MGT CH 15

How Leaders Create and Maintain Culture

An organization's culture is influenced in part by its industry. Different industries develop different cultures. Organizational culture is also influenced by the national culture in which the organization is embedded. Russian, Chinese, and American companies tend to differ due to the national cultures in which they are embedded. Company founders and leaders also influence a firm's culture. A leader has to define the culture to support the business strategy, consistently behave in ways that demonstrate the culture, explain the culture to employees so they understand why it is critical, and then hold himself or herself and others accountable for maintaining it. It can be very time-consuming to create and maintain an organizational culture. These cultural choices then influence the company's structure, compensation system, customer relations policies, human resource policies, and individual behavior and motivation, which reinforce the culture. Changes in strategy, technology, and organizational structure all trigger a need for changes in employees' attitudes, behaviors, values, and skills. This can require changes in the organization's culture to reinforce these new employee behaviors and values. Organizational culture has many layers. Outer layers of the culture, such as marketing strategies and customer service perceptions, can change quickly. Inner layers, including fundamental values and ideologies, are much slower to change. Organizations can also have different cultures in different areas. Different business units or subgroups of organizations can develop unique cultures supporting their unique business needs. This can actually mean that employees who belong to multiple subgroups simultaneously participate in several different organizational cultures.

Does culture matter?

Research has shown that by actively managing culture, your organization and its employees will be more likely to deliver on strategic objectives over the long run. In particular, culture boosts organizational performance when it (1)is strategically relevant, (2)is strong, and (3)emphasizes innovation and change to adapt to a changing environment. A company's culture should reinforce its business strategy, and can give a firm a competitive advantage. If a business strategy and corporate culture are pulling in two different directions, the culture will win no matter how good the strategy is. Culture is a source of competitive advantage. Creating a culture that supports sharing and helping other employees can have positive performance results. Technology can make a sharing culture possible.

Managing Symbols

Research suggests that organization culture is understood and communicated through the use of stories and other symbolic media. If this is correct, managers interested in changing cultures should attempt to substitute stories and myths that support new cultural values for those that support old ones. They can do so by creating situations that give rise to new stories. Suppose an organization traditionally has held the value "employee opinions are not important." When management meets in this company, the ideas and opinions of lower-level people—when discussed at all—are normally rejected as foolish and irrelevant. The stories that support this cultural value tell about subordinate managers who tried to make a constructive point only to have that point lost in personal attacks from superiors. An upper-level manager interested in creating a new story, one that shows lower-level managers that their ideas are valuable, might ask a subordinate to prepare to lead a discussion in a meeting and follow through by asking the subordinate to take the lead when the topic arises. The subordinate's success in the meeting will become a new story, one that may displace some of the many stories suggesting that the opinions of lower-level managers do not matter.

Taking Advantage of the Existing Culture

To take advantage of an existing cultural system, managers must first be fully aware of the culture's values and what behaviors or actions those values support. Becoming fully aware of an organization's values usually is not easy, however. It involves more than reading a pamphlet about what the company believes in. Managers must develop a deep understanding of how organizational values operate in the firm—an understanding that usually comes only through experience. This understanding, once achieved, can be used to evaluate the performance of others in the firm. Articulating organizational values can be useful in managing others' behaviors. For example, suppose a subordinate in a firm with a strong cultural value of "sticking to its knitting" develops a business strategy that involves moving into a new industry. Rather than attempting to argue that this business strategy is economically flawed or conceptually weak, the manager who understands the corporate culture can point to the company's organizational value: "In this firm, we believe in sticking to our knitting." Senior managers who understand their organization's culture can communicate that understanding to lower-level individuals. Over time, as these lower-level managers begin to understand and accept the firm's culture, they will require less direct supervision. Their understanding of corporate values will guide their decision making.

passive conflict management norms

Avoid addressing conflict

disagreeable conflict management norms

Resolve conflict competitively

Agreeable conflict management norms

Resolve conflict in a cooperative manner

Active conflict management norms

Resolve conflict openly

Espoused values and norms

The preferred values and norms explicitly stated by the organization

Innovation

is the process of creating and doing new things that are introduced into the marketplace as products, processes, or services. Innovation involves every aspect of the organization, from research through development, manufacturing, and marketing. One of the organization's biggest challenges is to bring innovative technology to the needs of the marketplace in the most cost-effective manner possible. Note that innovation does not just involve the technology to create new products: true organizational innovation is pervasive throughout the organization. According to Fortune magazine, the most admired organizations are those that are the most innovative. Those companies are innovative in every way—staffing, strategy, research, and business processes. In all fairness, some authors have suggested that the term, "innovation," has become a cliché from overuse by companies and consultants. As companies create positions, such as chief innovation officer, and consultants sell their services for hundreds of thousands of dollars, some claim that creating new products barely different from old ones or increasing production by small percentages may not deserve to be called innovations. They call for the term to be reserved for major disruptive or radical shifts in products, services, or processes.

radical innovation

sometimes disruptive innovation is a major breakthrough that changes or creates whole industries. Examples include xerography (which was invented by Chester Carlson in 1935 and became the hallmark of Xerox Corporation), steam engines, and the internal combustion engine (which paved the way for today's automobile industry).

culture of inclusion

reflects the extent to which majority members value efforts to increase minority representation, and whether the qualifications and abilities of minority members are questioned. These perceptions may be affected by the firm's diversity actions as well as by the extent to which diversity is salient to a particular individual. An organization's values and culture interact with its demographic composition to influence social interaction, conflict, productivity, and creativity. Organizations that focus on collective interests better capitalize on the potential benefits of demographic diversity. Research has supported the idea that pro-diversity cultures are related to lower turnover among blacks, whites, and Hispanics. Perceiving that the organization values diversity is also related to reduced absenteeism among black employees.

Conflict cultures

Shared norms for managing conflict which reflect different degrees of active versus passive and agreeable versus disagreeable conflict management norms.

Assumptions

Those organizational values that have become so taken for granted over time that they become the core of the company's culture

Collaborative Conflict Cultures

are active and agreeable. Employees actively manage and resolve conflicts cooperatively to find the best solution for all involved parties.

When we say that an organization has a certain type of culture, what do we mean?

Organizational culture is a system of shared values, norms, and assumptions that guides members' attitudes and behaviors and influences how they perceive and react to their environment.

artifacts

physical manifestations of the culture including the myths and stories told about the organization or its founder, awards, ceremonies and rituals, decorations, office space allocations, the dress code, how people address each other, published lists of organizational values, and so on.

How Leaders Can Influence an Organization's Culture

Develop a clear sense of mission and values about what the company should be, and communicate it to employees through what you pay attention to, measure, and control. Select employees who can share, express, and reinforce the desired values in order to help build the desired culture. Furniture retailer IKEA hires employees based on their attitudes, values, and fit with the company culture as much as for their qualifications. Steelmaker Nucor Corporation protects its culture by making cultural compatibility a key issue in acquiring other companies. In visiting companies it is interested in acquiring, Nucor pays careful attention to how plant managers and employees interact. Use daily routines and concrete actions and behaviors to demonstrate and exemplify appropriate values and beliefs. For example, Walmart employees are constantly reminded of the company's cost-control culture. Reinforcing the company's thrift, a Walmart vice president responsible for billions of dollars' worth of business has his visitors sit in mismatched, cast-off lawn chairs likely left behind as free samples during a sales call. Consistently role-model behaviors that reinforce the culture. Walmart CEO Lee Scott and Chief Financial Officer Tom Schoewe each earn millions of dollars a year, but on business trips, the two regularly share a modest hotel room. "Sharing rooms is a very symbolic part of what we do," Scott says. "It's also an equalizer. If I'm asking the district managers to share a room, but I won't share a room with Schoewe, then what am I saying? There are two different standards here? The customer is the most important thing for all of you, but for me I think I'll run a different standard."31 Leaders set the culture, and employees learn what behaviors and attitudes are appropriate from their leaders' behaviors. Make your human resource management procedures and criteria consistent. Communicate your priorities in the way you reward employees. Linking raises and promotions to specific behaviors communicates leaders' priorities. When Lou Gerstner took the lead at IBM, he reinforced his performance focus with new performance appraisal and compensation systems. Nurture traditions and rituals that express, define, and reinforce the culture. Awards and recognition ceremonies, having the CEO address new employees during their orientations, and reciting stories of past company successes can all define and reinforce a firm's culture.

Types of Innovation

Innovation can be radical, systems, or incremental.

New Ventures

New ventures based on innovations require entrepreneurship and good management to work. The profile of the entrepreneur typically includes a need for achievement, a desire to assume responsibility, a willingness to take risks, and a focus on concrete results. Entrepreneurship can occur inside or outside large organizations. Outside entrepreneurship requires all of the complex aspects of the innovation process. Inside entrepreneurship occurs within a system that usually discourages chaotic activity. Large organizations typically do not accept entrepreneurial types of activities. Thus, for a large organization to be innovative and develop new ventures, it must actively encourage entrepreneurial activity within the organization.

Four Levels of Culture

Organization culture has four levels: Artifacts, Assumptions, Espoused Values, and Enacted Values.

Changing the Organization Culture

Organization culture resists change for all the reasons that it is a powerful influence on behavior: it embodies the firm's basic values, it is often taken for granted, and it is typically most effectively communicated through stories or other symbols. When managers attempt to change organization culture, they are attempting to change people's basic assumptions about what is and is not appropriate behavior in the organization. Changing from a traditional organization to a team-based organization is one example of an organization culture change.

Innovation Risks

The most basic is the risk that decisions about new technology or innovation will backfire. As research proceeds, and engineers and scientists continue to develop new ideas or solutions to problems, there is always the possibility that innovations will fail to perform as expected. For this reason, organizations commit considerable resources to testing innovations. A second risk is the possibility that a competitor will make decisions enabling it to get an innovation to the market first. The marketplace has become a breeding ground for continuous innovation. While these criticisms may have some merit, organizations still need to be wary of simply maintaining the status quo and risk getting surpassed by more innovative practices by their competition or by new technological breakthroughs

Corporate Research

The most common means of developing innovation in the traditional organization is through corporate research, or research and development. Corporate research is usually set up to support existing businesses, provide incremental innovations in the organization's businesses, and explore potential new technology bases. It often takes place in a laboratory, either on the site of the main corporate facility or some distance away from normal operations. Corporate researchers are responsible for keeping the company's products and processes technologically advanced. Product life cycles vary a great deal, depending on how fast products become obsolete and whether substitutes for the product are developed. Obviously, if a product becomes obsolete or some other product can be substituted for it, the profits from its sales will decrease. The job of corporate research is to prevent this from happening by keeping the company's products current.

Managing Organizational Culture

The three elements of managing organization culture are (1). taking advantage of the existing culture, (2). teaching the organizational culture, and (3). changing the organization culture.

Enacted values and norms

Values and norms that employees exhibit based on their observations of what actually goes on in the organization If the company has the espoused value that ethics are important, the difference between that espoused value and its enacted values creates a gap that can negatively affect employee attitudes and company performance. Performance management, feedback, and compensation systems all help align espoused and enacted values and norms.

Dominating Conflict Cultures

are active and disagreeable; open confrontations are accepted as well as heated arguments and threats

Systems innovation

creates a new functionality by assembling parts in new ways. For example, the gasoline engine began as a radical innovation and became a systems innovation when it was combined with bicycle and carriage technology to create automobiles.

Organizational socialization

is the process through which employees learn about their organization's culture and pass their knowledge and understanding on to others. Employees are socialized into organizations, just as people are socialized into societies; that is, they come to know over time what is acceptable in the organization and what is not, how to communicate their feelings, and how to interact with others. They learn both through observation and through efforts by managers to communicate this information to them. Research into the process of socialization indicates that for many employees, socialization programs do not necessarily change their values, but instead they make employees more aware of the differences between personal and organization values and help them develop ways to cope with the differences. A variety of organizational mechanisms can affect the socialization of workers in organizations. Probably the most important are the examples that new employees see in the behavior of experienced people. Through observing examples, new employees develop a repertoire of stories they can use to guide their actions. When a decision needs to be made, new employees can ask, "What would my boss do in this situation?" This is not to suggest that formal training, corporate pamphlets, and corporate statements about organization culture are unimportant in the socialization process. However, these factors tend to support the socialization process based on people's close observations of the actions of others.

Socialization

is the process through which individuals become social beings. As studied by psychologists, it is the process through which children learn to become adults in a society—how they learn what is acceptable and polite behavior and what is not, how they learn to communicate, how they learn to interact with others, and so on. In complex societies, the socialization process takes many years.

Culture

the shared values, norms, and assumptions that guide behaviors in an organization. made up of formal and informal practices, artifacts, espoused values and norms, and assumptions.

Using Intranets to Build and Maintain Culture

By building and fostering a sense of community among employees, intranets can help reinforce an organization's culture. Because workgroups develop their own subcultures, intranets can be used to build a common cultural foundation that can help unify employees in different units and locations around common company values. This keeps people connected to the broader organization and also promotes consistency in how employees behave and make decisions. The key issue for organizations is not about using the latest information technologies, but about leveraging the right technologies for creating and maintaining a culture of trust, openness, relationship building, and information sharing. Each intranet design reflects a different type of organizational culture, and in turn reinforces the firm's culture by controlling the flow of information and establishing norms of behavior. Following are some of the ways intranets can both reflect and influence organizational culture: 1. Their scope. Intranets with a narrow scope can reinforce a culture of secrecy and information hoarding. Intranets that contain information on a variety of topics and links to other useful sites such as human resources, company and industry news, blogs, wikis, interviews with company leaders, and performance indicators reflect a culture of openness and teamwork. 2. Their openness to employee feedback and contributions. Intranets that contain "like it or not?" feedback tools and features that allow employees to contribute reflect a participative culture that values employee contributions. A more centralized, heavily edited and filtered site reflects a culture in which information flows less freely and employee contributions are less valued. 3. The frequency with which they are updated. Intranets that are rarely updated are not likely to influence the company's culture and can reflect a culture that does not value employee contributions, has poor internal communication, and has poor attention to detail. Lucent updates its intranet multiple times a day if appropriate. It also posts two weekly feature articles that reinforce the strategic vision and positioning of the company to entice employees to visit multiple times each week. 4. The number of intranets. This refers to whether there is just one company intranet, or several, each serving different groups of employees. For example, some organizations have one intranet for the sales force and another, completely different looking one, for the R&D group. 5. The use of symbols, stories, and ceremonies. Because these express a company's culture, intranets can convey such information via news of events affecting the organization, messages from CEOs, and announcements of employees' awards programs of importance to the organization.

Passive-Aggressive Conflict Cultures

are both passive and disagreeable. Rather than dealing openly with conflict, this culture develops norms to handle it via passive resistance such as refusing to participate in conflict-related discussions, giving the silent treatment, withholding information, or withdrawing from work and from interactions with coworkers. Hospitals often have passive-aggressive conflict cultures due to the many layers of authority and strong bureaucracy.

Avoidant Conflict Cultures

are passive and agreeable. This type of culture strives to preserve order and control and/or to maintain harmony and interpersonal relationships. Typical behaviors include accommodating or giving in to the other's point of view, changing the subject, or evading open discussion of the conflict issue.

Incremental innovation

continues the technical improvement and extends the applications of radical and systems innovations. There are many more incremental innovations than there are radical and systems innovations. In fact, several incremental innovations are often necessary to make radical and systems innovations work properly. Incremental innovations force organizations to continuously improve their products and keep abreast or ahead of the competition.

Building and Maintaining Culture with Remote Employees

Because they spend little time face-to-face with coworkers, it is harder for virtual employees to become familiar with an organization's culture. It is also harder for the organization to reinforce its cultural values among remote employees. This has important implications for employee identification with the organization and for the management of employee behaviors. Because they are not able to see and experience the culture firsthand, acclimating teleworking employees to a corporate culture can be challenging. Business research firm Dun & Bradstreet's formal telework program requires employees to put in at least three months in an office before working remotely. This office time lets managers assess employees' strengths, weaknesses, and work habits in person. Employees also experience the company's unique corporate culture and work ethic firsthand. Working in the same place also allows team members to get to know one another before embarking on an email and phone-based relationship

The Difficulty of Change

Changing a firm's culture is a long and difficult process. A primary problem is that upper-level managers, no matter how dedicated they are to implementing some new cultural value, may sometimes inadvertently revert to old patterns of behavior. This happens, for example, when a manager dedicated to implementing the value that lower-level employees' ideas are important vehemently attacks a subordinate's ideas. This mistake generates a story that supports old values and beliefs. After such an incident, lower-level managers may believe that although the boss seems to want employee input and ideas, in fact, nothing could be further from the truth. No matter what the boss says or how consistent his or her behavior is in the future, some credibility has been lost, and cultural change has been made more difficult.

intrapreneurship

Entrepreneurial activity that takes place within the context of a large organization is most effective when it is a part of everyday life in the organization and occurs throughout the organization rather than in the research and development department alone.

The Stability of Change

The processes of changing a firm's culture start with a need for change and move through a transition period in which efforts are made to adopt new values and beliefs. In the long run, a firm that successfully changes its culture will find that the new values and beliefs are just as stable and influential as the old ones. Value systems tend to be self-reinforcing. Once they are in place, changing them requires an enormous effort. Thus, if a firm can change its culture from performance-reducing to performance-enhancing, the new values are likely to remain in place for a long time. Again, these issues are revisited in our discussions of organizational change and change management in Chapter 16.

Strong Cultures

clarify appropriate behavior, are widely shared, and are internally consistent. Strong cultures can enhance organizational performance in two ways. First, they improve performance by energizing employees—appealing to their higher ideals and values, and rallying them around a set of meaningful, unified goals. Because they are engaging, these cultures stimulate employee commitment and effort. Second, strong cultures improve performance by coordinating employee behavior. Shared values and norms focus employees' attention on company priorities and goals that then guide their behavior and decision making without impinging on employee autonomy like formal control systems do. This makes strong cultures particularly helpful for dealing with changing environments. A strong positive culture promotes employee commitment to the firm's value system and helps to align employee and company values. In a strong negative culture, which means that employees have shared norms and values that are not consistent with what the organization wants or values, employee reactions to the plant manager's arrival would be: "Heads up! The plant manager is coming onto the production floor—look busy!" Because strong cultures create stable and consistent employee values and behaviors, they are slow to change. Culture is like the glue that holds things together in an organization—if it is too weak, it does not effectively guide employees. Research has found that long-term financial performance is highest for organizations with an adaptive culture receptive to change and innovation When a culture is strong, it pushes employees to engage in behaviors that reinforce the firm's values and culture, whether good or bad. Strong ethical cultures are known to influence employees' ethical behavior and commitment through formal and informal organizational structures and systems. An overall ethical environment that includes leadership, communication, reward systems, and a formal ethical behavior code of conduct decreases employees' unethical conduct. Culture matters to organizations because it influences employees' discretionary behaviors, including what they do in situations when the rules and expectations are unclear or when there is no direct supervision. This is critical because organizations cannot create procedures or policies covering every possible situation. One of the most important sources of employee motivation is the firm's culture. Understanding your corporate culture can create a personal competitive advantage by reducing the chances of your offending superiors or making a social blunder. Phrasing your ideas in ways consistent with actual company values and with the way top management views the world also increases your influence.