Module Three: Organizational Culture

1. MGMT630: Organizational Theory and Behavior in a Global Environment Module Three:Organizational Culture UMUC standardized PP Slides Adapted from Daft (9th ed.), 2007 and other noted sources.

2. Organizational Culture • Organizational Culture • What is it? • Why does it matter? • How does it impact change and communications?

3. Organizational Culture • What is meant by culture? • Systems of values and norms that are shared among a group of people and that when taken together constitute a design for living. • Values • Ideas about what a group believes to be good, right and desirable • Norms • Social rules and guidelines that prescribe appropriate behavior in particular situations.

4. Organizational Culture Culture springs from three sources: • (1) the beliefs, values, and assumptions of founders of the organization; • (2) the learning experiences of group members as their organization evolves; • (3) new beliefs, values, and assumptions brought in by new members and leaders

5. Organizational Culture • “A pattern of shared basic assumptions that the group learned as it solved problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems.” (Schein, 1992, p.12)

6. Levels of Organizational Culture Observable Symbols Ceremonies, Stories, Slogans, Behaviors, Dress, Physical Settings Underlying Values, Assumptions, Beliefs, Attitudes, Feelings

7. Organizational Culture Values and Beliefs Behavior Patterns Cultural Artifacts

8. Formal Policies Signs and Symbols How Do Managers Shape Culture? Stories Rites and Ceremonies How do we Shape Organizational Culture ?

9. A Typology of Organizational Rites and Their Social Consequences Source: Adapted from Harrison M. Trice and Janice M. Beyer, “Studying Organizational Cultures through Rites and Ceremonials,” Academy of Management Review 9 (1984), 653-659. Used with permission.

10. Organizational (Corporate) Culture “Standard operating procedures are the "habits' of organizations. Even the loosest of organizations adopt practices that become second nature. These cultural norms operate in subtle but powerful ways to box us in and restrict our thinking. They're especially potent barriers.” Kouzes and Posner (The Leadership Challenge)

11. Corporate Culture • This has massive practical implications. It means that companies seeking an “empowered" or decentralized environment should first and foremost impose a tight ideology, screen and indoctrinate people into that ideology, eject the viruses, and give those who remain the tremendous sense of responsibility that comes with membership in an elite organization. • It means getting the right actors on the stage, putting them in the right frame of mind and then giving them the freedom to ad lib as they see fit. • It means, in short, understanding that cult-like tightness around an ideology actually enables a company to turn people loose to experiment, change, adapt and-above all-to act.

12. Corporate Culture • Kotter notes, “One of the theories about change that has circulated widely over the last 15 years might be summarized as follows: The biggest impediment to creating change in a group is culture. Therefore the first step in a major transformation is to alter the norms and values. After the culture has been shifted, the rest of the change effort becomes more feasible and easier to put into effect. I once believed in this model. But everything I’ve seen over the past decade tells me its wrong. • Culture is not something that you manipulate easily. Attempts to grab it and twist it into a new shape never work because you can’t grab it. Culture changes only after you have successfully altered people’s actions, after a new behavior produces some group benefit for a period of time, and after people seem the connection between the new actions and the performance improvement.”

13. Corporate Culture To become a group, or culture, the group must develop a common language and category system, reach consensus on the boundaries of the group, determine who is in and who is out, and agree on how to distribute influence, power, and formal status. Finally, the group must agree on a clear assumption for reward and punishment and develop some deep-rooted explanations for the unpredictable or inexplicable.

14. Power of Culture • Five key elements are critical to the group’s survival in the external environment and therefore require adaptation of shared assumptions, • (1) the mission and strategy, • (2) the operational goals, • (3) the means of achievement, • (4) the criteria for measuring results, • (5) the remedial strategies. • All five of these elements require consensus if the group is to function effectively.

15. Corporate Culture • Rather, the point is to build an organization that fervently preserves its ideology in specific, concrete stays, The visionary companies translate • Their ideologies into tangible mechanisms aligned to send a consistent set of reinforcing signals. They indoctrinate people, impose tightness of fit, and create a sense of belonging to something special through practical, concrete items.

16. Corporate Culture Research makes clear that shared values make a difference to organizational and personal vitality and that values form the bedrock of an organization's culture. In a four-year study of nine to ten firms in each of twenty industries, management Professors Kotter and Heskett found that firms with a strong corporate culture based on a foundation of shared aloes outperformed the other firms by a huge margin. • Their revenue grew more than four times faster. • Their rate of job creation was seven times higher. • Their stock price grew twelve times faster. • Kouzes and Pozner (LC) “There are three central themes in the values of highly successful, strong culture organizations: • High performance standards • A caring attitude toward people • A sense of uniqueness and pride • These three common threads seem to be central to weaving a values tapestry that leads to greatness. “ Caldwell and O’Reilly (Kouzes and Pozner) (LC)

17. Corporate Culture • Changing culture is an exhaustive process that will take direct leader intervention, serious courage of convictions, exceptionally consistent communications and persuasion, a linking of like-minded thought leaders, a lasting change in behavior and the proof of success. Culture by its nature is nurturing, enveloping and pervasive. It is entrenched.

18. How Does Culture Start • Founders use their charisma and legitimate power to embed culture into the organization. • Schein identifies 6 primary embedding mechanisms: • “(1) what leaders pay attention to, measure, and control on a regular basis; • (2) how leaders react to critical incidents and organizational crisis; • (3) observed criteria by which leaders allocate scarce resources; • (4) deliberate role modeling, teaching, and coaching; • (5) observed criteria by which leaders allocate rewards and status; • (6) observed criteria by which leaders recruit, select, promote, retire, and excommunicate organizational members.” • Schein (1992)

19. Interpreting Culture • Potential risk factors: • The essence of culture is difficult to communicate, • The cultural analysis could be incorrect or superficial, • The organization might not be ready to receive feedback, • The culture may be varied across subgroups and not discovered or reported, and • The culture is evolving and may have changed since observation (or because of observation).

20. Leadership and Culture • Leadership is the ability to create an organization’s culture, perceive the limitations of that culture, and, when necessary, step outside the culture to adapt a new culture. • For leaders to be successful in creating and managing the culture within their organization, they must first develop an understanding of the content and dynamics of culture.

21. Leaders and Culture • Leaders must be able to perceive the problem and have insight into himself, the organization and its culture. • Must have a high degree of objectivity about themselves and the organization. • Leaders need the skills and motivation to intervene in the cultural process. • Leaders must be willing to unfreeze the organization. • Leaders must have emotional strength to absorb the anxiety that comes with change. They must also have the ability to remain supportive to the organization throughout the transition. • Leaders must have the ability to induce cognitive redefinition by articulating and selling new visions and concepts. • Leaders not only have to lead but also listen, emotionally involve the group and be genuinely participative. • Leader must have the ability to learn assumptions of a whole new organizational culture. (Schein, 1992)

22. Leadership and Culture • Leadership and organizational culture are two sides of the same coin. • To be successful leaders of organizations must create, manage, and, when necessary, change the culture within their organization • To create and manage an organizational culture the manager must first develop an understanding of the content and dynamics of organizational culture.

23. Leadership and Culture • Understanding the dynamics of an organization’s culture requires: • A clear definition of organizational culture • An identification of the key dimensions of a culture • An approach to studying and interpreting a given culture • An appreciation of how leaders can create and develop a culture • A recognition of the role of the leader in cultural change • A recognition of the implications of change and learning on leadership

24. Changing Culture • Cultural change requires different mechanisms at different stages of the organization. • All change occurs through disconfirmation, creation of quilt or anxiety and the presence of psychological safety. When all 3 are present, unfreezing occurs. • Change occurs through cognitive redefinition of core assumptions and the resultant behavioral changes become refrozen.

25. Aligning Culture • The critical roles of leadership in strategy formulation and implementation are: • To perceive accurately and in depth what is happening in the environment. • To create enough disconfirming information to motivate the organization to change without creating too much anxiety. • To provide psychological safety by providing a vision of how to change and in what direction. • To acknowledge uncertainty. • To embrace errors in the learning process as inevitable and desirable. • To manage all phases of the change process.

26. Essential: The Ability to Learn • The learning culture must: • Assume that the world can be managed. • Appropriate for humans to be proactive problem solvers. • Reality and truth must be proactively discovered. • Human nature is basically good and immutable. • Both individualism and groupism are appropriate if based on trust. • Best time horizon is between far future and near future. • Best units of time are “medium-length” • Accurate and relevant information must be capable of flowing freely in a fully connected network. • Diverse but connected units are desirable. • Both task and relationship orientations are desirable. • World is intrinsically complex field of interconnected forces in which multiple causation and over-determination are more likely than linear or simple causes. • Leaders must promote these assumptions and reward progress.

27. Existing Culture Realigned Culture Time Investment Values Chain Behavior Change Staff Changes New Staff Reinforcement Corporate Culture

28. Relationship of Environment and Strategy to Corporate Culture Needs of the Environment Flexibility Stability External Adaptability Culture Mission Culture Strategic Focus Clan Culture Bureaucratic Culture Internal Sources: Based on Daniel R. Denison and Aneil K. Mishra, “Toward a Theory of Organizational Culture and Effectiveness,” Organization Science 6, no. 2 (March-April 1995): 204-23; R. Hooijberg and F. Petrock, “On Culture Change: Using the Company Values Framework to Help Leaders Execute a Transformational Study,” Human Resource Management 32 (1993): 29-50; and R. E. Quinn, Beyond Rational Management: Mastering the Paradoxes And Competing Demands of High Performance (San Francisco: Jossey-Bass, 1988).