies.

Traits of Strong, Adaptive Corporate Cultures

An early, but still influential, attempt is T. J. Peters and R. H. Waterman's account of the values and norms characteristic of successful organizations and their cultures They argue that organizations with strong cultures are characterized by three common value sets. successful companies have values that promote a *bias for action.* The emphasis is on autonomy and entrepreneurship and employees are encouraged to take risks—for example, to create new products—even though there is no way to forecast if these products will be winners. Also, all managers closely monitor the day-to-day operations of the company. They have a "hands-on, value-driven approach," and they do not make strategic decisions isolated in some "ivory tower" remote from the problem. second set of values stems from the *nature of the organization's mission.* A company must stick with what it does best and protect and expand its expertise over core or central activi- ties, such as the technology that drives its new products or services. A company can easily get sidetracked into pursuing activities outside its area of expertise just because they seem to prom- ise a quick return. Managers must cultivate values so that a company "sticks to the knitting," which means pursuing the products it knows best. third set of values bears on *how to operate the organization.* Every company needs to de- sign their organizational structure so employees are motivated to work hard and do their best. And, high performance often results when the values and norms of its culture demonstrate respect and ap- preciation for employees and their efforts. Many U.S. companies, such as 3M, Caterpillar, and Google offer this kind of consideration to their employees, and employees who feel respected and trusted are more likely to make decisions that benefit their organizations. Authority should be decentralized to permit employees' participation, how- ever, it must also be centralized so that manages ensure all groups are working to achieve its mission and that its cultural values, especially its ethical values, are being closely followed.

VALUES

General criteria, standards, or guiding principles that people use to determine which types of behav- iors, events, situations, and out- comes are desirable or undesirable

Jim McCormick's ADE-51 "Bomb Detector"

Jim McCormick, the director of a "bomb detecting device" company based in rural Somerset, England, set out to make money by developing a bomb detector, the ADE-51, that he sold to 20 countries—including Iraq—for $40,000 each. The Iraqi government alone spent $85 million on the handheld detectors that were used at dangerous check- points in Baghdad. The device used a "special electronic card" to detect bombs and was powered by the users' own "kinetic energy." However, after a tipoff, an independent computer labo- ratory that tested the device said the card contained only the common tag used by stores to prevent theft.74 The de- tectors could not possibly detect the bombs that have killed hundreds of people—small wonder that McCormick is facing prosecution for misrepresentation and fraud. Of course, his device has also been banned from sale, and steps are underway to develop strict rules that will govern the inspection of future safety devices aimed to protect the lives of innocent people.

Creating an Ethical Culture

One of the most important effects of ethical rules is to regulate and control the pursuit of unbridled self-interest. To understand why self-interest needs to be regulated, consider the effects of the "tragedy of the commons." The tragedy of the commons holds that it is rational for individuals to wish to maximize their own personal use of "common" land or resources (parks and the open range are examples) because it's free. For example, cattle owners will all want to graze their herds on the open range to promote their individual interests. But, if they all do so, the number of cattle will multiply and the result will be that common land is overgrazed. Now, the bare soil is easily eroded by wind and rain so the land becomes unusable for everyone. In short, the "rational" pursuit of individual self-interest results in a collective disaster. former CEO of Computer Associates, Sanjay Kumar, for example, received over $100 million in illegal payments from backdating stock options and is now serving a long prison sentence. Ethical values in an organi- zation's culture reduce the need for employees to have to continuously evaluate what is right or wrong. By internalizing ethical rules, people are also more productive because they spend less time and effort trying to decide what course of action to take—they know the right thing to do. it gains a good reputation.

Stories, Ceremonies, and Organizational Language

Organizations use several types of ceremonial rites to communicate cultural norms and values. *Rites of passage* mark an individual's entry to, promotion in, and departure from the organization. The socialization programs used by the army and by Dell are rites of passage; so, too, are the ways in which an organization grooms people for promotion or retirement. *Rites of integration*, such as shared announcements of organizational success, office parties, and company cookouts, build and reinforce common bonds between members *Rites of enhancement*, like awards dinners, newspaper releases, and employee promotions, give an organization the opportunity to publicly acknowledge and reward employees' contributions and thereby enhance their commitment to its values The stories and language of an organization are also important media for communicating culture. Stories (fact or fiction) about organizational heroes provide important clues about cultural values and norms. Such stories can reveal the kinds of behaviors that the organiza- tion values and the kinds of practices it frowns on. Studying the stories and language can re- veal the values that guide behavior. At 3M, for example, to build cooperative values and norms, each crossfunctional team is headed by a "product champion," who becomes respon- sible for building cohesive team relationships. Each team is also given a "management spon- sor," Clearly, a team with a champion and a sponsor is more likely to ex- perience success. Because language is the principal medium of communication in organizations, the charac- teristic names or phrases a company uses to frame and describe events provide important clues about norms and values. Many organizations use technical languages to facilitate cooperation between their employees. For example, because many 3M products are flat, such as Scotch tape, Post-It notes, floppy disks, and sandpaper, the quality of "flatness" has come to be closely associated with 3M's terminal values. Flatness is often a winning theme in 3M's corporate lan- guage. Jargon, the shorthand words and phrases used to save time, and sometimes lives, is devel- oped by specialized work groups in the military, sports teams, hospitals, and anywhere else it is needed. The concept of organizational language encompasses not only spoken language but also how people dress, the offices they occupy, the company cars they drive, and how they formally address one another. At Google, Apple, and Microsoft, casual dress is norm, and today many large companies that emphasized conservative business-type clothing such as Ford and IBM also encourage "business casual" clothing and promote "dress-down" days in which employees wear the clothes that make them feel the most comfortable or relaxed. Like socialization practices, organizational language, ceremonies, and stories help people "learn the ropes" and the organization's cultural values. As the following OB Today feature dis- cusses, the founders of both UPS and Walmart used many of these means to socialize their em- ployees to build and strengthen their organizational cultures.

ORGANIZATIONAL ETHICS

The moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and with people outside the organization. controls the way its members behave. Apple strict secrecy rules. Foxconn china keep workers in canteens, dormitories and recreational facilities.Apple canceled contracts with warehouse that hired children labor. *SOCIETAL ETHICS* "The ethics of the country or society in which the organization exists" are important determinants of its ethical values. the moral values formalized in a so- ciety's legal system, in its customs and practices, and in the unwritten values and norms that its people follow in their daily lives. *PROFESSIONAL ETHICS* The moral values that a group of similarly trained people develop to control their behavior Some organiza- tions have many types of professionals working for them—nurses, lawyers, researchers, doctors, and accountants—whose behavior is governed by professional ethics. *INDIVIDUAL ETHICS* The personal moral values that people use to structure their interactions with other people the result of the way people are raised or brought up, for example, they are often learned by exposure to the values of their family, friends, or mem- bership in religious or other social organizations.

ORGANIZATIONAL CULTURE

The set of shared values, beliefs, and norms that influences the way employees think, feel, and behave toward each other and toward people outside the organization. An organization's culture thus consists of the end states that the organization seeks to achieve *(its terminal values)* and the modes of behavior the organization encourages *(its instrumental values)*. This then turns in to the organization's specific norms, rules etc.

How Is an Organization's Culture Transmitted to Its Members?

They learn pivotal values and norms from an organization's formal socialization practices, and from the signs, symbols, stories, rites, ceremonies, and organizational language that develop informally as an organization's culture matures. Socialization and Socialization Tactics To learn an organization's culture, newcomers must obtain information about cultural values, and they do so formally by participating in an organization's socialization program. They do so informally by observing and working with other employees. Dell has built a culture using socialization practices that are very instructive in this respect. The Texas-based computer maker has developed a *lean organizational culture* focused on cutting costs and providing excellent customer service to sell its products. Dell has a "boot camp" to which it sends its employees for training. For four weeks, employees go to a Dell training center outside Austin, Texas, where they are educated about the software Dell installs on its computers At the end of the boot camp, a mini-project is assigned to 6 to 9 people who are asked to solve a real business problem facing Dell; their goal is to find a solution and present their findings to their instructors. During this training, new employees internalize the values and norms that guide Dell employees, especially those relating to excel- lent customer service. Employees form common bonds because they are socialized together in such a focused way. After "boot camp," a week of shadowing is required. The new hires observe experienced Dell employees performing the tasks that will soon become their responsibility. The new recruits absorb information quickly and effectively and in this way, Dell's lean, cost-cutting values are transmitted to employees.

Establish, maintain, & change organizational culture.

a. *What managers & teams pay attention to* (permeates through the entire restaurant) b. *Reactions to incidents & crises* (Costco & Southwest Air not firing people during economic crises) c. *Role modeling, teaching and coaching.* d. *Allocation of rewards & status* e. *Recruitment, selection, promotion, removal.* f. *Organizational rites, ceremonies & stories*

Organizational norms

standards or styles of behavior considered acceptable or typical for a group of people who perform a certain task or job norms are informal rules of conduct that emerge over time to encourage employees to cultivate the work attitudes and behaviors important to an organization. Norms are largely informal, so many of an organization's most crucial values are not writ- ten down. They exist only in the shared norms, beliefs, assumptions, and ways of thinking and behaving that people and groups within an organization use to relate to each other and approach problems

Organizational Structure

the formal system of task and reporting relationships designed to coordinate and mo- tivate employees in the most effective way. redesigning human resource policies and introducing new train- ing, promotion, and incentive systems can alter an organization's culture by changing its instru- mental values and norms. Bimba's culture changed because it altered its organizational structure and empowered self-managed teams. At Bimba, this change eliminated the need for close super- vision. Its owner, Charles Bimba, decided to sell the company to its em- ployees by establishing an employee stock-ownership mechanistic structures are tall, highly centralized, and standardized. In a tall, centralized organization, most employees have relatively little personal authority, and desirable behaviors include being cautious, obeying superiors, and respecting traditions. Thus, a mechanistic structure is likely to give rise to a culture in which predictability and stability are desired end states. organic structures are flat, decentralized, and rely on mutual adjustment between people and groups. flat, decentralized structure, employees enjoy considerable autonomy and have more freedom to control their own activities so desirable instrumental values such as being creative or courageous and taking risks develop. Thus, an organic structure is likely to result in a culture in which innovation and flexibility are desired terminal values.

organizational symbols

used to communicate an organization's cultural val- ues and norms to its members and to others outside the organization.34 In some organizations, for example, the size of peoples' offices, their location on the third floor or the thirty-third floor, the luxury of the furniture in them, and so on symbolize the cultural values an organization holds. Sometimes, the design or architecture of a company's building itself is a symbol of an organization's values.