Culture
Change and Competitive Effectiveness
Communication in organizations
INTRODUCTION
The most difficult part of organizational change[1]at a organization transitioning to competition is the subtle, difficult-to-manage and difficult-to-measure culture change that must take place.
The purpose of this module is to deepen our knowledge and perspective about the phenomena called culture change. We will learn how to identify culture and its characteristics. We will consider where culture comes from, as well as how to use culture to achieve organization and project/programme purpose unit goals in a competitive organization.
Monopolies of any kind - government, project/programme purpose, NGO –
tend to be status quo in their outlook and methods of operation. They tend to be guided by rules and regulations. They are risk-adverse and control-oriented. They are influenced by politics more than by
impersonal market forces. More often than not
the leaders of the organization seek control, not input.
Innovation and risk-taking tends not to be rewarded and failure is usually
penalized. Employees generally receive orders
and direction, not the information necessary to take initiative and autonomous actions. The framework of personnel policies and procedures
in such organizations contain incentives that reward discipline and predictability rather
than initiative and innovation.
Major structural changes of monopoly organizations rarely
succeed unless accompanied by equally major changes in the culture of the organization.
This module addresses the key difficulties organizations experience as they try to move their culture away from a “command and control” past towards a future that values innovation, creativity and initiative. The right type of culture can be very precisely described – managing to create that type of culture is a very difficult art. And, not all managers will be up to the challenge.
Many research studies – some of the best are provided
as required reading for you, or listed in the bibliography as optional readings – are
available to help us. Managing cultural change
represents a very difficult task; but one that is very satisfying when successfully
accomplished.
TABLE OF CONTENTS
I. Introduction----------------------------------------------------------------------------- 1
II. Culture Defined-------------------------------------------------------------------------- 3
III. Evolution of Culture--------------------------------------------------------------------- 4
A. Where does the culture of a organization come from?----------------------------------- 4
B. Does culture matter and what role does it play in a organization?------------------------ 4
IV. Dominant Cultures and Subcultures------------------------------------------------------ 5
V. Two Models of project/programme purpose Culture-------------------------------------------------------- 6
A. Monopoly Culture------------------------------------------------------------------- 6
B. Competitive Culture----------------------------------------------------------------- 6
VI. Making organization Culture Practical------------------------------------------------------ 7
A. Decision-making--------------------------------------------------------------------- 7
B. Personnel policies: Incentives and Rewards------------------------------------------ 7
C. Personnel policies: Selection and Socialization--------------------------------------- 7
VII. How Do Employees Learn The Culture of a organization?---------------------------------- 9
A. Stories------------------------------------------------------------------------------ 9
B. Rituals------------------------------------------------------------------------------- 9
C. Material symbols-------------------------------------------------------------------- 9
D. Language---------------------------------------------------------------------------- 9
VIII. Assignments----------------------------------------------------------------------------- 10
A. Assignment 1: The ENEL Culture--------------------------------------------------- 10
B. Assignment 2: The culture of The Department or Work Unit------------------------- 10
C. Assignment 3 Suggestions for How ENEL Culture Might Change------------------- 11
D. Assignment 4 A Team Based Case Study------------------------------------------ 11
IX.
Bibliography-----------------------------------------------------------------------------
13
X.
Glossary---------------------------------------------------------------------------------
15
XI.
Interview
(Q&A)------------------------------------------------------------------------
16
Pages with references to ENEL, IMU, etc.: 10, 11, 12
To a large extent, our understanding of culture[2]
is based on methodical anthropology research[3]
among isolated groups and remote societies. A
classic study of this genre is Margaret Mead’s[4],
Coming of Age in Samoa. Many of the
ideas associated with project/programme purpose culture, were originally developed by anthropologists, and
later adapted to contemporary institutions, including project/programme purpose organizations. While there is divergence regarding a definition of
culture, we will use as a working definition for this module the following formulation:
Culture
represents a common set of values (“shared meanings”), shared by members of a
population such as a continent (e.g. European culture), a country (e.g., Italy versus
France), a region (North versus South), a organization, a project/programme purpose unit or a profession (e.g.,
engineers versus scientists). Culture consists
of customs, traditions, norms and routines. Culture
changes with the times but the speed at which the culture of different institutions change
varies widely. Organizations (e.g., project/programme purpose
organizations) develop their own culture. The
culture of a organization consists of elements that are valued and practiced.
As you can see from the definition of culture adopted for
this module, it is quite possible to think of the culture of a country, or a geographic
region, or even of a family. Of course, our
focus is on the culture of project/programme purpose organizations[5]
as they transition from a monopoly to a competitive organization. We will present two culture models (monopoly and
competitive organization).
Among the questions we will ask about cultural change are: Where does the culture of a organization come from? How can people learn what the culture of a organization
actually is? What is the impact of culture on
the organization’s bottom line profit? Who can
do something about changing the culture of a organization?
Why should managers be concerned about organizational
culture[6]? The readings and exercises in this module will give
you a foundation to help provide the answers to these types of questions.
III. EVOLUTION OF CULTURE
A. Question 1: Where does the culture of a organization come from?
This is a very good question; the answer is neither simple
nor intuitive. But like so many things in an
established organization to find the answer to this question we need to go back to the
organization’s early days where the culture has its roots. The founders and top leadership of a organization
usually have a tremendous influence on the main characteristics of the organization’s
culture. Obviously, as a organization ages the Founders will depart, but they often leave a
powerful legacy. Many of the contributions and influences of the early Founders will be
preserved. For example, the culture of the Microsoft organization[7],
founded only in 1982, closely reflects the characteristics of Bill
Gates[8],
its Founder[9]. Microsoft as a organization promotes itself as highly
intelligent, innovative, competent and competitive, the same characteristics ascribed to
Bill Gates himself. We might add to this list
aggressiveness and arrogance. We have no doubt
that at some point in the future – long after Bill Gates is no longer with the
organization – the impact he is having right now will still be evident.
State owned organizations as a monopoly organization, develop a
culture characteristic of that kind of organization without much regard to what the personal
preferences or leadership qualities of the early leaders were. They probably had little real opportunity to exert
a strong personal stamp on the organization. Obviously
there are exceptions to this.
However, in a organization reinventing itself, the
individuals in top leadership positions who are guiding the transition of the organization from
monopoly to competition will have a profound and long lasting impact on the culture of the
new organization. Let’s explore how this
works. One of the most powerful things that
leaders do is project a vision for the organization – where it has been and where it is
going. It is the vision that will propel
people to action and provide a rallying point for managers and employees alike.
B. Question 2: Does Culture Matter and What Roles Does it Play in
a organization?
Yes, culture does matter; it matters a lot. Organizational culture plays several important roles. We can illustrate these roles with several examples.
E. First, culture unites (brings together) employees by providing a sense of identity with the organization.
F. Second, culture enables organizations to differentiate themselves from one another.
G. Third, culture often generates commitment, superceding personal interests.
H. Fourth, culture sets organization norms, rules and standards. Thereby, culture enables employees to function in an organization, by teaching them how to behave.
I. Fifth, culture becomes especially important in a competitive organization. In such a organization, the hierarchy is flat and decision-making is moved to the project/programme purpose units and departments. In this context, culture provides the guiding light towards achievement of goals and objectives.
IV. DOMINANT CULTURES AND SUBCULTURES
All
organizations have a dominant, pervasive culture, but it can also have many subcultures.
Although the organization represents the dominant culture which will permeate the entire
organization, it has many project/programme purpose units that have cultural characteristics of their own. This is what we call a subculture. For example,
each regional office and plant will share the organization’s core values. But in addition
they develop a culture which characterizes only that office and is influenced by factors
in that particular project/programme purpose and in that particular region.
When the values of a sub-culture are in conflict with the dominant culture
it will often cause general organizational and project/programme purpose difficulties which are the
responsibility of top management to correct.
Culture establishes norms, rules, and standards of behavior for all employees. When the environment changes the old culture may become obsolete and may become an obstacle in the face of change.
V. TWO MODELS OF project/programme purpose CULTURE
Below we will indicate in a graphic way the cultural change that must occur if an organization is to successfully transition from a monopoly past to a future of competition.
To summarize: Because
a monopoly functions in an environment without competition and a captive beneficiary base, it
tends to be risk-adverse and process-oriented. Employees obey rules and regulations, which
are very detailed. The monopoly is interested
in stability and self-maintenance. All key decisions tend to be made at the very top, for
the entire organization. Monopolies tend to be autocratic. Personnel policies tend to reward
obedience and discipline. By contrast, a competitive organization functions, if it is to
survive and thrive must do things very differently. It
needs to be innovative and performance-oriented. It decentralizes authority and
responsibility. The structure of the
organization tends to be quite flat and flexible. Managers at all levels, as well as front
line employees are given real authority and responsibility and are expected to be in touch
with beneficiaries and know their needs. Personnel
policies – and more importantly, personnel practices – will reward performance
more than seniority. A competitive organization
is beneficiary and shareholder focused.
Figure
1 is a graphical presentation of many of the key differences between the monopoly project/programme purpose
culture and the competitive project/programme purpose culture
A. Monopoly Culture
B. Competitive Culture
No competition
Competition
Risk adverse
Risk-taking
Process oriented
Results and profit oriented
Stability and predictability
Dynamism and diversity
Centralized
Decentralized
Autocratic
Participative
Controlled communication
Open communication
Inaccessible leaders
Accessible leaders
Rule and regulations
Results and bottom-line
Seniority
Performance
Political Stakeholders
Shareholder Stakeholders
Paternalism
Empowerment/Trust
As we can see, in a competitive organization, the structures
become flat and flexible, enabling employees to participate in the decision-making
process. Many such organizations are based on teamwork, be it a team within a
department/project/programme purpose unit or a cross-functional team. Personnel
policies are structured to reward performance, initiative, and teamwork. It often includes
stock options and profit sharing. The physical setting reflects the democratic structures
of the organization, with similar facilities for all employees, from the top managers to each
contributor. Naturally, in a competitive
organization, employees represent the spirit of the competitive organization.
VI. MAKING organization CULTURE PRACTICAL
In this unit we will illustrative some of the practical
implications of a competitive project/programme purpose culture. If
culture did not have practical consequences it would make for a very academic discussion. But organizational culture does impact on
real people and has real consequences. We will
consider three important arenas in which competitive project/programme purpose culture can make a major
difference.
A. Decision-making
Unlike in monopoly cultures, in flat, competitive organizations top executives set the main goals and directives for the organization. They quickly seek to move the decision-making to the lower ranks of the organization, where project/programme purpose units can themselves decide how to best achieve organization goals. Further, many such organizations adopt the participative decision-making approach, which brings frontline employees centrally into the process. The great advantage is that employees who are in direct contact with the beneficiaries can now have an important input in the decision-making process. It is the responsibility of management to decide the degree of autonomy they will confer on their frontline employees.
B. Personnel Policies: Incentives and
Rewards
Personnel
policies are structured to promote and propagate culture models. Especially reward
policies, such as promotions, bonuses, pay increases denote cultural models.
In a monopoly culture, reward and incentive systems are structured to benefit the stability of the organization. Individuals are promoted through the ranks, primarily based upon seniority and organization tenure. In the same fashion, pay increases are very predictable and planned based upon seniority and organization tenure.
In a competitive organization, rewards are structured to reflect performance. In a profit-oriented organization, employees are rewarded based upon the actual contribution they make. Consequently, they receive promotions, pay increases, and bonuses, as well as recognition, based upon their skills and capabilities, and especially upon their achievements, their deliverables, which contribute at the organization performance and bottom line. Competitive organizations recognize high achievers. In many flat, team-oriented organizations, team-based-rewards are use. In other words, if a team brings a contribution, the bonus is awarded to the team rather than to individuals.
C. Personnel Policies: Selection and
Socialization
Selection represents the process of hiring new employees
into the organization. organizations preserve culture by hiring those employees who have not only
the skills and expertise necessary to perform the job, but who also fit in the organization. In
other words, by the process of selection, the organization brings in those employees who
would adapt well to its culture.
This is why, in a monopoly culture the tradition is to bring in people at a very young age and have them trained on the job and then grow with the organization. In a competitive organization, many employees are hired from the outside at various levels of responsibility. Hiring at a competitive organization is based primarily on skills and expertise and ability to deliver.
Socialization refers to the process of new employees’ adaptation to the organization. For employees to fit in the organization, they need to understand, learn and adapt the culture of the organization. Most organizations use training programs for new employees to teach each of them the norms, rules and standards of the organization.
VII. HOW DO EMPLOYEES LEARN THE CULTURE
OF A organization?
A. Stories: organizations
tell stories, that make them unique, special and human. For instance, many high technology
organizations in the
B. Rituals: organizations
evolve rituals, such as birthday or retirement parties, annual barbecues. These events
personalize the organization, bringing employees together, as a large family.
C. Material symbols: Employees can take their cues about the culture
of a organization from examining space allocation and office furnishings, as well as dress
codes. The space allocation may be indicative of a rigid hierarchy or of a flat
organization, where hierarchy is minimized. For instance, banks traditionally follow the
hierarchical system. Banks often provide lavishly furnished and spacious offices for their
top management and very small and plain offices for lower ranking managers and frontline
employees. By contrast, a high technology organization, with a flat structure, uses cubicles
for all employees, from top management to frontline workers.
Dress codes can also indicates the organization culture. Senior management
initiates the dress code. In a bank, to use
the previous example, employees tend to dress formally, wearing dark suits and ties. In a
high technology organization, especially in the R&D department, developers wear blue jeans.
D. Language: organizations develop their own jargons and
acronyms to describe things.
You have learned a great deal about the culture of ENEL and its practical meaning for
individual managers and for the ability of ENEL to accomplish the goals that the
top leaders have set for the organization. One of
the key learnings is that the top management has a profoundly important impact on the
organization’s culture, and on all levels of management. As you develop you’re answer to each of the
three questions below you are encouraged to draw upon your direct experience as a manager,
as well as what you have learned from the readings and from completion of the work in the
preceding study units. The three questions
below are intended to assist you in describing the ENEL culture as it is influenced and
shaped by the words and actions of top management. Please
provide short answers in writing to the following questions:
XII.
How would you
characterize the degree of freedom (or autonomy) managers at your level have to take
initiative and act independently?
XIII.
In general, how much
freedom are subordinates given to make decision without having to obtain approval from
their immediate supervisors.
XIV. How
would you characterize the ability of employees to participate in decision-making within
the organization?
[Note to
IMU; The idea of this first assignment is that each
learner would answer these questions in writing and provide the answers to the tutor. We have no plans for the use of this material
beyond the learning gained from answering the questions themselves.]
In Assignment 1 you were asked to assess some aspect of
the culture of ENEL as a whole. Assignment 1 has a organization-wide focus. It is also at the organization-wide level where one can
most readily see the direct impact of the top leadership of the organization. You have learned in this module that
subcultures also exist. A subculture operates
and can be described at the level of the department and work unit. In this assignment you are being asked to
comment in a sentence or two on a number of different indicators of culture. We are asking you to consider these indicators from
the standpoint of your own department or work unit. In
short, this assignment gives you an opportunity to identify the cultural significance of
various elements of your immediate work environment.
C. The
immediate physical surroundings
D. The
dress code
E. Two
examples of shared values
F. How
new employees become integrated into the work unit
G. Criteria
for money payments
H. Individual
vs. team basis for pay
I. Criteria
for being successful at work
J. To
what do others in your unit attribute their success
K. How are
mistakes handled
L. What
distinguishes successful from unsuccessful employees
[Note to
IMU: Idea is that each learner would have a chance to
describe his or her own unit or work environment from a culture standpoint. It would be
good for discussion with tutor to be part of this assignment. It would also be a good learning exercise (but
perhaps too time consuming) if each learner would take the comments to the specific items
and summarize them into a short essay]
In Assignment 3 you will have the opportunity to give your
ideas on what should happen at ENEL
for it to successfully make the transition from a monopoly organization to a competitive
organization. You will want to draw on
everything in this course – readings, exercises, discussions, your own experiences
– in offering your comments. The three
questions will provide an opportunity to make suggestions for your own department or work
unit as well as for ENEL as a
whole.
C. What
are the main elements of the culture model that ENEL should develop to become a
competitive organization
D. What
are the main elements of the culture model that your department or work unit should adopt
to became an effective part of a competitive organization
E. What
are some of the concrete things that need to change in ENEL to effect the cultural change you
identified in item 1?
F. What
are some of the concrete things that need to change in your department or work unit to
effect the cultural changes you identified in item 2?
[Note to IMU: The idea here is that each learner would have a chance to write a short answer to each question. It would be desirable if a chat room discussion could follow the individual work.]
Maria Celentano works as Vice President of
Human Resources Management for the Government Insurance organization. (GIC) The president of GIC has given Maria two tough
questions. He has provided her one-week to
prepare recommendations to the two questions. Maria’s
recommendations will be discussed by the Executive Board in a special meeting concerned
with the human resource management implications of the new project/programme purpose environment in which
GIC finds itself. The reason for this urgent
situation is that things have become highly unstable at the organization lately, with the news
of privatization in the insurance sector of activity. Many
new organizations are now entering the project/programme purpose, taking away market share from GIC and even
threatening GIC’s viability. Things used
to be predictable and smooth. Maria took pride
in running a comprehensive (although slow), fair and predictable human resources program. Now, among other things, there is talk of
productivity improvement and of frontline employee and even management layoffs. Your job is to help Maria prepare her report
and recommendations for the meeting with the President and the Executive Board in one
week. Here are the questions for which Maria
has been asked to prepare recommendations.
E. Which
of the current human resource policies and practices will probably need to be changed to
help GIC to be competitive in the new insurance environment?
F. What
actions – from the human resources standpoint - can top management take now to
creative a culture within GIC that will help the organization get through the crises?
[Note to IMU: The best way to handle this case study would be to divide the learners into teams of 3 – 5 individuals. Each team should have online discussion before they formulate their recommendations to the two questions]
A.
Required
Schein, Edgar,
Chapter 3, “Functions of Culture in Organizations,” in Organization, Culture
and Leadership,
Clayton, Christensen and Kirstin Shu, “What is an
Organization’s Culture?” Publication of Harvard project/programme purpose School Publishing,
(Product #9-339-104), 7 pages.
B. Optional
project/programme purpose Week, “The Real Killer is the
Cultural Legacy,” February 14, 2000.
Six experts discuss issues organizations have to face and resolve in order to survive.
Kotter, John and James K. Leahey, “Changing the
Culture at British Airways,” Harvard project/programme purpose Review, September 13, 1993,
(Product 9-491-009).
This article focuses on the culture change process at British Airways between 1980 and 1990. The organization underwent a profound transformation from a monopoly to a competitive organization, due to deregulation in the airlines sector of activity. The ability to change the culture led to the current success of British Airways.
Schein, Edgar H., “Organizational Socialization and the Profession of Management,” Sloan Management Review, Fall 1988, 30 (1): 53-65.
This article focuses on the process of socialization, namely new employees’ integration within organizations.
Schein, Edgar H., “Are you organizational Cultured?,”
Personnel Journal, November 1986, 65(11): 82-96.
This article highlights the important role culture plays in an organization. It also examines potential negative effects of culture. Culture helps employees manage their external and internal environments. The actions, functions and behaviors of management contribute towards the development and reinforcement of culture.
Schein, Edgar H., “The Role for the Founder in Creating
Organizational Culture,” Organizational Dynamics, Summer 1983, 12 (1): 13-28.
This article focuses on the decisive role played by the organization founder in determining the culture of the organization. The original culture prevails, unless a strong leader or management team decides to change it.
Wilkins, Alan L., “The Creation of organization
Cultures: The Role of Stories and Human
Resource Systems,” Human Resources Management, Spring 1984, 23 (1): 41-60.
This author suggests that human resources practices and stories told to employees create organizational culture. Managers and leaders through their actions create the culture and the stores that support it, leading to the success of the organization.
A. Competitive Culture: A organization functioning in a competitive
environment, where many organizations offer the same products and services to the same
beneficiaries. The organization is profit driven and
beneficiary oriented.
B. Monopoly Culture: A organization functioning in an environment without
competitors. Lack of competition leads to a
bureaucratic organization. Examples are
government and state organizations. These
organizations tend to become complacent, driven by hierarchical structures and an
autocratic power system. Compensation policies
are structured to favor organization tenure and seniority.
There is no room for initiative and innovation. Monopolies are not so much beneficiary oriented, as
they are self-oriented. They are
process-oriented, rather than profit oriented.
C. Organizational Culture: A
common set of values shared (shared meaning) by the members of an organization. They include customs, traditions, norms and
routines, which are being practiced at that organization.
Culture holds members together and gives them a sense of identity. Culture teaches members how to act and behave in
the organization in order to be able to adapt and survive.
Culture can differentiate organizations from each other.
D. Participative Management. A
management system whereby managers include employees in the main decision making
processes. Employees tend to be empowered by being part of the management process. Employees become more vested and committed to the
decisions made. One disadvantage of this
approach to management is the additional time required for consultation.
E. Anthropology:
the study of human beings, in particular the study of
their physical character, evolutionary history, racial classification, historical and
present-day geographic distribution, group relationships, and cultural history.
Anthropology can be characterized as the naturalistic description and interpretation of
the diverse peoples of the world. Modern-day anthropology consists of two major divisions:
cultural anthropology, which is the study of human physical character, in both the past
and present.
F. Culture:
behaviour peculiar to Homo sapiens, together with material
objects used as an integral part of this behaviour. Thus, culture includes language,
ideas, beliefs, customs, codes, institutions, tools, techniques, works of art, rituals,
and ceremonies, among other elements.
G. Norm:
also called social
norm, rule or standard of behaviour shared by members of a social group. Norms may be
internalised – i.e., inorganizationald within the individual so that there is conformity
without external rewards or punishments, or they may be enforced by positive or negative
sanctions from without. The social unit sharing particular norms may be small (e.g.,
clique of friends) or may include all adult members of a society.
Question 1: What is a mission statement?
Answer
1: A mission statement is a single, memorable
statement that helps guide the on-going management and decision-making of an organization. Good mission statements are short, memorable,
specific and represent a clear call to action.
Question 2: There have been many references in this course to
transition and restructuring. For many of us
this is quite unsettling. Could you say a bit
more about what the likely effect of this will be on employees in the organization?
Answer 2:
Major
changes are always unsettling, mainly because of the long periods of uncertainty that are
involved. These types of reorganizations
usually affect employees at all levels of the organization.
Potential changes, many of which have been discussed in this course,
include:
· Loss of job
·
Change in job, including new duties and location
·
Transfer to another part of the organization or to a different
location
·
Change in monetary and non-monetary payments
·
Changes in job title which might also mean a change in
power, status and prestige
·
Changes which may
result in new colleagues, bosses and subordinates
· Changes in organizational culture.
These are just example of the kind of changes that often
acorganization major transitions and reorganizations. You
should not assume that the only changes are negative ones.
Many employees will realize new jobs, higher pay and greater career
opportunities.
Questions 3 &
4: Two additional Q&As are embedded in
the text of the Lesson.
[5]
http://www.ndu.edu/inss/books/Books%20-%201999/Strategic%20Leadership%20and%20Decision-making%20-%20Feb%2099/pt4ch16.html; http://www.personal.psu.edu/faculty/v/m/vmg3/mgmt501/rch_17.doc;
http://www.soi.org/reading/change/culture.shtml; http://www.toolpack.com/culture.html
http://www.pamij.com/barkdoll.html; http://www.pamij.com/hickok.html; http://www.mapnp.org/library/org_chng/org_chng.htm;