CHAPTER 3 Organizational Culture

Transcription

1 CHAPTER 3 Organizational Culture learning Objectives After studying this chapter, you should be able to: LO3-1 List and discuss the four sources of organizational culture. LO3-2 Discuss the characteristics and types of organizational culture. LO3-3 Discuss the importance of organizational culture. LO3-4 Describe how to manage organizational culture.

2 CHAPTER 3 Organizational Culture Learning Objectives After studying this chapter, you should be able to: LO3-1 List and discuss the four sources of organizational culture. LO3-2 Discuss the characteristics and types of organizational culture. LO3-3 Discuss the importance of organizational culture. LO3-4 Describe how to manage organizational culture.

3 A MANAGER S CHAllENGE The Journey to Becoming a Successful Multinational Telecommunication Giant In 1987, the Qatari government established a new corporation, Qatar Public Telecommunications Corporation (QPTC), to offer local telecommunication services. QPTC s main purpose at that time was to operate the existing landline network. A few years later, QPTC introduced a number of services such as cable television and mobile telephone services, but still locally. In the mid- 1990s the Qatari government started a privatization program, aiming to reduce government ownership in major public corporations. Qatar Telecom (Qtel), the successor to QPTC, was the first to be sold in an initial public offering (IPO) in 1998, but the real change in Qtel s vision, structure, and culture did not start until In that year, Qtel launched its reorganization program, Q-Turn, with a new vision of being among the top 20 Telecommunication Companies in the world by In pursuit of its new vision, Qtel launched new services locally, established joint ventures regionally and acquired international telecommunication companies. Now, Qtel has a presence in 17 countries across three regions: the Middle East, North Africa, and South East Asia. In total, it provides coverage to a population in excess of one billion people, with 75 million consolidated subscribers, and it is still committed to expansion in those three and other regions. The growth in the company profile was Qtel s head office in Doha.

4 accompanied by a change in how the company manages and cares about its employees and the local community. To build employee loyalty, Qtel provides its employees with advancement opportunities. Indeed, most of Qtel s executives have been promoted from within. One of them is Mr. Waleed Al-Sayed, who joined Qtel in 1987 and worked as a sales representative. Mr. Al-Sayed moved up through the organization s hierarchy until he was appointed Chief Operating Officer. Qtel employees are offered numerous training and development opportunities, including sponsorship and scholarship, personal development plans, succession planning and leadership development. Mr. Al-Sayed explained: When we interview people for hiring, we try to move away from negotiating the financial package to illustrating development as well as advancement opportunities in Qtel. That being said, Qtel employees also have access to a variety of benefits ranging from medical insurance to subsidized telecommunication services and end-of-year financial bonuses. Qtel s efforts in improving the work environment, engaging in a variety of corporate social responsibility programs (CSR), pursuing appealing vision and operating a customer-oriented business all paid off. Seventy percent of customers in Qatar, for example, prefer Qtel. Qtel also has received many international awards 15 in 2010 alone including the Recognized for Excellence Award from EFQM, the Best New Telecoms Service at the Comms MEA Awards, and two top awards at Asia s Best Employer Brand Awards. LO3-1 List and discuss the four sources of organizational culture. As the story of Qtel suggests, becoming a successful Overview company is not easy and requires a lot of effort. Plans need to be designed and then implemented and concrete actions need to be taken to make these plans a reality. All these initiatives to improve the competitive position of the company are the consequences of a vision set by the owners of the firm and/or its top managers. These actions contribute to shaping the culture of the organization defined as the way things are done in the business. A specific vision, employee diversity, and a mix of resources, policies, and plans among others make the company s culture unique in comparison with other organizational cultures including those of competing firms. In this chapter, we study organizational culture, the sources and the types of organizational cultures, the importance of organizational culture and how to manage organizational culture. By the end of this chapter, you will understand how organizational culture impacts the management of organizations.

5 Where Does Organizational Culture Come From? Organizational Culture 73 In managing organizational culture, some important questions that arise are these: Where does organizational culture come from? Why do different companies have different cultures? Why might a culture that for many years helped an organization achieve its goals suddenly harm the organization? Organizational culture is shaped by the interaction of four main factors: the personal and professional characteristics of people within the organization, organizational ethics, the nature of the employment relationship, and the design of its organizational structure (see Figure 3.1). These factors work together to produce different cultures in different organizations and cause changes in culture over time. Characteristics of Organizational Members The ultimate source of organizational culture is the people who make up the organization. If you want to know why organizational cultures differ, look at how the characteristics of their members differ. Organizations A, B, and C develop distinctly different cultures because they attract, select, and retain people who have different values, personalities, and ethics. 1 People may be attracted to an organization whose values match theirs; similarly, an organization selects people who share its values. Over time, people who do not fit in leave. The result is that people inside the organization become more similar, the values of the organization become more pronounced and clear-cut, and the culture becomes distinct from those of similar organizations. 2 Figure 3.1 Sources of an Organization s Culture Characteristics of organizational members Organizational ethics Organizational culture The employment relationship Organizational structure

6 74 Chapter 3 The fact that an organization s members become similar over time and come to share the same values may actually hinder their ability to adapt and respond to changes in the environment. 3 This happens when the organization s values and norms become so strong and promote so much cohesiveness in members attitudes that the members begin to misperceive the environment, as did Ford s top managers. 4 Companies such as Ford, Emirates Airline, SABIC or NBAD need a strong set of values that emphasize innovation and hard work; they also need to be careful their success does not lead members to believe their company is the best in the business. Companies frequently make this mistake. One famous example is the CEO of Digital Equipment, who in the 1990s laughed off the potential threat posed by PCs to his powerful minicomputers, claiming, Personal computers are just toys. This company no longer exists. 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. Organizational Ethics The managers of an organization can set out purposefully to develop specific cultural values and norms to control how its members behave. One important class of values in this category stems from organizational ethics, which are 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. Ethical values rest on principles stressing the importance of treating organizational stakeholders fairly and equitably. Managers and employees are constantly making choices about the right, or ethical, thing to do; and to help them make ethical decisions, top managers purposefully implant ethical values into an organization s culture. 5 Consequently ethical values, and the rules and norms that embody them, become an integral part of an organization s culture and determine how its members will manage situations and make decisions. At the Emirates Group, great value is placed on corporate citizenship and social responsibility and the belief that business ethics are integral to continued success. Each member of staff s commitment towards ongoing improvement combines to maintain the competitive edge of our operation in global markets. 6 The Employment Relationship A third factor shaping organizational culture is the nature of the employment relationship a company establishes with its employees via its human resource policies and practices. Recall from Chapter 1 our discussion of the changing relationship between organizations and their employees due to the growth of outsourcing and employment of contingent workers. Like a company s hiring, promotion, and layoff policies, human resource policies, along with pay and benefits, can influence how hard employees will work to achieve the organization s goals, how attached they will be to the organization, and whether they will buy into its values and norms. 7 As we discuss in Chapter 11, an organization s human resource policies are a good indicator of the values in its culture concerning its responsibilities to employees. Consider the effects of a company s promotion policy, for example: A company with a policy of promoting from within will fill higher-level positions with employees who already work for the organization. On the other hand, a company with a policy of promotion from without will fill its open positions with qualified outsiders. What does this say about each organization s culture? Promoting from within will bolster strong values and norms that build loyalty, align employees goals with the organization, and encourage employees to work hard to advance within the organization. If employees see no prospect

7 Organizational Culture 75 of being promoted from within, they are likely to look for better opportunities elsewhere, cultural values and norms result in self-interested behavior, and cooperation and cohesiveness fall. The tech sector has gone through great turmoil in recent years, and over 2 million US tech employees lost their jobs during the 2000s because of outsourcing and the recession. Apple, HP, and IBM known for their strong employee-oriented values that emphasized longterm employment and respect for employees were among the many companies forced to lay off employees, and their cultures have changed as a result. To rebuild their cultures, and make their remaining employees feel like owners, many companies have HRM pay policies that reward superior performance with bonuses and stock options. 8 For example, Southwest Airlines and Google established companywide stock option systems that encourage their employees to be innovative and responsive to customers. Dubai Properties Group (DPG), a member of Dubai Holding, fosters a culture of collaborative learning. Employees are their greatest assets. The outcome of the knowledge transfer initiative will have a profound impact on DPG competitiveness and productivity through better leveraging of knowledge. The company empowers recently qualified employees to spearhead new projects and leverage the expertise of professionals with DPG to drive the business forward. Organizational Structure We have seen how the values and norms that shape employee work attitudes and behaviors derive from an organization s people, ethics, and HRM policies. A fourth source of cultural values comes from the organization s structure. Different kinds of structure give rise to different kinds of culture; so to create a certain culture, managers often need to design a particular type of structure. Tall and highly centralized structures give rise to totally different sets of norms, rules, and cultural values than do structures that are flat and decentralized. In a tall, centralized organization people have little personal autonomy, and norms that focus on being cautious, obeying authority and respecting traditions emerge because predictability and stability are desired goals. In a flat, decentralized structure people have more freedom to choose and control their own activities, and norms that focus on being creative and courageous and taking risks appear, giving rise to a culture in which innovation and flexibility are desired goals. Whether a company is centralized or decentralized also leads to the development of different kinds of cultural values. By decentralizing authority and empowering employees, an organization can establish values that encourage and reward creativity or innovation. In doing this, an organization signals employees that it is okay to be innovative and do things their own way as long as their actions are consistent with the good of the organization. Conversely, in some organizations it is important that employees do not make decisions on their own and that their actions be open to the scrutiny of superiors. In cases like this, centralization can be used to create cultural values that reinforce obedience and accountability. For example, in nuclear power plants, values that promote stability, predictability, and obedience to authority are deliberately fostered to prevent disasters. 9 Through norms and rules, employees are taught the importance of behaving consistently and honestly, and they learn that sharing information with supervisors, especially information about mistakes or errors, is the only acceptable form of behavior. 10 At Deloitte Middle East, the diversity of each and every one is valued. With each member firm operating independently but united by a common vision, Deloitte gives its branches the opportunity to feel part of a local community led by global

8 76 Chapter 3 LO3-2 Discuss the characteristics and types of organizational culture. standards. While the culture in each of the Middle East member firms varies, it is characterized by a combination of world-class leaders and regional pragmatism, producing a conducive environment to feed growth and self-exploration while making sure short-term objectives are always kept in sight. 11 An organization that seeks to manage and change its culture must take a hard look at all four factors that shape culture: the characteristics of its members, its ethical values, its human resource policies, and its organizational structure. However, changing a culture can be difficult because of the way these factors interact and affect one another. 12 Often a major reorganization is necessary for a cultural change to occur. Characteristics of Organizational Culture Organizational culture is a system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Organizational culture reflects employees and managers views about how things get done in the organization. Culture gives meaning to actions and procedures within an organization and may be considered as the glue that holds organizational members together and what keeps them focused without deviating on the achievement of organizational goals. The culture specific to each firm affects how employees feel and act as well as the type of employee hired and retained by the company. There are three aspects of an organization s culture; the most obvious is visible culture or the aspects of organizational culture that one can hear, see, or feel. For instance, the dress code conveys order and homogeneity of organizational culture, the furniture or office layout might tell about the values of competitiveness and aggressiveness versus consensus and harmony promoted by the culture, assigned parking spots according to rank, or cafeteria policies are a few rules and dimensions through which an observer can sense, feel and assess the culture of an organization. The visible aspects of the culture represent the first aspects mostly superficial that we see, hear, or feel when we first interact with a culture. The signs of a visible culture make it possible to study dominant cultural characteristics such as whether the organization is competitive or values harmony, formal or informal, hierarchical or egalitarian, liberal or conservative. For instance, firms where managers use an open door policy or management by walking tend to value informal communication, empowerment of employees, and to decentralize decision making. At a deeper level, espoused values are not readily observed but instead are the ways managers and employees explain and justify actions and decisions. Espoused values are those values that are expressed on behalf of an organization or that are expressed as explanations for policies or actions. Managers might explain that major layoffs or restructuring are a response to the economic crisis and decrease in sales volumes; they might argue the adoption of a structure that values formal communication and respect of hierarchy, rank, and seniority was promoted for the sake of keeping the company s activities under control and avoiding deviation from the objective. Promoting an innovative culture or a customer-responsive culture might be promoted to keep the company s competitive advantage, compete more effectively against other firms in the industry, or adjust to a changing market or changing needs and demand of customers. Managers might not, however, give the real reason behind their actions. For instance, they might not tell that massive layoffs or restructuring is driven

9 Organizational Culture 77 by profit maximization only and not justified by a drop in demand or difficult financial situation. They might not tell the truth about why promotions and salary increases were given to some employees and not to others, arguing that they were distributed based on merit while in reality they were assigned and given based on personal relationships and friendships. Usually, if a gap exists between the espoused values as highlighted by managers in their discourse and how they are managed in reality, employees will rapidly find out and will quickly spot the hypocrisy of the culture. Managers who are not honest about why actions were taken may create an organizational culture that encourages dishonesty and cynicism, and is characterized by a lack of ethics as managers who are supposed to lead by example, act as role models, and set an example for the rest of the company are not playing their role. This will eventually translate into poor firm performance because trust between employees and managers is missing and because employees will most probably deviate from the culture as it is not enforced by managers. For Naguib Sawiris, executive chairman of Orascom Telecom Holding, The value of sticking to principles and not giving people what they thought they could get by threats, extortion, or blackmail is just enormous. Ibrahim Dabdoub from National Bank of Kuwait says, succinctly, You can t be a crook and a leader at the same time. In the Middle East, loyalty is important. Loyalty to networks, to the tribe, and to an ethnic or religious group, continues to play a key role in the region. Although Westerners tend to view this trait with a degree of cynicism, for most leaders in the region wasta gives them a feeling of trust in their business dealings. It is the underpinning for the culture of my word is my bond. Espoused values may vary substantially across organizations and reflect the importance of the role played by managers in conveying the values that shape employee attitudes towards work and expected behaviors. Espoused values are generally consciously and explicitly communicated. At the center of organizational culture are core values that are widely shared, operate unconsciously, and are considered fundamental to the culture and non-negotiable. In some organizations, a basic assumption might be that stability and commitment of the workforce are critical for success. Consequently, employees are valued, rewarded for goal-achievement, are treated fairly, and are empowered and encouraged to contribute in decisions. The opposite would be that stability and commitment of employees are not critical for the company s success. This will translate into more formal controls, no established reward systems and low motivation, no delegation of authority, lack of empowerment and centralization of decision making. Employees are seen as commodities and an expense that should be minimized. They are easily replaceable and are a means through which the company reaches its ends. There will be detailed standard operating procedures and rules detailing what employees can do and what they cannot do, and managers believe that it is their duty to prevent deviations from the norms and to emphasize rigor, order, respect of the hierarchy, and formality. A climate of suspicion, sabotage, and whistleblowing will flourish in the organization as employees will tend to see their colleagues as enemies they are competing against and not as collaborators. Negative competition will be encouraged leading to a lack of harmony within the firm. In the Arab world, some of the values promoted by organizational culture are specific to the local culture. For example, Mohammed Alshaya, Executive Chairman of Kuwait-based M.H. Alshaya Co., the retail division of the Alshaya Group of companies like his father before him, will not enter into ventures that involve selling alcohol or tobacco. He says, We shy away from many opportunities that we don t feel fit with our culture. Group Chalhoub

10 78 Chapter 3 is guided by the philosophy of being Committed to Excellence. With the aim of optimizing performance of brands, providing quality service and offering a stimulating work environment, the group cultivates the core values of Excellence, Respect and Entrepreneurial Spirit. 13 The following Management Insight box highlights the values used by the Qatar Museums Authority (QMA). Management Insight The Qatar National Museum in Doha. It s Another Exciting Day at Work The Qatar Museums Authority (QMA) was founded in late 2005 as a successor to the National Council for Culture, Heritage and the Arts. QMA s purpose is to manage the resources of all museums in the State of Qatar, to develop cultural institutions such as museums and galleries, and to provide an effective system for collecting, protecting, preserving, and interpreting historic sites, monuments, and artifacts. In 2007 a new managerial team headed by Mr. Abdullah Al-Najjar was appointed. The new leadership thought that QMA s aims would not be achieved unless a new organizational culture was developed. As Mr. Al-Najjar phrased it, We want our employees to wake up in the morning saying, I m going to QMA today because it ll be another exciting day. To build this vision, the leadership team introduced a new set of values. Seven core values were identified, as follows: Passionate: Inspire others, love our work; Empowering: Enable leadership and responsibility; Collaborative: Work as a team with colleagues and partners; Creative: Harness our talent for invention and innovation; Professional: Excellence and efficiency in all we do; Ethical: Firm adherence to ethical standards; and Communicative: Accessible and transparent in our interactions. To support the implementation of these values, the organization went through a reorganization process. One outcome of the process was empowering the human capital department to act as an agent for change. With full support from the leadership team, the traditional electronic attendance monitoring system was dropped. Employees work became task-driven rather than time-driven. Tasks and projects were performed and completed in teams. Improvements were also introduced in the workplace. A new health and fitness center, a nursery and a prayer room were opened on campus. Employees were also encouraged to take breaks and join their colleagues for coffee, breakfast, or lunch in the stylish new cafeteria and discuss off-work topics. The leadership team also joins the various departments over breakfast once a month to encourage open communication. Recently, QMA has provided its employees with health insurance coverage and shopping discount cards. The Chief Human Capital Officer summarizes all of this in a few words: You look after our business and we look after you. 14

11 Organizational Culture 79 The basic underlying cultural assumptions create the lenses through which people perceive and interpret events. For instance, production line employees engaging in a conversation on the job might be perceived as an attempt to goof off and relax while on the job, which will decrease worker productivity and lead to a drop in performance. Employees are perceived as trying to take advantage of the culture and exploit any loopholes. In other companies, this conversation might indicate employee commitment to improving work processes and their engagement to promote collaborative work and to finding better ways to do the work as sharing of ideas and communication on issues related to how to perform the job and improve work processes was done through this conversation. Positive or negative interpretation of employee actions depends on these cultural assumptions and their impact on perceptions and interpretations of events. Research indicates that there are seven dimensions that describe organizational culture; 15 each of the seven dimensions ranges from low to high, meaning that it is not a characteristic of the culture (low rating) or is a characteristic of the culture (high rating). Characterizing the organizational culture by using these dimensions gives a description of the underlying values used and promoted in the company. Attention to detail: degree to which employees are expected to exhibit precision, analysis, and attention to detail. In industries necessitating precision and craftsmanship, attention to detail is essential to reach organizational goals. For instance, in companies such as Louis Vuitton or Hermès, the brand name is built on such values, which are communicated to employees and perpetuated through socialization and training programs. The diversified nature of Qatar Foundation s business requires creativity and some risk-taking to achieve our goals. Leadership plays a pro-active role in this regard by promoting a culture of trust, where employees are allowed to harness their individual talents to the full. 16 Innovation and risk-taking: degree to which employees are encouraged to be innovative and to take risks. The culture of financial institutions such as Citibank and JPMorgan is a risk-taking culture. Traders are encouraged to take calculated risks when trading stocks and currencies for the benefit of the bank. Stability: degree to which organizational decisions and actions emphasize maintaining the status quo. The culture of Toyota emphasizes stability and conservatism. Even in their worst crises, the managers preferred to keep employees and looked for other ways to solve the crisis instead of resorting to major layoffs. Aggressiveness: degree to which employees are aggressive and competitive rather than cooperative. At Kanoo group, a culture based on employee cooperation and teamwork is promoted. In most US corporations, competition between teams, divisions, and units is used to fuel productivity and performance. Team orientation: degree to which work is organized around teams rather than individuals. Qatar airways seek team-oriented candidates to fill its cabin-crew positions. The same cultural dimension is present at Emirates Airlines. People orientation: degree to which management decisions take into account the effects on people in the organization. For instance, continuous

12 80 Chapter 3 learning and development is one of the core values of NBAD s corporate culture since it enables the staff to contribute effectively to developing innovative, efficient, and secure products and services to allow customers to enjoy the most convenient banking experience. Investing in career development will ultimately support the achievement of business strategies through staff commitment and engagement, increased retention rates, and the enhancement of intellectual assets. 17 Outcome orientation: degree to which the managers focus on results or outcomes rather than on how these outcomes are achieved. At the Emirates Group, great value is placed on corporate citizenship and social responsibility and business ethics are integral to continued success. Each member of staff s commitment towards ongoing improvement combines to maintain the competitive edge of the operation in global markets. At Emirates, managers believe that employees are their greatest asset and their contribution to the staggering pace at which the company grows cannot be underestimated. 18 The following Ethics in Action box depicts some of the cultural characteristics of Al Jazeera, mainly their people and innovation orientations. Focus on Diversity Diversity at Al Jazeera Sami Al Hajj, a Sudanese journalist working for the Al Jazeera network, was arrested in 2001 while on his way to do camera work for the network in Afghanistan and sent to the United States Guantanamo Bay detainment camp in Cuba for over six years before being released without any charge on May 1, Al Hajj was the only journalist to be held in Guantanamo. In response to this detention, Al Jazeera launched a global campaign to release him. At the same time, the Arabic network did not forget its responsibility toward Al Hajj s family. His full monthly salary and all other benefits were provided to his family as if he were still doing his full-time job. After being released from Guantanamo, Al Hajj was promoted and then appointed the director of a new department established to defend journalists worldwide. Many of Al Jazeera s correspondents and journalists are arrested, injured and even killed while doing their work, so what makes working for Al Jazeera worthwhile? Al Jazeera has more than 65 bureaus across the globe, more than 3,000 staff members across the world, including more than 400 journalists from more than 60 countries. It is inevitable that the workforce in such an organization will be diverse because of the international nature of its operation; nevertheless, Al Jazeera believes in the importance of diversity to the extent that even in its headquarters in Qatar, there are employees from more than 55 nationalities. Al Jazeera was voted by brandchannel.com readers in 2004 as the fifth most influential global brand, behind Apple, Google, Ikea, and Starbucks. Other important features fueling the success of the network besides diversity are empowerment and flexibility. Producers, presenters, and editors are fully empowered in determining what to present and how to present it

13 Organizational Culture 81 as long as it fits with the network code of ethics. Flexibility is important to achieve agility, meaning having the right person in the right place at the right time. Al Jazeera s coverage of the Arab Spring is a good example of this agility. Therefore, it is emphasized in Al Jazeera Laws that Al Jazeera doesn t create events but is always at their heart. Strong, Adaptive Cultures versus Weak, Inert Cultures Many researchers and managers believe that employees of some organizations go out of their way to help the organization because it has a strong and cohesive organizational culture an adaptive culture that controls employee attitudes and behaviors. Adaptive cultures are those whose values and norms help an organization to build momentum and to grow and change as needed to achieve its goals and be effective. By contrast, inert cultures are those whose values and norms fail to motivate or inspire employees; they lead to stagnation and, often, failure over time. What leads to a strong adaptive culture or one that is inert and hard to change? Researchers have found that organizations with strong adaptive cultures, like 3M, UPS, Microsoft, and IBM, invest in their employees. They demonstrate their commitment to their members 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 spend a lot of money on training and development to increase employees value to the organization. In these ways, terminal and instrumental values pertaining to the worth of human resources encourage the development of supportive work attitudes and behaviors. 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 (ESOPs) are developed in which workers as a group are allowed to buy a significant percentage of their company s stock. Workers who are owners of the company have additional incentive to develop skills that allow them to perform highly and search actively for ways to improve quality, efficiency, and performance. At Dell, for example, employees may still buy Dell stock at a steep 15% discount, and this will allow them to build a sizable stake in the company over time if its performance recovers. Some organizations, however, develop cultures with values that do not include protecting and increasing the worth of their human resources as a major goal. Their employment practices are based on short-term employment according to the needs of the organization and on minimal investment in employees who perform simple, routine tasks. Moreover, employees are not often rewarded on the basis of their performance and thus have little incentive to improve their skills or otherwise invest in the organization to help it achieve goals. If a company has an inert culture, poor working relationships frequently develop between the organization and its employees, and instrumental values of noncooperation, laziness, and loafing and work norms of output restriction are common.

14 82 Chapter 3 Moreover, an adaptive culture develops an emphasis on entrepreneurship and respect for the employee and allows the use of organizational structures, such as the cross-functional team structure, that empower employees to make decisions and motivate them to succeed. By contrast, in an inert culture, employees are content to be told what to do and have little incentive or motivation to perform beyond minimum work requirements. As you might expect, the emphasis is on close supervision and hierarchical authority, which results in a culture that makes it difficult to adapt to a changing environment. Nokia is a good example of a company in which managers strive to create an adaptive culture. 19 Nokia s top managers, including its present CEO Jorma Ollila, have always believed that Nokia s cultural values are based on the Finnish character: Finns are down-to-earth, rational, straightforward people. They are also friendly and democratic people who do not believe in a rigid hierarchy based either on a person s authority or on social class. Nokia s culture reflects these values because innovation and decision making are pushed right down to the bottom line, to teams of employees who take up the challenge of developing the ever-smaller and more sophisticated phones for which the company is known. Bureaucracy is kept to a minimum at Nokia; its adaptive culture is based on informal and personal relationships and norms of cooperation and teamwork. To help strengthen its culture, Nokia built a futuristic open-plan steel and glass building just outside Helsinki. Here, in an open environment, its R&D employees can work together to innovate new kinds of cell phones focused on Nokia s company mission to produce phones that are more versatile, cheaper, and easier to use than competitors phones. This is the Nokia Way a system of cultural values and norms that cannot be written down but is always present in the values that cement people together and in the language and stories its members use to orient themselves to the company. Yet, as we noted before, Nokia is the cell phone company that is most sensitive to the need to appreciate the values, norms, and tastes of other nations. So the Nokia Way is not just confined to Finland; the company has taken it to every country around the globe in which it operates. Another company with an adaptive culture is GlaxoSmithKline, the prescription drug maker discussed earlier in the chapter. Much of GSK s success can be attributed to its ability to recruit the best research scientists because its adaptive culture nurtures scientists and emphasizes values and norms of innovation. Scientists are given great freedom to pursue intriguing ideas even if the commercial payoff is questionable. Moreover, researchers are inspired to think of their work as a quest to alleviate human disease and suffering worldwide, and GSK has a reputation as an ethical company whose values put people above profits. Although the experience of Nokia and GSK suggests that organizational culture can give rise to managerial actions that ultimately benefit the organization, this is not always the case. The cultures of some organizations become dysfunctional, encouraging managerial actions that harm the organization and discouraging actions that might improve performance. 20 For example, Sunflower Electric Power, an electricity generation and transmission cooperative, almost went bankrupt in the early 2000s. A committee of inquiry set up to find the source of the problem put the blame on Sunflower s CEO and decided he had created an abusive culture based on fear and blame that encouraged managers to fight over and protect their turf an inert culture. The CEO was fired, and a new CEO was appointed to change the cooperative s

15 Organizational Culture 83 culture, which he found hard to do because his top managers were so used to the old values and norms. With the help of consultants, he changed values and norms to emphasize cooperation, teamwork, and respect for others which involved firing many top managers. Clearly, managers can influence how their organizational culture develops over time. An interesting example of a manager who has been working hard to change a company s culture is profiled in the following Manager as a Person box. Manager as a Person Alan Mulally Transforms Ford s Culture After a loss of more than $13 billion in 2006, William Ford III, who had been Ford Motor s CEO for five years, decided he was not the right person to turn around the company s performance. 21 In fact, it became apparent that he was a part of Ford s problems because he and other Ford top managers tried to build and protect their own corporate empires, and none would ever admit that mistakes had occurred over the years. As a result the whole company s performance had suffered; its future was in doubt. Finally Ford s board of directors realized they needed an outsider to change Ford s culture and the way it operated, and they recruited Alan Mulally from Boeing to become Ford s new CEO. After arriving at Ford, Mulally attended hundreds of executive meetings with his new managers; and at one meeting he became confused why one top division manager, who obviously did not know the answer to one of Mulally s questions concerning the performance of his car division, had rambled on for several minutes trying to disguise his ignorance. Mulally turned to his second-in-command Mark Fields and asked him why the manager had done that. Fields explained that at Ford you never admit when you don t know something. He also told Mulally that when he arrived as a middle manager at Ford and wanted to ask his boss to lunch to gain information about divisional operations, he was told, What rank are you at Ford? Don t you know that a subordinate never asks a superior to lunch? 22 It turned out that over the years Ford had develop a tall hierarchy composed of managers whose main goal was to protect their turf and avoid any direct blame for its plunging car sales. When asked why car sales were falling, they did not admit to bad design and poor quality issues in their divisions; instead they hid in the details. They brought thick notebooks and binders to meetings, listing the high prices of components and labor costs to explain why their own particular car models were not selling well or even why they had to be sold at a loss. Why, Mulally wondered, did Ford s top executives have this inward-looking, destructive mind-set? Mulally soon realized the problem was the values and norms in Ford s culture that had created a situation in which the managers of its

16 84 Chapter 3 different divisions and functions thought the best way to maintain their jobs, salaries, and status was to hoard, rather than share, information. Thus values and norms of secrecy and ambiguity, and of emphasizing status and rank, to protect their information had developed. The reason why only the boss could ask a subordinate to lunch was to allow superiors to protect their information and positions. Ford s culture allowed managers to hide their problems and poor performance. What could Mulally do? He issued a direct order that the managers of every division should share with every other Ford division a detailed statement of the costs they incurred to build each of its vehicles. He insisted that each of Ford s divisional presidents should attend a weekly (rather than a monthly) meeting to share and discuss openly the problems all the company s division s faced. He also told them they should bring a different subordinate with them to each meeting so every manager in the hierarchy would learn of the problems that had been kept hidden. 23 Essentially, Mulally s goal was to demolish the dysfunctional values and norms of Ford s culture that focused managers attention on their own empires at the expense of the whole company. No longer would they be allowed to protect their own careers at the expense of customers. Mulally s goal was to create new values and norms that it was fine to admit mistakes, share information about all aspects of model design and costs, and of course find ways to speed development and reduce costs. He also wanted to emphasize norms of cooperation within and across divisions to improve performance. How could this situation have gone unchanged in a major car company that has been experiencing increased competition since the mid- 1970s? The answer is that the norms and values of an organization s culture are difficult to change; and despite Ford s major problems, no CEO had been able to change the mind-set of the top managers in the company. Ford had become more hierarchical and bureaucratic over time as its problems increased because poor performance led managers to become more defensive and concerned with defending their empires. By 2010 it was clear that Mulally had changed Ford s values and norms; the company finally reported a profit in the spring of 2010, for which Mulally received over $17 million in salary and other bonuses. Many managers who could not or would not conform to the new Ford culture were gone; the others were still learning to adjust their behavior to the new culture oriented to satisfying the needs of customers, not the needs of top managers. New Ford CEO Alan Mulally (left), with former CEO Bill Ford (right), who realized the company needed an outsider at the helm to change Ford s insular, self-protective culture.

17 Organizational Culture 85 The cultures of organizations can differ in a variety of ways. For instance, cultural uniformity, the strength of the firm s culture, the degree of formalization emphasized by cultural values, and the gap or differences between organizational culture and national culture can characterize the culture of an organization and determine how organizational culture influences employees. Moreover, the nature or type of organizational culture varies widely across organizations. There are different typologies of organizational cultures. Being able to classify and recognize the type of organizational culture present in the firm will make the identification of the values supported by the culture an easier task. Cultural Uniformity versus Heterogeneity Organizations vary in the extent to which a uniform culture is promoted throughout the company. In some large corporations, different subcultures might be found in the different branches and subsidiaries. This indicates managers in the company s headquarters allow the different branches or divisions to develop their own values and guiding principles as long as the major core values in the branches are the same as those used at headquarters. This cultural flexibility is justified by a need for each division to create its own identity, or by differences in goals and nature of activities. The dominant culture is emphasized throughout the firm but with some variations in some divisions and branches. In 2009, Etisalat received an award at the 3rd Middle East Customer Care Excellence Awards, organized by the Middle East Excellence Awards Institute. Etisalat won this award for its strong corporate culture and dedication to providing quality customer service. New employees in the company are immediately integrated into Etisalat s quality culture, thanks to the clear and structured processes they follow. These processes help managers to review and augment these systems, to ensure staff performs at consistently high levels. Etisalat has been named Best Operator in the Middle East five times in the last three years and was recently named Best International Carrier in the world at the World Communications Awards. 24 Neither uniformity nor heterogeneity is good or bad in a company. When cultural heterogeneity is promoted, branches and divisions are given flexibility and freedom to adjust the company s strategy and make it fit with the contingencies that are specific to the division or branch. Because of the specificities of these contingencies or product lines or production processes, cultural flexibility is needed to allow for a customer-responsive and innovation-driven culture. Culture versus Formalization Organizational culture might substitute for formal systems of control and decision making such as organizational structure, rules, procedures, policies, and direct supervision. When the values are widely supported by employees, compliance, predictability and consistency would be much easier to obtain. All employees understand the values that guide their actions in the company and trust between employees, commitment to the goals, and loyalty to the

18 86 Chapter 3 firm reduce the need for written documentation, formal rules and SOPs, and for monitoring and formal control mechanisms. When employees trust each other and are reliable and responsible; the need for these mechanisms decreases. For instance, CAD GULF LLC is a team-based organization focused on the roles and competencies of its people. Throughout the years, the company has been able to gather some of the best people in the industry, hone their skills and cross-train them in other aspects of the business. The result is a synergistic group living in a culture of excellence, professionalism, teamwork, and customer orientation. 25 National versus Organizational Culture A national culture can guide behaviors; for example Arabs tend to be more collectivistic while Americans are more individualistic. Teamwork with reward systems geared toward group performance might experience more success in Arab countries than in the US. The culture of the organization will be influenced not only by the national culture but also by regional influences, and ethnic and religious backgrounds and beliefs. By embracing diversity and through employee selection and socialization, organizations keep the best of the national culture and align it with the values supported by the founders and top managers vision. Some multinational companies deliberately attempt to create a culture that values diversity to fuel innovation and creativity and increase the company s capacity to quickly adjust to changes in the environment and to the ever-evolving customer needs. For instance, the fear of losing face in the Arab world is a significant restraint on creating new businesses. It tempers any desire that talented graduates might have to become entrepreneurs, steering them instead to the relative safety of an established family firm or a well-paid government job. This regional reticence is also, in part, a function of the culture s continuing respect for age. Young people are less likely than in the West to go against the wishes of their parents, and their parents views are almost certain to be more conservative than their own. This dynamic also plays out powerfully in family firms, where three generations may be working side by side. All will defer to the eldest, who in general will be one of the least inclined to take a gamble on a new business. What s more, as one leader puts it, In the Arab world almost everything is politicized, and governments are rarely encouraging to new business. 26 An increasing number of culture typologies are being used Types to identify various kinds of culture. Classifying the type of culture in an organization can be helpful to understand if the culture fits with the strategies of the firm or if some adjustments are needed to make them more aligned. The control mechanisms, the reward systems, and other procedures and standards are impacted by the type of culture and its characteristics. For instance, the adoption of formal or informal control mechanisms can be linked to the nature or type of culture emphasized in the organization. The type of culture has implications on how employees should be managed and what candidates should be hired. Cultural elements and their relationships within an organization create a pattern that is a unique part of that organization, creating an organization s culture. Several types of organizational culture can be described, namely the

19 Organizational Culture 87 bureaucratic culture, clan culture, entrepreneurial culture, and market culture. In Figure 3.2 the vertical axis reflects the relative formal control orientation within the organization, which ranges from stable control to flexible control. The horizontal axis, on the other hand, reflects the relative focus of attention of the organization, and ranges from internal functioning to external functioning. The farthest corners of the four quadrants correspond to four pure organizational cultural types, which are bureaucratic, clan, entrepreneurial and market. Each of the four organizational cultural types developed by Hellriegel et al. 27 will be briefly discussed. Bureaucratic Culture: This type of organization values rules, hierarchical coordination, formalization and standard operating procedures; with the long-term concerns being efficiency, predictability, and stability. Managers within a bureaucratic organization are good coordinators, organizers, and enforcers of rules and procedures that are clearly defined. The tasks, responsibilities, and authority for all the organization s employees are also clearly stated. For example, most municipalities and government Table 3-1 Organizational Culture Typology Type Characteristics Formal control Example Orientation and Forms of Attention Bureaucratic culture Rules, hierarchical coordination, formalization and standard operating procedures. Long-term concerns are efficiency, predictability, and stability. Managers are good coordinators, organizers, and enforcers of clearly-defined rules and procedures. Clan culture Tradition, loyalty, teamwork, personal commitment, and self-management. Employee contribution exceeds contractual agreements. Long-term commitment through a long and thorough socialization process. Entrepreneurial culture Strong peer pressure to adhere to important norms. High levels of risk-taking, dynamism, and creativity. Commitment to experimentation and innovation. Individual initiative, flexibility, and freedom are encouraged and rewarded. Reacts quickly to change and creates it. Market culture Achievement of measurable and demanding agreed upon goals. Contractual relationship between the employee and the organization. Concerns for competitiveness and productivity. Increased levels of performance are rewarded through increased compensation. Stable control and internal attention. Flexible control and internal attention. Flexible control and external attention. Stable control and external attention. McDonald s Health Matrix Group Chalhoub General Electric

20 88 Chapter 3 institutions have bureaucratic cultures, which can hinder their effectiveness and efficiency. The focus of attention of this organization is internal, and the formal control is stable. McDonald s promotes a bureaucratic culture throughout the organization as the company follows standard operating procedures and needs to emphasize homogeneity, coordination of activities, and control of work sequences. Setting routines to be followed by all McDonald s restaurants is essential for success. The need for co ordination, routinized work processes, formality, and respect of the chain of command outweighs the need for flexibility and informality. This is why a bureaucratic culture fits McDonald s vision and strategy. Clan Culture: Attributes of this type of organization are tradition, loyalty, teamwork, personal commitment, and self-management. The organization focuses its attention internally, yet its formal control is flexible. The members of this organization recognize an obligation that is beyond their job descriptions, with the understanding that their contributions to the organization may exceed their contractual agreements. Employees identify that their long-term commitment to their organization, in the form of loyalty, is in exchange for the organization s long-term commitment to the employee, in the form of security. Unity from this culture type is created through a long and thorough socialization process, where long-term clan members serve as mentors and role models for newer members. There is also strong peer pressure to adhere to important norms within the organization, and an environment is created in which few departments are left completely free from normative pressures, which may generate innovation and risk-taking behavior. Success of this type of organization is assumed to depend on teamwork, participation, consensus decision making, as well as employee sensitivity to customers and concern for people. According to Mishal Kanoo from Kanoo Group, the Arab business is not just run by the family; it is run for the family. A leader s success is not judged merely by financial results, but also by the sense of responsibility and commitment he gives to the family as a whole. The measure of commercial success lies more in retaining a strong family business culture and providing ongoing security for the family than it does in simply making profits. 28 Clan culture means working together with emphasis on concern for people. A good example of a collaborative culture or clan is Health Matrix, a company based in the Middle East, which provides innovative IT solutions for the growing healthcare market. Managers recognize that the company is only as good as its people, which is why they invest in top talent. According to the company s website, the goal of the company has always been to share its success by attracting, developing, and retaining top talent in a healthcare IT industry, and employees experience the company s commitment and dedication to the team. Health Matrix thrives in a highly collaborative culture of innovation and teamwork. The company respects relationships with coworkers, customers, owners, agents, suppliers, the community, and the environment and provides employees with a safe and fulfilling environment and an opportunity to grow and learn. 29 Leaders in the Arab world think of hiring people for life, of treating employees as an extension of their family. This puts a different angle on their ideas about fostering teams. Mohammed Alshaya says the key is to treat people as you would like to be treated. Mishal Kanoo believes in what he calls consultative leadership. This is the ability to negotiate with people so that they buy into your ideas. You won t get 100 percent of what you want, but 80 percent is not a bad goal to aim for. 30

21 Organizational Culture 89 LO3-3 Discuss the importance of organizational culture. Entrepreneurial Culture: This cultural form is characterized by high levels of risk-taking, dynamism and creativity. Employees are committed to experimentation, innovation, and being on the leading edge. This organizational culture type reacts quickly to change, as well as creates it due to the fact that individual initiative, flexibility, and freedom promoting growth are encouraged and rewarded. Effectiveness within this organization means providing new and unique products and rapid growth. The organization focuses its attention externally and formal control orientation is flexible in order to foster innovation and change. For instance, Group Chalhoub is guided by the philosophy of being Committed to Excellence. With the aim of optimizing performance of brands, providing quality service and offering a stimulating work environment, the group cultivates the core values of Excellence, Respect and Entrepreneurial Spirit. 31 Google develops innovative web tools, taking advantage of entrepreneurial software engineers and cutting-edge processes and technologies. Its ability to quickly develop new services and capture market share has made it a leader in the marketplace and forced competitors to catch up and revise their strategies. Market Culture: The achievement of measurable and demanding goals, especially those that are finance-based and market-based, are characteristics of this type of organizational culture. In this organization, the relationship between employee and organization is contractual, where the obligation of each is agreed in advance; therefore the formal control orientation is quite stable. This is because the employee is responsible for an agreed level of performance; with the organization exchanging this for an agreed level of remuneration and reward in return. Competitiveness and a profit-gaining orientation therefore exist throughout this organization because increased levels of performance from the employee are rewarded through increased compensation from the organization. Market cultures are concerned with competitiveness and productivity through emphasis on partnerships and positioning. General Electric, under the leadership of former CEO Jack Welch, is a good example of a market culture. He famously announced that if businesses divisions were not first or second in their markets then, simply, they would be sold. Its corporate culture was (and still largely is) highly competitive where performance results speak louder than process. 32 The Importance of Culture Organizational culture can be critical in determining the performance of the firm and its capacity to compete effectively in the market place and maintain and strengthen its competitive advantage. While culture may seem more of a concept than something that is physically real, the potential harm or potential benefit for the business might be real and careful attention is needed to properly manage organizational culture. Studies show that loyalty and commitment to the goals of the company are the result of an effective and positive organizational culture more than pay and benefits. Culture might also differentiate firms in the labor market and make some companies more attractive than others to job seekers. For instance, Qatar Airways which was ranked among the top 100 best companies to work for in the Middle East benefits from a competitive advantage that very few other companies in

22 90 Chapter 3 the industry have. With its organizational culture that focuses on creating an environment that nurtures employee skills, emphasizes collaboration and team work, values participation, delegation of authority, and empowerment of employees along with promoting a work environment where diversity is valued and supported, the company is able to attract talented job candidates and to recruit best employees which gives the company a competitive edge against rival companies. Organizational culture can help managers achieve objectives in several ways. Organizational culture helps create favorable conditions that facilitate the achievement of organizational goals. Each of the following aspects points out how organizational culture can help or hinder the achievement of organizational objectives. Employee Self-Management To direct and help employees achieve organizational goals, managers define jobs with job descriptions, create a structure and hierarchy to establish a chain of command and line of authority, dedicate resources to departments and units, and develop work schedules. While these mechanisms and actions guide employee actions, the company s goals will only be achieved when employees decide to behave the way the company desires. Organizational culture can induce employees to behave in a particular way without close supervision or formal control mechanisms. When employees support the organizational culture and feel part of it, they tend to conform to it as their own values match those promoted by the culture of the organization. Conversely, failure to comply with cultural norms generates social pressure to conform as the group will look down on those who do not conform with the norms and values emphasized by the culture; thus the employee will either adjust and align his or her behaviors and attitudes with the cultural expectations or face peer pressure which might lead to the departure of the employee when there is no willingness and readiness to conform. Much of this process through which the culture directs the actions and attitudes of employees occurs informally and in an unspecified manner. Stability Culture provides a sense of continuity in the midst of rapid change and intense competition. In industries operating in dynamic environments such as the high technology industry, culture ensures predictability, security, and comfort. Organizational culture ensures that employees can effectively adjust to the changing conditions in the environment and feel that they are in control and on track to achieve the goals of the organization and are confident that the company s strategies will lead to success. The stress caused by fierce competition in the market place, by the rapid adjustments and updates of product lines and services as they become quickly obsolete, by the need to continuously innovate and create new work routines or new products and services can be controlled and alleviated through organizational culture. Socialization Organizational culture subtly teaches employees the values of the organization. The process of internalizing or taking organizational values as one s own is called socialization. Socialization is a three-stage process. The first stage, prearrival, consists of the values, attitudes, biases, and expectations the employee

23 Organizational Culture 91 brings to the organization when first hired. These values are influenced by the background of the employee, his prior experiences, and the environment he lived in previously. The values of newcomers tell about their way to do things as learned from their culture and past experiences. Organizations try to select candidates that most likely fit into the company s culture. Even if the firm hires the right candidate whose values fit within those promoted by the business, it still has to learn the culture of the organization and adjust if there is a gap between his values and those of the company. When the employee joins the company and starts working in his new position, he reaches the encounter stage. At this point, the individual begins to compare his expectations about the firm s culture with the reality of the expectations set by the firm. For instance, the employee might have his own perception of what being punctual and on time to work means while the company has a very strict attendance policy. There is a misfit, in this case, between employee values as concretely translated into practice and the values promoted by the culture of the organization. When there is a gap between cultural expectations and reality, the employee has to adjust to the culture of the organization during the metamorphosis stage. Training programs are designed to help employees adjust their values to firm expectations. An organization can choose from among formal or informal, individual or collective, fixed or variable, serial or random, and investiture or divestiture socialization. Not all employees adjust successfully to the requirements of the culture and when the company fails to socialize employees, the employee might decide to leave the company and join a company that supports the same values he is supporting or the company might decide to terminate the employee if the gap prevents the employee from reaching organizational goals. While companies must maintain and strengthen their cultures through proper socialization, they also have to value employee diversity and promote an environment that nurtures employee skills and talents and where employees can capitalize on their own values and cultural background. This might also bring value to the company and help it strengthen its competitive position in the market place. Implementation of the Organization Strategy Organization strategy may support the achievement of the goals and the vision of the firm by supporting the implementation of the firm s strategies and desired changes in the strategy in case actual strategies are revised or changed. Organizational culture helps create the needed commitment to organizational goals. For high performance, the firm strategy and the culture must be aligned and ideally they must reinforce each other. Any change in the culture must be reflected in the strategy and vice versa. The shared values and norms make it easier for employees to support the company s strategy. Negative Culture While the company s culture may support the company s strategy and help with goal achievement, it might also lead to negative outcomes. For instance, a culture that is too strong and fully entrenched into one model and one set of values and norms that are constantly emphasized as being the best, might lack the capacity to adjust if change is needed to improve performance, strengthen

24 92 Chapter 3 LO3-4 Describe how to manage organizational culture. a competitive advantage, or even guarantee survival. A closed and inflexible culture might diminish the firm s capacity to adjust to the different forces in the environment and make any strategy revision very difficult to set and to implement. At the other extreme, when the values and norms are not constantly emphasized and reinforced, the company fails to achieve its goals as employees will show little support and commitment to organizational goals. When the values are not deeply held by employees and reinforced by managers, following the vision of the company becomes difficult and so would be the implementation of strategies to convey the vision. Each employee or group of employees will have his own interpretation of the company s values and norms, which leads to inconsistent actions that prevent the company from reaching its goals. A too strong or a too weak culture may harm performance and goal achievement. Managing Cultural Processes The culture of an organization evolves gradually over time. It starts with the founders of the company and is influenced by their beliefs and philosophy. Their vision for the company is usually reflected in the initial set of values and norms they develop for the firm. These beliefs and values are then transmitted to a group of close associates and different mechanisms are then set (e.g. training programs) to further transmit them to a larger number of employees as the company grows in size. Managers have to act as role models and lead the process of transmission and enforcement of cultural values to fellow employees. A variety of techniques and elements maintain and reinforce culture over time. Some may be deliberately imposed by management such as cultural symbols, rituals, and the choice of company heroes that embody the firm s values. Others may be largely unconscious processes such as the use of stories, language, and employee perception of the company s leadership style. Cultural Symbols Cultural symbols are the icons and objects that communicate organizational values such as flags, uniforms, or other logos. The management uses them to create a sense of belongingness and identity and convey and sustain shared meanings among employees. For example, holding classes for female students and classes for male students at the University of Sharjah symbolizes religious beliefs used as guiding values of the organizational culture at that university. Company Rituals and Ceremonies Organizations plan events and ceremonies to offer employees and stakeholders the opportunity to share cultural meanings. At the American University of Sharjah and AUB, graduation ceremonies at the end of every teaching semester convey the values and beliefs of the institution and delineate the use of the American model of higher education in these two universities. Company Heroes Organizations communicate their values to employees by identifying individuals whose deeds best reflect what the organization believes in so that other people and employees can reproduce their behavior and can use these

25 Organizational Culture 93 heroes as an inspiration to guide attitudes and actions in the workplace. For instance, the Al Fardan name has been strongly associated with pearl trading in the Arabian Gulf for over a century. The owners and managers of the group still see in its founder, Mr. Ibrahim Al Fardan a renowned pearl expert and trader a hero who still guides the vision and strategy of the group. In 1954 the chairman of the Group, Mr. Hassan Ibrahim Al Fardan, started the first establishment as the Al Fardan Jewellery showroom in the UAE. 33 Stories Organizational culture is sustained by the narratives and legends that capture the organization s values and beliefs. For instance, Dubai history highlights the role of HH Sheikh Ahmed bin Saeed Al Maktoum who has been at the forefront of Dubai s remarkable economic development for more than 25 years and who was appointed Chairman of Dubai World in December Under his leadership, Dubai World has entered a new phase of growth in line with Dubai s economic development. HH Sheikh Ahmed has been a highly successful corporate leader since 1985, when he was appointed President of the Dubai Department of Civil Aviation and Chairman of the newly launched Emirates Airline. The phenomenal growth of Dubai s aviation industry under his stewardship is testimony to HH Sheikh Ahmed s grand vision and foresight. He is now the Chairman and Chief Executive of Emirates Airline and Group. 34 Language The language used by managers is used to convey company values and promotes both positive and negative values. For example, the language used at Abu Dhabi Investment Authority is different than the language used at Dubai School of Government. The visions, missions, strategies, and objectives of the two institutions are different, so is the language used to convey cultural values and beliefs. Firms often use slogans to reflect their values and make stakeholders aware of the culture of the firm. The slogan for Abu Dhabi Commercial Bank (ADCB) is Our Knowledge. Your Future. Leadership Employee actions are influenced by how leaders behave in the organization. Effective leaders set a vision for the organization that employees will commit to and try to achieve. Leaders are also role models for employees. They provide a daily example of how to articulate the values in practice and emphasize the important values that employees have to follow. All the leaders interviewed for the Business Leadership in the Arab World report emphasized the importance of following their moral compass. As a leader, you are being challenged every day with issues that cut across your value system, says Loay Nazer, the founder in 1991 of Nazer Group, a holding company that has made a diverse range of entrepreneurial investments in Saudi Arabia and abroad. To establish leadership you have to have a pre-defined value system. 35 Organizational Policies and Decision Making Performance appraisals, budgets, new plans, and other policies and decisions clearly communicate company values and therefore the company s culture.

26 94 Chapter 3 The control mechanisms and the criteria used to measure performance reflect the values promoted by organizational culture. Employees learn what the company truly values when change is required in times of crisis. The need for restructuring, downsizing of company activities and to plan revisions will be handled in accordance with the most important values supported by the organization. The conservative and stable culture used at Toyota was emphasized when the company faced major crises throughout its history but refused to adopt a massive layout strategy. Toyota s culture values seniority and creates loyalty and commitment to the company s goals and vision. Cultural values are communicated by the ways employees are rewarded. In top-tier research universities, promotions and salary increases are tied to research productivity and quality of faculty publications while teaching universities reward faculties based on their course evaluations and on other indicators of their teaching performance. Summary and Review LO3-1 HOW TO SHAPE ORGANIZATIONAL CULTURE Organizational culture is shaped by the interaction of four main factors: the personal and professional characteristics of people within the organization, organizational ethics, the nature of the employment relationship, and the design of its organizational structure. These factors work together to produce different cultures in different organizations and cause changes in culture over time. LO3-2 LO3-3 LO3-4 CHARACTERISTICS OF ORGANIZATIONAL CULTURE Organizational culture is a system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Organizational culture reflects employees and managers views about how things get done in the organization. Culture gives meaning to actions and procedures within an organization and may be considered as the glue that holds organizational members together and what keeps them focused without deviating from the achievement of organizational goals. The culture specific to each firm affects how employees feel and act as well as the type of employee hired and retained by the company. THE IMPORTANCE OF CULTURE Organizational culture can be critical in determining the performance of the firm and its capacity to compete effectively in the market place and maintain and strengthen its competitive advantage. While culture may seem more of a concept than something that is physically real, the potential harm or potential benefit to the business might be real and careful attention is needed to properly manage organizational culture. The culture can support employee self-management, increase stability, smoothen the socialization process, and facilitate the implementation of the organization strategy. MANAGING CULTURAL PROCESSES The culture of an organization evolves gradually over time. It starts with the founders of the company and is influenced by their beliefs and philosophy. A variety of techniques and elements maintain and reinforce culture over time. Some may be deliberately imposed by management such as cultural symbols, rituals, and the choice of company heroes that embody the firm s values. Others may be largely unconscious processes such as the use of stories, language, and employee perception of the company s leadership style.

27 Management in Action Topics for Discussion and Action Discussion 1. How does organizational culture emerge? [LO3-1] 2. How do managers select the characteristics and dimensions to include in the culture? [LO3-2] 3. Discuss the different types of culture that could possibly be implemented in a firm. Explain how managers select one type over the others and analyze the factors that explain their choice. [LO3-2] 4. Why is culture so needed in a firm? How does it help the firm reach a good level of performance? [LO3-3] 5. How can organizational culture be managed through artifacts? Provide examples of these artifacts and discuss how they can be used to maintain and strengthen the culture. [LO3-4] Action 6. Interview a manager and identify the type of organizational culture that his organization has implemented. Why is the organization using this type of culture? Do you think other types might be more appropriate? Which one(s)? Explain. [LO3-2] 7. Interview some employees of an organization, and ask them about the organization s values and norms, the typical characteristics of employees, the organization s ethical values, cultural dimensions, and the artifacts. Using this information, try to describe the organization s culture and the way it affects how people and groups behave. [LO3-1, 3-2, 3-4] Building Management Skills Understanding Organizational Culture [LO 3-1, 3-2, 3-4] Think of an organization with which you are familiar, perhaps one you have worked for, such as a store, restaurant, bank, office, or school. Then answer the following questions: 1. Describe the dimensions of its organizational culture. Were innovation and risk-taking part of these dimensions? Be specific. 2. How did this organizational culture emerge? 3. What role did organizational culture play to guarantee the stability and performance of the company? 4. Different artifacts are used to manage organizational culture and perpetuate it. These artifacts include language, symbols, stories, heroes, rituals, and ceremonies. How were these artifacts used in the organization to maintain and manage organizational culture? 5. Can you think of any additional action that the managers could take to reinforce organizational culture or to change it? 6. Was the culture bureaucratic, clan-oriented, entrepreneurial, or more market-driven? Explain. 7. What made the company s managers decide to adopt a specific type of culture instead of another one? Explain. 8. How did the internal and the external environments of the firm influence organizational culture? Provide specific examples. 9. What advice would you give to the company s managers to help them improve the culture of their firm? 95

28 Managing Ethically [LO3-1, 3-2] Suppose an organization has just recruited a new management team and started laying off many of its middle managers. The new top managers decided to terminate all managers who disagree with the cultural change that the new top managers want to introduce. They want to move from a bureaucratic culture characterized by centralized decision making and low employee empowerment to a more entrepreneurial culture emphasizing more decentralized decision making and more employee empowerment. The new managers believe that all those who disagree with their vision have to leave the company. Some high performing middle managers who spent most of their careers in the company have been laid off. Think of the ethical issues involved in designing a hierarchy, and discuss the following issues. Questions Small Group Breakout Exercise Leena s Jewelry [LO3-1, 3-2, 3-3] 1. Do you think managers can decide to lay off high performing employees just because they disagree with their vision? Explain what you would have done if you were part of the new management team appointed in this company. 2. Some people argue that employees who have worked for an organization for many years have a claim on the organization at least as strong as that of its stakeholders. What do you think of the ethics of this position can employees claim to own their jobs if they have contributed significantly to the organization s past success? Form groups of three or four people, and appoint one member as the spokesperson who will communicate your findings to the class when called on by the instructor. Then discuss the following scenario: Leena s Jewelry sells and services high-end jewelry and luxury watches. Over the years, the company has developed a good reputation for the quality of its products and for its excellent customer service. However, the store was run as a small business and the owner Leena Munajed never thought of designing formal plans, of setting a formal structure, or devising a long-term vision for the company. While her experience in the field (as she worked in a jewelry store when she was a student) helped her succeed in the field, her lack of management skills prevented her from expanding the business rapidly. The deepening economic crisis and the fierce competition faced from more established jewelry stores are threatening the expansion and the longterm survival of Leena s Jewelry. You are a team of local consultants whom Leena has called in to advise her as she tries to learn about how to manage her business. She asked you to help her answer these questions: 1. How can she build an organizational culture and how does she pick the right one? 2. How can she improve effectiveness and efficiency by picking the right culture for her firm? 3. Leena wants to expand to one of the neighboring GCC countries. She thinks that expanding could help generate more revenues and profits. She is asking you to help her figure out whether the culture of the new branch should be similar or different from the original one and the advantages and disadvantages of having dissimilar cultures in the different branches. Exploring the World Wide Web [LO3-1, 3-2] Go to the website of the Emirates Group ( Click on Our Vision and Values. Explore the values promoted by the group. 1. What values are promoted by the Emirates Group? How do you think promoting these values has helped the group be successful? Browse the group s website and identify the type of organizational culture used. Is it the best culture to use? Is there any other alternative culture that could be used by the Emirates Group? Explain.

29 Be the Manager [LO3-1, 3-2, 3-3, 3-4] You have been hired as a middle manager in a large multi-branch furniture store. The company is seeking to expand internationally and is in the process of selecting foreign suppliers to lower its dependence on local suppliers and diversify its supply sources. The company s top managers delegated their powers to you and charged you to negotiate and to sign on their behalf the contracts with the new suppliers. The top managers briefed you on how crucial these contracts are to secure the firm s expansion and asked you not to disappoint them even when sealing the deal requires bribery and binding the rules. The company promotes a clanoriented and ethical culture and managers do their best to act as role models for the rest of the employees. Bribing and acting unethically are not part of the values you personally support. However, you know how important these deals are for your company and for your future career in the company. 1. How do you think you should act? Follow the guidelines that were given by your bosses or follow your values and beliefs? Why? 2. Do you think the culture should reflect the values and beliefs of the top managers? Are there inconsistencies between the way cultural values are outlined and the way the top managers act? 3. If top managers keep separating between written values and actions, the company would most probably fail in the long run. What cultural changes do you suggest to make the values more aligned with the actions? 97

30 A MANAGER S CHALLENGE The Journey to Becoming a Successful Multinational Telecommunication Giant In 1987, the Qatari government established a new corporation, Qatar Public Telecommunications Corporation (QPTC), to offer local telecommunication services. QPTC s main purpose at that time was to operate the existing landline network. A few years later, QPTC introduced a number of services such as cable television and mobile telephone services, but still locally. In the mid- 1990s the Qatari government started a privatization program, aiming to reduce government ownership in major public corporations. Qatar Telecom (Qtel), the successor to QPTC, was the first to be sold in an initial public offering (IPO) in 1998, but the real change in Qtel s vision, structure, and culture did not start until In that year, Qtel launched its reorganization program, Q-Turn, with a new vision of being among the top 20 Telecommunication Companies in the world by In pursuit of its new vision, Qtel launched new services locally, established joint ventures regionally and acquired international telecommunication companies. Now, Qtel has a presence in 17 countries across three regions: the Middle East, North Africa, and South East Asia. In total, it provides coverage to a population in excess of one billion people, with 75 million consolidated subscribers, and it is still committed to expansion in those three and other regions. The growth in the company profile was Qtel s head office in Doha.

31 accompanied by a change in how the company manages and cares about its employees and the local community. To build employee loyalty, Qtel provides its employees with advancement opportunities. Indeed, most of Qtel s executives have been promoted from within. One of them is Mr. Waleed Al-Sayed, who joined Qtel in 1987 and worked as a sales representative. Mr. Al-Sayed moved up through the organization s hierarchy until he was appointed Chief Operating Officer. Qtel employees are offered numerous training and development opportunities, including sponsorship and scholarship, personal development plans, succession planning and leadership development. Mr. Al-Sayed explained: When we interview people for hiring, we try to move away from negotiating the financial package to illustrating development as well as advancement opportunities in Qtel. That being said, Qtel employees also have access to a variety of benefits ranging from medical insurance to subsidized telecommunication services and end-of-year financial bonuses. Qtel s efforts in improving the work environment, engaging in a variety of corporate social responsibility programs (CSR), pursuing appealing vision and operating a customer-oriented business all paid off. Seventy percent of customers in Qatar, for example, prefer Qtel. Qtel also has received many international awards 15 in 2010 alone including the Recognized for Excellence Award from EFQM, the Best New Telecoms Service at the Comms MEA Awards, and two top awards at Asia s Best Employer Brand Awards. LO3-1 List and discuss the four sources of organizational culture. As the story of Qtel suggests, becoming a successful Overview company is not easy and requires a lot of effort. Plans need to be designed and then implemented and concrete actions need to be taken to make these plans a reality. All these initiatives to improve the competitive position of the company are the consequences of a vision set by the owners of the firm and/or its top managers. These actions contribute to shaping the culture of the organization defined as the way things are done in the business. A specific vision, employee diversity, and a mix of resources, policies, and plans among others make the company s culture unique in comparison with other organizational cultures including those of competing firms. In this chapter, we study organizational culture, the sources and the types of organizational cultures, the importance of organizational culture and how to manage organizational culture. By the end of this chapter, you will understand how organizational culture impacts the management of organizations.

32 Where Does Organizational Culture Come From? Organizational Culture 73 In managing organizational culture, some important questions that arise are these: Where does organizational culture come from? Why do different companies have different cultures? Why might a culture that for many years helped an organization achieve its goals suddenly harm the organization? Organizational culture is shaped by the interaction of four main factors: the personal and professional characteristics of people within the organization, organizational ethics, the nature of the employment relationship, and the design of its organizational structure (see Figure 3.1). These factors work together to produce different cultures in different organizations and cause changes in culture over time. Characteristics of Organizational Members The ultimate source of organizational culture is the people who make up the organization. If you want to know why organizational cultures differ, look at how the characteristics of their members differ. Organizations A, B, and C develop distinctly different cultures because they attract, select, and retain people who have different values, personalities, and ethics. 1 People may be attracted to an organization whose values match theirs; similarly, an organization selects people who share its values. Over time, people who do not fit in leave. The result is that people inside the organization become more similar, the values of the organization become more pronounced and clear-cut, and the culture becomes distinct from those of similar organizations. 2 Figure 3.1 Sources of an Organization s Culture Characteristics of organizational members Organizational ethics Organizational culture The employment relationship Organizational structure

33 74 Chapter 3 The fact that an organization s members become similar over time and come to share the same values may actually hinder their ability to adapt and respond to changes in the environment. 3 This happens when the organization s values and norms become so strong and promote so much cohesiveness in members attitudes that the members begin to misperceive the environment, as did Ford s top managers. 4 Companies such as Ford, Emirates Airline, SABIC or NBAD need a strong set of values that emphasize innovation and hard work; they also need to be careful their success does not lead members to believe their company is the best in the business. Companies frequently make this mistake. One famous example is the CEO of Digital Equipment, who in the 1990s laughed off the potential threat posed by PCs to his powerful minicomputers, claiming, Personal computers are just toys. This company no longer exists. 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. Organizational Ethics The managers of an organization can set out purposefully to develop specific cultural values and norms to control how its members behave. One important class of values in this category stems from organizational ethics, which are 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. Ethical values rest on principles stressing the importance of treating organizational stakeholders fairly and equitably. Managers and employees are constantly making choices about the right, or ethical, thing to do; and to help them make ethical decisions, top managers purposefully implant ethical values into an organization s culture. 5 Consequently ethical values, and the rules and norms that embody them, become an integral part of an organization s culture and determine how its members will manage situations and make decisions. At the Emirates Group, great value is placed on corporate citizenship and social responsibility and the belief that business ethics are integral to continued success. Each member of staff s commitment towards ongoing improvement combines to maintain the competitive edge of our operation in global markets. 6 The Employment Relationship A third factor shaping organizational culture is the nature of the employment relationship a company establishes with its employees via its human resource policies and practices. Recall from Chapter 1 our discussion of the changing relationship between organizations and their employees due to the growth of outsourcing and employment of contingent workers. Like a company s hiring, promotion, and layoff policies, human resource policies, along with pay and benefits, can influence how hard employees will work to achieve the organization s goals, how attached they will be to the organization, and whether they will buy into its values and norms. 7 As we discuss in Chapter 11, an organization s human resource policies are a good indicator of the values in its culture concerning its responsibilities to employees. Consider the effects of a company s promotion policy, for example: A company with a policy of promoting from within will fill higher-level positions with employees who already work for the organization. On the other hand, a company with a policy of promotion from without will fill its open positions with qualified outsiders. What does this say about each organization s culture? Promoting from within will bolster strong values and norms that build loyalty, align employees goals with the organization, and encourage employees to work hard to advance within the organization. If employees see no prospect

34 Organizational Culture 75 of being promoted from within, they are likely to look for better opportunities elsewhere, cultural values and norms result in self-interested behavior, and cooperation and cohesiveness fall. The tech sector has gone through great turmoil in recent years, and over 2 million US tech employees lost their jobs during the 2000s because of outsourcing and the recession. Apple, HP, and IBM known for their strong employee-oriented values that emphasized longterm employment and respect for employees were among the many companies forced to lay off employees, and their cultures have changed as a result. To rebuild their cultures, and make their remaining employees feel like owners, many companies have HRM pay policies that reward superior performance with bonuses and stock options. 8 For example, Southwest Airlines and Google established companywide stock option systems that encourage their employees to be innovative and responsive to customers. Dubai Properties Group (DPG), a member of Dubai Holding, fosters a culture of collaborative learning. Employees are their greatest assets. The outcome of the knowledge transfer initiative will have a profound impact on DPG competitiveness and productivity through better leveraging of knowledge. The company empowers recently qualified employees to spearhead new projects and leverage the expertise of professionals with DPG to drive the business forward. Organizational Structure We have seen how the values and norms that shape employee work attitudes and behaviors derive from an organization s people, ethics, and HRM policies. A fourth source of cultural values comes from the organization s structure. Different kinds of structure give rise to different kinds of culture; so to create a certain culture, managers often need to design a particular type of structure. Tall and highly centralized structures give rise to totally different sets of norms, rules, and cultural values than do structures that are flat and decentralized. In a tall, centralized organization people have little personal autonomy, and norms that focus on being cautious, obeying authority and respecting traditions emerge because predictability and stability are desired goals. In a flat, decentralized structure people have more freedom to choose and control their own activities, and norms that focus on being creative and courageous and taking risks appear, giving rise to a culture in which innovation and flexibility are desired goals. Whether a company is centralized or decentralized also leads to the development of different kinds of cultural values. By decentralizing authority and empowering employees, an organization can establish values that encourage and reward creativity or innovation. In doing this, an organization signals employees that it is okay to be innovative and do things their own way as long as their actions are consistent with the good of the organization. Conversely, in some organizations it is important that employees do not make decisions on their own and that their actions be open to the scrutiny of superiors. In cases like this, centralization can be used to create cultural values that reinforce obedience and accountability. For example, in nuclear power plants, values that promote stability, predictability, and obedience to authority are deliberately fostered to prevent disasters. 9 Through norms and rules, employees are taught the importance of behaving consistently and honestly, and they learn that sharing information with supervisors, especially information about mistakes or errors, is the only acceptable form of behavior. 10 At Deloitte Middle East, the diversity of each and every one is valued. With each member firm operating independently but united by a common vision, Deloitte gives its branches the opportunity to feel part of a local community led by global

35 76 Chapter 3 LO3-2 Discuss the characteristics and types of organizational culture. standards. While the culture in each of the Middle East member firms varies, it is characterized by a combination of world-class leaders and regional pragmatism, producing a conducive environment to feed growth and self-exploration while making sure short-term objectives are always kept in sight. 11 An organization that seeks to manage and change its culture must take a hard look at all four factors that shape culture: the characteristics of its members, its ethical values, its human resource policies, and its organizational structure. However, changing a culture can be difficult because of the way these factors interact and affect one another. 12 Often a major reorganization is necessary for a cultural change to occur. Characteristics of Organizational Culture Organizational culture is a system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Organizational culture reflects employees and managers views about how things get done in the organization. Culture gives meaning to actions and procedures within an organization and may be considered as the glue that holds organizational members together and what keeps them focused without deviating on the achievement of organizational goals. The culture specific to each firm affects how employees feel and act as well as the type of employee hired and retained by the company. There are three aspects of an organization s culture; the most obvious is visible culture or the aspects of organizational culture that one can hear, see, or feel. For instance, the dress code conveys order and homogeneity of organizational culture, the furniture or office layout might tell about the values of competitiveness and aggressiveness versus consensus and harmony promoted by the culture, assigned parking spots according to rank, or cafeteria policies are a few rules and dimensions through which an observer can sense, feel and assess the culture of an organization. The visible aspects of the culture represent the first aspects mostly superficial that we see, hear, or feel when we first interact with a culture. The signs of a visible culture make it possible to study dominant cultural characteristics such as whether the organization is competitive or values harmony, formal or informal, hierarchical or egalitarian, liberal or conservative. For instance, firms where managers use an open door policy or management by walking tend to value informal communication, empowerment of employees, and to decentralize decision making. At a deeper level, espoused values are not readily observed but instead are the ways managers and employees explain and justify actions and decisions. Espoused values are those values that are expressed on behalf of an organization or that are expressed as explanations for policies or actions. Managers might explain that major layoffs or restructuring are a response to the economic crisis and decrease in sales volumes; they might argue the adoption of a structure that values formal communication and respect of hierarchy, rank, and seniority was promoted for the sake of keeping the company s activities under control and avoiding deviation from the objective. Promoting an innovative culture or a customer-responsive culture might be promoted to keep the company s competitive advantage, compete more effectively against other firms in the industry, or adjust to a changing market or changing needs and demand of customers. Managers might not, however, give the real reason behind their actions. For instance, they might not tell that massive layoffs or restructuring is driven

36 Organizational Culture 77 by profit maximization only and not justified by a drop in demand or difficult financial situation. They might not tell the truth about why promotions and salary increases were given to some employees and not to others, arguing that they were distributed based on merit while in reality they were assigned and given based on personal relationships and friendships. Usually, if a gap exists between the espoused values as highlighted by managers in their discourse and how they are managed in reality, employees will rapidly find out and will quickly spot the hypocrisy of the culture. Managers who are not honest about why actions were taken may create an organizational culture that encourages dishonesty and cynicism, and is characterized by a lack of ethics as managers who are supposed to lead by example, act as role models, and set an example for the rest of the company are not playing their role. This will eventually translate into poor firm performance because trust between employees and managers is missing and because employees will most probably deviate from the culture as it is not enforced by managers. For Naguib Sawiris, executive chairman of Orascom Telecom Holding, The value of sticking to principles and not giving people what they thought they could get by threats, extortion, or blackmail is just enormous. Ibrahim Dabdoub from National Bank of Kuwait says, succinctly, You can t be a crook and a leader at the same time. In the Middle East, loyalty is important. Loyalty to networks, to the tribe, and to an ethnic or religious group, continues to play a key role in the region. Although Westerners tend to view this trait with a degree of cynicism, for most leaders in the region wasta gives them a feeling of trust in their business dealings. It is the underpinning for the culture of my word is my bond. Espoused values may vary substantially across organizations and reflect the importance of the role played by managers in conveying the values that shape employee attitudes towards work and expected behaviors. Espoused values are generally consciously and explicitly communicated. At the center of organizational culture are core values that are widely shared, operate unconsciously, and are considered fundamental to the culture and non-negotiable. In some organizations, a basic assumption might be that stability and commitment of the workforce are critical for success. Consequently, employees are valued, rewarded for goal-achievement, are treated fairly, and are empowered and encouraged to contribute in decisions. The opposite would be that stability and commitment of employees are not critical for the company s success. This will translate into more formal controls, no established reward systems and low motivation, no delegation of authority, lack of empowerment and centralization of decision making. Employees are seen as commodities and an expense that should be minimized. They are easily replaceable and are a means through which the company reaches its ends. There will be detailed standard operating procedures and rules detailing what employees can do and what they cannot do, and managers believe that it is their duty to prevent deviations from the norms and to emphasize rigor, order, respect of the hierarchy, and formality. A climate of suspicion, sabotage, and whistleblowing will flourish in the organization as employees will tend to see their colleagues as enemies they are competing against and not as collaborators. Negative competition will be encouraged leading to a lack of harmony within the firm. In the Arab world, some of the values promoted by organizational culture are specific to the local culture. For example, Mohammed Alshaya, Executive Chairman of Kuwait-based M.H. Alshaya Co., the retail division of the Alshaya Group of companies like his father before him, will not enter into ventures that involve selling alcohol or tobacco. He says, We shy away from many opportunities that we don t feel fit with our culture. Group Chalhoub

37 78 Chapter 3 is guided by the philosophy of being Committed to Excellence. With the aim of optimizing performance of brands, providing quality service and offering a stimulating work environment, the group cultivates the core values of Excellence, Respect and Entrepreneurial Spirit. 13 The following Management Insight box highlights the values used by the Qatar Museums Authority (QMA). Management Insight The Qatar National Museum in Doha. It s Another Exciting Day at Work The Qatar Museums Authority (QMA) was founded in late 2005 as a successor to the National Council for Culture, Heritage and the Arts. QMA s purpose is to manage the resources of all museums in the State of Qatar, to develop cultural institutions such as museums and galleries, and to provide an effective system for collecting, protecting, preserving, and interpreting historic sites, monuments, and artifacts. In 2007 a new managerial team headed by Mr. Abdullah Al-Najjar was appointed. The new leadership thought that QMA s aims would not be achieved unless a new organizational culture was developed. As Mr. Al-Najjar phrased it, We want our employees to wake up in the morning saying, I m going to QMA today because it ll be another exciting day. To build this vision, the leadership team introduced a new set of values. Seven core values were identified, as follows: Passionate: Inspire others, love our work; Empowering: Enable leadership and responsibility; Collaborative: Work as a team with colleagues and partners; Creative: Harness our talent for invention and innovation; Professional: Excellence and efficiency in all we do; Ethical: Firm adherence to ethical standards; and Communicative: Accessible and transparent in our interactions. To support the implementation of these values, the organization went through a reorganization process. One outcome of the process was empowering the human capital department to act as an agent for change. With full support from the leadership team, the traditional electronic attendance monitoring system was dropped. Employees work became task-driven rather than time-driven. Tasks and projects were performed and completed in teams. Improvements were also introduced in the workplace. A new health and fitness center, a nursery and a prayer room were opened on campus. Employees were also encouraged to take breaks and join their colleagues for coffee, breakfast, or lunch in the stylish new cafeteria and discuss off-work topics. The leadership team also joins the various departments over breakfast once a month to encourage open communication. Recently, QMA has provided its employees with health insurance coverage and shopping discount cards. The Chief Human Capital Officer summarizes all of this in a few words: You look after our business and we look after you. 14

38 Organizational Culture 79 The basic underlying cultural assumptions create the lenses through which people perceive and interpret events. For instance, production line employees engaging in a conversation on the job might be perceived as an attempt to goof off and relax while on the job, which will decrease worker productivity and lead to a drop in performance. Employees are perceived as trying to take advantage of the culture and exploit any loopholes. In other companies, this conversation might indicate employee commitment to improving work processes and their engagement to promote collaborative work and to finding better ways to do the work as sharing of ideas and communication on issues related to how to perform the job and improve work processes was done through this conversation. Positive or negative interpretation of employee actions depends on these cultural assumptions and their impact on perceptions and interpretations of events. Research indicates that there are seven dimensions that describe organizational culture; 15 each of the seven dimensions ranges from low to high, meaning that it is not a characteristic of the culture (low rating) or is a characteristic of the culture (high rating). Characterizing the organizational culture by using these dimensions gives a description of the underlying values used and promoted in the company. Attention to detail: degree to which employees are expected to exhibit precision, analysis, and attention to detail. In industries necessitating precision and craftsmanship, attention to detail is essential to reach organizational goals. For instance, in companies such as Louis Vuitton or Hermès, the brand name is built on such values, which are communicated to employees and perpetuated through socialization and training programs. The diversified nature of Qatar Foundation s business requires creativity and some risk-taking to achieve our goals. Leadership plays a pro-active role in this regard by promoting a culture of trust, where employees are allowed to harness their individual talents to the full. 16 Innovation and risk-taking: degree to which employees are encouraged to be innovative and to take risks. The culture of financial institutions such as Citibank and JPMorgan is a risk-taking culture. Traders are encouraged to take calculated risks when trading stocks and currencies for the benefit of the bank. Stability: degree to which organizational decisions and actions emphasize maintaining the status quo. The culture of Toyota emphasizes stability and conservatism. Even in their worst crises, the managers preferred to keep employees and looked for other ways to solve the crisis instead of resorting to major layoffs. Aggressiveness: degree to which employees are aggressive and competitive rather than cooperative. At Kanoo group, a culture based on employee cooperation and teamwork is promoted. In most US corporations, competition between teams, divisions, and units is used to fuel productivity and performance. Team orientation: degree to which work is organized around teams rather than individuals. Qatar airways seek team-oriented candidates to fill its cabin-crew positions. The same cultural dimension is present at Emirates Airlines. People orientation: degree to which management decisions take into account the effects on people in the organization. For instance, continuous

39 80 Chapter 3 learning and development is one of the core values of NBAD s corporate culture since it enables the staff to contribute effectively to developing innovative, efficient, and secure products and services to allow customers to enjoy the most convenient banking experience. Investing in career development will ultimately support the achievement of business strategies through staff commitment and engagement, increased retention rates, and the enhancement of intellectual assets. 17 Outcome orientation: degree to which the managers focus on results or outcomes rather than on how these outcomes are achieved. At the Emirates Group, great value is placed on corporate citizenship and social responsibility and business ethics are integral to continued success. Each member of staff s commitment towards ongoing improvement combines to maintain the competitive edge of the operation in global markets. At Emirates, managers believe that employees are their greatest asset and their contribution to the staggering pace at which the company grows cannot be underestimated. 18 The following Ethics in Action box depicts some of the cultural characteristics of Al Jazeera, mainly their people and innovation orientations. Focus on Diversity Diversity at Al Jazeera Sami Al Hajj, a Sudanese journalist working for the Al Jazeera network, was arrested in 2001 while on his way to do camera work for the network in Afghanistan and sent to the United States Guantanamo Bay detainment camp in Cuba for over six years before being released without any charge on May 1, Al Hajj was the only journalist to be held in Guantanamo. In response to this detention, Al Jazeera launched a global campaign to release him. At the same time, the Arabic network did not forget its responsibility toward Al Hajj s family. His full monthly salary and all other benefits were provided to his family as if he were still doing his full-time job. After being released from Guantanamo, Al Hajj was promoted and then appointed the director of a new department established to defend journalists worldwide. Many of Al Jazeera s correspondents and journalists are arrested, injured and even killed while doing their work, so what makes working for Al Jazeera worthwhile? Al Jazeera has more than 65 bureaus across the globe, more than 3,000 staff members across the world, including more than 400 journalists from more than 60 countries. It is inevitable that the workforce in such an organization will be diverse because of the international nature of its operation; nevertheless, Al Jazeera believes in the importance of diversity to the extent that even in its headquarters in Qatar, there are employees from more than 55 nationalities. Al Jazeera was voted by brandchannel.com readers in 2004 as the fifth most influential global brand, behind Apple, Google, Ikea, and Starbucks. Other important features fueling the success of the network besides diversity are empowerment and flexibility. Producers, presenters, and editors are fully empowered in determining what to present and how to present it

40 Organizational Culture 81 as long as it fits with the network code of ethics. Flexibility is important to achieve agility, meaning having the right person in the right place at the right time. Al Jazeera s coverage of the Arab Spring is a good example of this agility. Therefore, it is emphasized in Al Jazeera Laws that Al Jazeera doesn t create events but is always at their heart. Strong, Adaptive Cultures versus Weak, Inert Cultures Many researchers and managers believe that employees of some organizations go out of their way to help the organization because it has a strong and cohesive organizational culture an adaptive culture that controls employee attitudes and behaviors. Adaptive cultures are those whose values and norms help an organization to build momentum and to grow and change as needed to achieve its goals and be effective. By contrast, inert cultures are those whose values and norms fail to motivate or inspire employees; they lead to stagnation and, often, failure over time. What leads to a strong adaptive culture or one that is inert and hard to change? Researchers have found that organizations with strong adaptive cultures, like 3M, UPS, Microsoft, and IBM, invest in their employees. They demonstrate their commitment to their members 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 spend a lot of money on training and development to increase employees value to the organization. In these ways, terminal and instrumental values pertaining to the worth of human resources encourage the development of supportive work attitudes and behaviors. 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 (ESOPs) are developed in which workers as a group are allowed to buy a significant percentage of their company s stock. Workers who are owners of the company have additional incentive to develop skills that allow them to perform highly and search actively for ways to improve quality, efficiency, and performance. At Dell, for example, employees may still buy Dell stock at a steep 15% discount, and this will allow them to build a sizable stake in the company over time if its performance recovers. Some organizations, however, develop cultures with values that do not include protecting and increasing the worth of their human resources as a major goal. Their employment practices are based on short-term employment according to the needs of the organization and on minimal investment in employees who perform simple, routine tasks. Moreover, employees are not often rewarded on the basis of their performance and thus have little incentive to improve their skills or otherwise invest in the organization to help it achieve goals. If a company has an inert culture, poor working relationships frequently develop between the organization and its employees, and instrumental values of noncooperation, laziness, and loafing and work norms of output restriction are common.

41 82 Chapter 3 Moreover, an adaptive culture develops an emphasis on entrepreneurship and respect for the employee and allows the use of organizational structures, such as the cross-functional team structure, that empower employees to make decisions and motivate them to succeed. By contrast, in an inert culture, employees are content to be told what to do and have little incentive or motivation to perform beyond minimum work requirements. As you might expect, the emphasis is on close supervision and hierarchical authority, which results in a culture that makes it difficult to adapt to a changing environment. Nokia is a good example of a company in which managers strive to create an adaptive culture. 19 Nokia s top managers, including its present CEO Jorma Ollila, have always believed that Nokia s cultural values are based on the Finnish character: Finns are down-to-earth, rational, straightforward people. They are also friendly and democratic people who do not believe in a rigid hierarchy based either on a person s authority or on social class. Nokia s culture reflects these values because innovation and decision making are pushed right down to the bottom line, to teams of employees who take up the challenge of developing the ever-smaller and more sophisticated phones for which the company is known. Bureaucracy is kept to a minimum at Nokia; its adaptive culture is based on informal and personal relationships and norms of cooperation and teamwork. To help strengthen its culture, Nokia built a futuristic open-plan steel and glass building just outside Helsinki. Here, in an open environment, its R&D employees can work together to innovate new kinds of cell phones focused on Nokia s company mission to produce phones that are more versatile, cheaper, and easier to use than competitors phones. This is the Nokia Way a system of cultural values and norms that cannot be written down but is always present in the values that cement people together and in the language and stories its members use to orient themselves to the company. Yet, as we noted before, Nokia is the cell phone company that is most sensitive to the need to appreciate the values, norms, and tastes of other nations. So the Nokia Way is not just confined to Finland; the company has taken it to every country around the globe in which it operates. Another company with an adaptive culture is GlaxoSmithKline, the prescription drug maker discussed earlier in the chapter. Much of GSK s success can be attributed to its ability to recruit the best research scientists because its adaptive culture nurtures scientists and emphasizes values and norms of innovation. Scientists are given great freedom to pursue intriguing ideas even if the commercial payoff is questionable. Moreover, researchers are inspired to think of their work as a quest to alleviate human disease and suffering worldwide, and GSK has a reputation as an ethical company whose values put people above profits. Although the experience of Nokia and GSK suggests that organizational culture can give rise to managerial actions that ultimately benefit the organization, this is not always the case. The cultures of some organizations become dysfunctional, encouraging managerial actions that harm the organization and discouraging actions that might improve performance. 20 For example, Sunflower Electric Power, an electricity generation and transmission cooperative, almost went bankrupt in the early 2000s. A committee of inquiry set up to find the source of the problem put the blame on Sunflower s CEO and decided he had created an abusive culture based on fear and blame that encouraged managers to fight over and protect their turf an inert culture. The CEO was fired, and a new CEO was appointed to change the cooperative s

42 Organizational Culture 83 culture, which he found hard to do because his top managers were so used to the old values and norms. With the help of consultants, he changed values and norms to emphasize cooperation, teamwork, and respect for others which involved firing many top managers. Clearly, managers can influence how their organizational culture develops over time. An interesting example of a manager who has been working hard to change a company s culture is profiled in the following Manager as a Person box. Manager as a Person Alan Mulally Transforms Ford s Culture After a loss of more than $13 billion in 2006, William Ford III, who had been Ford Motor s CEO for five years, decided he was not the right person to turn around the company s performance. 21 In fact, it became apparent that he was a part of Ford s problems because he and other Ford top managers tried to build and protect their own corporate empires, and none would ever admit that mistakes had occurred over the years. As a result the whole company s performance had suffered; its future was in doubt. Finally Ford s board of directors realized they needed an outsider to change Ford s culture and the way it operated, and they recruited Alan Mulally from Boeing to become Ford s new CEO. After arriving at Ford, Mulally attended hundreds of executive meetings with his new managers; and at one meeting he became confused why one top division manager, who obviously did not know the answer to one of Mulally s questions concerning the performance of his car division, had rambled on for several minutes trying to disguise his ignorance. Mulally turned to his second-in-command Mark Fields and asked him why the manager had done that. Fields explained that at Ford you never admit when you don t know something. He also told Mulally that when he arrived as a middle manager at Ford and wanted to ask his boss to lunch to gain information about divisional operations, he was told, What rank are you at Ford? Don t you know that a subordinate never asks a superior to lunch? 22 It turned out that over the years Ford had develop a tall hierarchy composed of managers whose main goal was to protect their turf and avoid any direct blame for its plunging car sales. When asked why car sales were falling, they did not admit to bad design and poor quality issues in their divisions; instead they hid in the details. They brought thick notebooks and binders to meetings, listing the high prices of components and labor costs to explain why their own particular car models were not selling well or even why they had to be sold at a loss. Why, Mulally wondered, did Ford s top executives have this inward-looking, destructive mind-set? Mulally soon realized the problem was the values and norms in Ford s culture that had created a situation in which the managers of its

43 84 Chapter 3 different divisions and functions thought the best way to maintain their jobs, salaries, and status was to hoard, rather than share, information. Thus values and norms of secrecy and ambiguity, and of emphasizing status and rank, to protect their information had developed. The reason why only the boss could ask a subordinate to lunch was to allow superiors to protect their information and positions. Ford s culture allowed managers to hide their problems and poor performance. What could Mulally do? He issued a direct order that the managers of every division should share with every other Ford division a detailed statement of the costs they incurred to build each of its vehicles. He insisted that each of Ford s divisional presidents should attend a weekly (rather than a monthly) meeting to share and discuss openly the problems all the company s division s faced. He also told them they should bring a different subordinate with them to each meeting so every manager in the hierarchy would learn of the problems that had been kept hidden. 23 Essentially, Mulally s goal was to demolish the dysfunctional values and norms of Ford s culture that focused managers attention on their own empires at the expense of the whole company. No longer would they be allowed to protect their own careers at the expense of customers. Mulally s goal was to create new values and norms that it was fine to admit mistakes, share information about all aspects of model design and costs, and of course find ways to speed development and reduce costs. He also wanted to emphasize norms of cooperation within and across divisions to improve performance. How could this situation have gone unchanged in a major car company that has been experiencing increased competition since the mid- 1970s? The answer is that the norms and values of an organization s culture are difficult to change; and despite Ford s major problems, no CEO had been able to change the mind-set of the top managers in the company. Ford had become more hierarchical and bureaucratic over time as its problems increased because poor performance led managers to become more defensive and concerned with defending their empires. By 2010 it was clear that Mulally had changed Ford s values and norms; the company finally reported a profit in the spring of 2010, for which Mulally received over $17 million in salary and other bonuses. Many managers who could not or would not conform to the new Ford culture were gone; the others were still learning to adjust their behavior to the new culture oriented to satisfying the needs of customers, not the needs of top managers. New Ford CEO Alan Mulally (left), with former CEO Bill Ford (right), who realized the company needed an outsider at the helm to change Ford s insular, self-protective culture.

44 Organizational Culture 85 The cultures of organizations can differ in a variety of ways. For instance, cultural uniformity, the strength of the firm s culture, the degree of formalization emphasized by cultural values, and the gap or differences between organizational culture and national culture can characterize the culture of an organization and determine how organizational culture influences employees. Moreover, the nature or type of organizational culture varies widely across organizations. There are different typologies of organizational cultures. Being able to classify and recognize the type of organizational culture present in the firm will make the identification of the values supported by the culture an easier task. Cultural Uniformity versus Heterogeneity Organizations vary in the extent to which a uniform culture is promoted throughout the company. In some large corporations, different subcultures might be found in the different branches and subsidiaries. This indicates managers in the company s headquarters allow the different branches or divisions to develop their own values and guiding principles as long as the major core values in the branches are the same as those used at headquarters. This cultural flexibility is justified by a need for each division to create its own identity, or by differences in goals and nature of activities. The dominant culture is emphasized throughout the firm but with some variations in some divisions and branches. In 2009, Etisalat received an award at the 3rd Middle East Customer Care Excellence Awards, organized by the Middle East Excellence Awards Institute. Etisalat won this award for its strong corporate culture and dedication to providing quality customer service. New employees in the company are immediately integrated into Etisalat s quality culture, thanks to the clear and structured processes they follow. These processes help managers to review and augment these systems, to ensure staff performs at consistently high levels. Etisalat has been named Best Operator in the Middle East five times in the last three years and was recently named Best International Carrier in the world at the World Communications Awards. 24 Neither uniformity nor heterogeneity is good or bad in a company. When cultural heterogeneity is promoted, branches and divisions are given flexibility and freedom to adjust the company s strategy and make it fit with the contingencies that are specific to the division or branch. Because of the specificities of these contingencies or product lines or production processes, cultural flexibility is needed to allow for a customer-responsive and innovation-driven culture. Culture versus Formalization Organizational culture might substitute for formal systems of control and decision making such as organizational structure, rules, procedures, policies, and direct supervision. When the values are widely supported by employees, compliance, predictability and consistency would be much easier to obtain. All employees understand the values that guide their actions in the company and trust between employees, commitment to the goals, and loyalty to the

45 86 Chapter 3 firm reduce the need for written documentation, formal rules and SOPs, and for monitoring and formal control mechanisms. When employees trust each other and are reliable and responsible; the need for these mechanisms decreases. For instance, CAD GULF LLC is a team-based organization focused on the roles and competencies of its people. Throughout the years, the company has been able to gather some of the best people in the industry, hone their skills and cross-train them in other aspects of the business. The result is a synergistic group living in a culture of excellence, professionalism, teamwork, and customer orientation. 25 National versus Organizational Culture A national culture can guide behaviors; for example Arabs tend to be more collectivistic while Americans are more individualistic. Teamwork with reward systems geared toward group performance might experience more success in Arab countries than in the US. The culture of the organization will be influenced not only by the national culture but also by regional influences, and ethnic and religious backgrounds and beliefs. By embracing diversity and through employee selection and socialization, organizations keep the best of the national culture and align it with the values supported by the founders and top managers vision. Some multinational companies deliberately attempt to create a culture that values diversity to fuel innovation and creativity and increase the company s capacity to quickly adjust to changes in the environment and to the ever-evolving customer needs. For instance, the fear of losing face in the Arab world is a significant restraint on creating new businesses. It tempers any desire that talented graduates might have to become entrepreneurs, steering them instead to the relative safety of an established family firm or a well-paid government job. This regional reticence is also, in part, a function of the culture s continuing respect for age. Young people are less likely than in the West to go against the wishes of their parents, and their parents views are almost certain to be more conservative than their own. This dynamic also plays out powerfully in family firms, where three generations may be working side by side. All will defer to the eldest, who in general will be one of the least inclined to take a gamble on a new business. What s more, as one leader puts it, In the Arab world almost everything is politicized, and governments are rarely encouraging to new business. 26 An increasing number of culture typologies are being used Types to identify various kinds of culture. Classifying the type of culture in an organization can be helpful to understand if the culture fits with the strategies of the firm or if some adjustments are needed to make them more aligned. The control mechanisms, the reward systems, and other procedures and standards are impacted by the type of culture and its characteristics. For instance, the adoption of formal or informal control mechanisms can be linked to the nature or type of culture emphasized in the organization. The type of culture has implications on how employees should be managed and what candidates should be hired. Cultural elements and their relationships within an organization create a pattern that is a unique part of that organization, creating an organization s culture. Several types of organizational culture can be described, namely the

46 Organizational Culture 87 bureaucratic culture, clan culture, entrepreneurial culture, and market culture. In Figure 3.2 the vertical axis reflects the relative formal control orientation within the organization, which ranges from stable control to flexible control. The horizontal axis, on the other hand, reflects the relative focus of attention of the organization, and ranges from internal functioning to external functioning. The farthest corners of the four quadrants correspond to four pure organizational cultural types, which are bureaucratic, clan, entrepreneurial and market. Each of the four organizational cultural types developed by Hellriegel et al. 27 will be briefly discussed. Bureaucratic Culture: This type of organization values rules, hierarchical coordination, formalization and standard operating procedures; with the long-term concerns being efficiency, predictability, and stability. Managers within a bureaucratic organization are good coordinators, organizers, and enforcers of rules and procedures that are clearly defined. The tasks, responsibilities, and authority for all the organization s employees are also clearly stated. For example, most municipalities and government Table 3-1 Organizational Culture Typology Type Characteristics Formal control Example Orientation and Forms of Attention Bureaucratic culture Rules, hierarchical coordination, formalization and standard operating procedures. Long-term concerns are efficiency, predictability, and stability. Managers are good coordinators, organizers, and enforcers of clearly-defined rules and procedures. Clan culture Tradition, loyalty, teamwork, personal commitment, and self-management. Employee contribution exceeds contractual agreements. Long-term commitment through a long and thorough socialization process. Entrepreneurial culture Strong peer pressure to adhere to important norms. High levels of risk-taking, dynamism, and creativity. Commitment to experimentation and innovation. Individual initiative, flexibility, and freedom are encouraged and rewarded. Reacts quickly to change and creates it. Market culture Achievement of measurable and demanding agreed upon goals. Contractual relationship between the employee and the organization. Concerns for competitiveness and productivity. Increased levels of performance are rewarded through increased compensation. Stable control and internal attention. Flexible control and internal attention. Flexible control and external attention. Stable control and external attention. McDonald s Health Matrix Group Chalhoub General Electric

47 88 Chapter 3 institutions have bureaucratic cultures, which can hinder their effectiveness and efficiency. The focus of attention of this organization is internal, and the formal control is stable. McDonald s promotes a bureaucratic culture throughout the organization as the company follows standard operating procedures and needs to emphasize homogeneity, coordination of activities, and control of work sequences. Setting routines to be followed by all McDonald s restaurants is essential for success. The need for co ordination, routinized work processes, formality, and respect of the chain of command outweighs the need for flexibility and informality. This is why a bureaucratic culture fits McDonald s vision and strategy. Clan Culture: Attributes of this type of organization are tradition, loyalty, teamwork, personal commitment, and self-management. The organization focuses its attention internally, yet its formal control is flexible. The members of this organization recognize an obligation that is beyond their job descriptions, with the understanding that their contributions to the organization may exceed their contractual agreements. Employees identify that their long-term commitment to their organization, in the form of loyalty, is in exchange for the organization s long-term commitment to the employee, in the form of security. Unity from this culture type is created through a long and thorough socialization process, where long-term clan members serve as mentors and role models for newer members. There is also strong peer pressure to adhere to important norms within the organization, and an environment is created in which few departments are left completely free from normative pressures, which may generate innovation and risk-taking behavior. Success of this type of organization is assumed to depend on teamwork, participation, consensus decision making, as well as employee sensitivity to customers and concern for people. According to Mishal Kanoo from Kanoo Group, the Arab business is not just run by the family; it is run for the family. A leader s success is not judged merely by financial results, but also by the sense of responsibility and commitment he gives to the family as a whole. The measure of commercial success lies more in retaining a strong family business culture and providing ongoing security for the family than it does in simply making profits. 28 Clan culture means working together with emphasis on concern for people. A good example of a collaborative culture or clan is Health Matrix, a company based in the Middle East, which provides innovative IT solutions for the growing healthcare market. Managers recognize that the company is only as good as its people, which is why they invest in top talent. According to the company s website, the goal of the company has always been to share its success by attracting, developing, and retaining top talent in a healthcare IT industry, and employees experience the company s commitment and dedication to the team. Health Matrix thrives in a highly collaborative culture of innovation and teamwork. The company respects relationships with coworkers, customers, owners, agents, suppliers, the community, and the environment and provides employees with a safe and fulfilling environment and an opportunity to grow and learn. 29 Leaders in the Arab world think of hiring people for life, of treating employees as an extension of their family. This puts a different angle on their ideas about fostering teams. Mohammed Alshaya says the key is to treat people as you would like to be treated. Mishal Kanoo believes in what he calls consultative leadership. This is the ability to negotiate with people so that they buy into your ideas. You won t get 100 percent of what you want, but 80 percent is not a bad goal to aim for. 30

48 Organizational Culture 89 LO3-3 Discuss the importance of organizational culture. Entrepreneurial Culture: This cultural form is characterized by high levels of risk-taking, dynamism and creativity. Employees are committed to experimentation, innovation, and being on the leading edge. This organizational culture type reacts quickly to change, as well as creates it due to the fact that individual initiative, flexibility, and freedom promoting growth are encouraged and rewarded. Effectiveness within this organization means providing new and unique products and rapid growth. The organization focuses its attention externally and formal control orientation is flexible in order to foster innovation and change. For instance, Group Chalhoub is guided by the philosophy of being Committed to Excellence. With the aim of optimizing performance of brands, providing quality service and offering a stimulating work environment, the group cultivates the core values of Excellence, Respect and Entrepreneurial Spirit. 31 Google develops innovative web tools, taking advantage of entrepreneurial software engineers and cutting-edge processes and technologies. Its ability to quickly develop new services and capture market share has made it a leader in the marketplace and forced competitors to catch up and revise their strategies. Market Culture: The achievement of measurable and demanding goals, especially those that are finance-based and market-based, are characteristics of this type of organizational culture. In this organization, the relationship between employee and organization is contractual, where the obligation of each is agreed in advance; therefore the formal control orientation is quite stable. This is because the employee is responsible for an agreed level of performance; with the organization exchanging this for an agreed level of remuneration and reward in return. Competitiveness and a profit-gaining orientation therefore exist throughout this organization because increased levels of performance from the employee are rewarded through increased compensation from the organization. Market cultures are concerned with competitiveness and productivity through emphasis on partnerships and positioning. General Electric, under the leadership of former CEO Jack Welch, is a good example of a market culture. He famously announced that if businesses divisions were not first or second in their markets then, simply, they would be sold. Its corporate culture was (and still largely is) highly competitive where performance results speak louder than process. 32 The Importance of Culture Organizational culture can be critical in determining the performance of the firm and its capacity to compete effectively in the market place and maintain and strengthen its competitive advantage. While culture may seem more of a concept than something that is physically real, the potential harm or potential benefit for the business might be real and careful attention is needed to properly manage organizational culture. Studies show that loyalty and commitment to the goals of the company are the result of an effective and positive organizational culture more than pay and benefits. Culture might also differentiate firms in the labor market and make some companies more attractive than others to job seekers. For instance, Qatar Airways which was ranked among the top 100 best companies to work for in the Middle East benefits from a competitive advantage that very few other companies in

49 90 Chapter 3 the industry have. With its organizational culture that focuses on creating an environment that nurtures employee skills, emphasizes collaboration and team work, values participation, delegation of authority, and empowerment of employees along with promoting a work environment where diversity is valued and supported, the company is able to attract talented job candidates and to recruit best employees which gives the company a competitive edge against rival companies. Organizational culture can help managers achieve objectives in several ways. Organizational culture helps create favorable conditions that facilitate the achievement of organizational goals. Each of the following aspects points out how organizational culture can help or hinder the achievement of organizational objectives. Employee Self-Management To direct and help employees achieve organizational goals, managers define jobs with job descriptions, create a structure and hierarchy to establish a chain of command and line of authority, dedicate resources to departments and units, and develop work schedules. While these mechanisms and actions guide employee actions, the company s goals will only be achieved when employees decide to behave the way the company desires. Organizational culture can induce employees to behave in a particular way without close supervision or formal control mechanisms. When employees support the organizational culture and feel part of it, they tend to conform to it as their own values match those promoted by the culture of the organization. Conversely, failure to comply with cultural norms generates social pressure to conform as the group will look down on those who do not conform with the norms and values emphasized by the culture; thus the employee will either adjust and align his or her behaviors and attitudes with the cultural expectations or face peer pressure which might lead to the departure of the employee when there is no willingness and readiness to conform. Much of this process through which the culture directs the actions and attitudes of employees occurs informally and in an unspecified manner. Stability Culture provides a sense of continuity in the midst of rapid change and intense competition. In industries operating in dynamic environments such as the high technology industry, culture ensures predictability, security, and comfort. Organizational culture ensures that employees can effectively adjust to the changing conditions in the environment and feel that they are in control and on track to achieve the goals of the organization and are confident that the company s strategies will lead to success. The stress caused by fierce competition in the market place, by the rapid adjustments and updates of product lines and services as they become quickly obsolete, by the need to continuously innovate and create new work routines or new products and services can be controlled and alleviated through organizational culture. Socialization Organizational culture subtly teaches employees the values of the organization. The process of internalizing or taking organizational values as one s own is called socialization. Socialization is a three-stage process. The first stage, prearrival, consists of the values, attitudes, biases, and expectations the employee

50 Organizational Culture 91 brings to the organization when first hired. These values are influenced by the background of the employee, his prior experiences, and the environment he lived in previously. The values of newcomers tell about their way to do things as learned from their culture and past experiences. Organizations try to select candidates that most likely fit into the company s culture. Even if the firm hires the right candidate whose values fit within those promoted by the business, it still has to learn the culture of the organization and adjust if there is a gap between his values and those of the company. When the employee joins the company and starts working in his new position, he reaches the encounter stage. At this point, the individual begins to compare his expectations about the firm s culture with the reality of the expectations set by the firm. For instance, the employee might have his own perception of what being punctual and on time to work means while the company has a very strict attendance policy. There is a misfit, in this case, between employee values as concretely translated into practice and the values promoted by the culture of the organization. When there is a gap between cultural expectations and reality, the employee has to adjust to the culture of the organization during the metamorphosis stage. Training programs are designed to help employees adjust their values to firm expectations. An organization can choose from among formal or informal, individual or collective, fixed or variable, serial or random, and investiture or divestiture socialization. Not all employees adjust successfully to the requirements of the culture and when the company fails to socialize employees, the employee might decide to leave the company and join a company that supports the same values he is supporting or the company might decide to terminate the employee if the gap prevents the employee from reaching organizational goals. While companies must maintain and strengthen their cultures through proper socialization, they also have to value employee diversity and promote an environment that nurtures employee skills and talents and where employees can capitalize on their own values and cultural background. This might also bring value to the company and help it strengthen its competitive position in the market place. Implementation of the Organization Strategy Organization strategy may support the achievement of the goals and the vision of the firm by supporting the implementation of the firm s strategies and desired changes in the strategy in case actual strategies are revised or changed. Organizational culture helps create the needed commitment to organizational goals. For high performance, the firm strategy and the culture must be aligned and ideally they must reinforce each other. Any change in the culture must be reflected in the strategy and vice versa. The shared values and norms make it easier for employees to support the company s strategy. Negative Culture While the company s culture may support the company s strategy and help with goal achievement, it might also lead to negative outcomes. For instance, a culture that is too strong and fully entrenched into one model and one set of values and norms that are constantly emphasized as being the best, might lack the capacity to adjust if change is needed to improve performance, strengthen

51 92 Chapter 3 LO3-4 Describe how to manage organizational culture. a competitive advantage, or even guarantee survival. A closed and inflexible culture might diminish the firm s capacity to adjust to the different forces in the environment and make any strategy revision very difficult to set and to implement. At the other extreme, when the values and norms are not constantly emphasized and reinforced, the company fails to achieve its goals as employees will show little support and commitment to organizational goals. When the values are not deeply held by employees and reinforced by managers, following the vision of the company becomes difficult and so would be the implementation of strategies to convey the vision. Each employee or group of employees will have his own interpretation of the company s values and norms, which leads to inconsistent actions that prevent the company from reaching its goals. A too strong or a too weak culture may harm performance and goal achievement. Managing Cultural Processes The culture of an organization evolves gradually over time. It starts with the founders of the company and is influenced by their beliefs and philosophy. Their vision for the company is usually reflected in the initial set of values and norms they develop for the firm. These beliefs and values are then transmitted to a group of close associates and different mechanisms are then set (e.g. training programs) to further transmit them to a larger number of employees as the company grows in size. Managers have to act as role models and lead the process of transmission and enforcement of cultural values to fellow employees. A variety of techniques and elements maintain and reinforce culture over time. Some may be deliberately imposed by management such as cultural symbols, rituals, and the choice of company heroes that embody the firm s values. Others may be largely unconscious processes such as the use of stories, language, and employee perception of the company s leadership style. Cultural Symbols Cultural symbols are the icons and objects that communicate organizational values such as flags, uniforms, or other logos. The management uses them to create a sense of belongingness and identity and convey and sustain shared meanings among employees. For example, holding classes for female students and classes for male students at the University of Sharjah symbolizes religious beliefs used as guiding values of the organizational culture at that university. Company Rituals and Ceremonies Organizations plan events and ceremonies to offer employees and stakeholders the opportunity to share cultural meanings. At the American University of Sharjah and AUB, graduation ceremonies at the end of every teaching semester convey the values and beliefs of the institution and delineate the use of the American model of higher education in these two universities. Company Heroes Organizations communicate their values to employees by identifying individuals whose deeds best reflect what the organization believes in so that other people and employees can reproduce their behavior and can use these

52 Organizational Culture 93 heroes as an inspiration to guide attitudes and actions in the workplace. For instance, the Al Fardan name has been strongly associated with pearl trading in the Arabian Gulf for over a century. The owners and managers of the group still see in its founder, Mr. Ibrahim Al Fardan a renowned pearl expert and trader a hero who still guides the vision and strategy of the group. In 1954 the chairman of the Group, Mr. Hassan Ibrahim Al Fardan, started the first establishment as the Al Fardan Jewellery showroom in the UAE. 33 Stories Organizational culture is sustained by the narratives and legends that capture the organization s values and beliefs. For instance, Dubai history highlights the role of HH Sheikh Ahmed bin Saeed Al Maktoum who has been at the forefront of Dubai s remarkable economic development for more than 25 years and who was appointed Chairman of Dubai World in December Under his leadership, Dubai World has entered a new phase of growth in line with Dubai s economic development. HH Sheikh Ahmed has been a highly successful corporate leader since 1985, when he was appointed President of the Dubai Department of Civil Aviation and Chairman of the newly launched Emirates Airline. The phenomenal growth of Dubai s aviation industry under his stewardship is testimony to HH Sheikh Ahmed s grand vision and foresight. He is now the Chairman and Chief Executive of Emirates Airline and Group. 34 Language The language used by managers is used to convey company values and promotes both positive and negative values. For example, the language used at Abu Dhabi Investment Authority is different than the language used at Dubai School of Government. The visions, missions, strategies, and objectives of the two institutions are different, so is the language used to convey cultural values and beliefs. Firms often use slogans to reflect their values and make stakeholders aware of the culture of the firm. The slogan for Abu Dhabi Commercial Bank (ADCB) is Our Knowledge. Your Future. Leadership Employee actions are influenced by how leaders behave in the organization. Effective leaders set a vision for the organization that employees will commit to and try to achieve. Leaders are also role models for employees. They provide a daily example of how to articulate the values in practice and emphasize the important values that employees have to follow. All the leaders interviewed for the Business Leadership in the Arab World report emphasized the importance of following their moral compass. As a leader, you are being challenged every day with issues that cut across your value system, says Loay Nazer, the founder in 1991 of Nazer Group, a holding company that has made a diverse range of entrepreneurial investments in Saudi Arabia and abroad. To establish leadership you have to have a pre-defined value system. 35 Organizational Policies and Decision Making Performance appraisals, budgets, new plans, and other policies and decisions clearly communicate company values and therefore the company s culture.

53 94 Chapter 3 The control mechanisms and the criteria used to measure performance reflect the values promoted by organizational culture. Employees learn what the company truly values when change is required in times of crisis. The need for restructuring, downsizing of company activities and to plan revisions will be handled in accordance with the most important values supported by the organization. The conservative and stable culture used at Toyota was emphasized when the company faced major crises throughout its history but refused to adopt a massive layout strategy. Toyota s culture values seniority and creates loyalty and commitment to the company s goals and vision. Cultural values are communicated by the ways employees are rewarded. In top-tier research universities, promotions and salary increases are tied to research productivity and quality of faculty publications while teaching universities reward faculties based on their course evaluations and on other indicators of their teaching performance. Summary and Review LO3-1 HOW TO SHAPE ORGANIZATIONAL CULTURE Organizational culture is shaped by the interaction of four main factors: the personal and professional characteristics of people within the organization, organizational ethics, the nature of the employment relationship, and the design of its organizational structure. These factors work together to produce different cultures in different organizations and cause changes in culture over time. LO3-2 LO3-3 LO3-4 CHARACTERISTICS OF ORGANIZATIONAL CULTURE Organizational culture is a system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Organizational culture reflects employees and managers views about how things get done in the organization. Culture gives meaning to actions and procedures within an organization and may be considered as the glue that holds organizational members together and what keeps them focused without deviating from the achievement of organizational goals. The culture specific to each firm affects how employees feel and act as well as the type of employee hired and retained by the company. THE IMPORTANCE OF CULTURE Organizational culture can be critical in determining the performance of the firm and its capacity to compete effectively in the market place and maintain and strengthen its competitive advantage. While culture may seem more of a concept than something that is physically real, the potential harm or potential benefit to the business might be real and careful attention is needed to properly manage organizational culture. The culture can support employee self-management, increase stability, smoothen the socialization process, and facilitate the implementation of the organization strategy. MANAGING CULTURAL PROCESSES The culture of an organization evolves gradually over time. It starts with the founders of the company and is influenced by their beliefs and philosophy. A variety of techniques and elements maintain and reinforce culture over time. Some may be deliberately imposed by management such as cultural symbols, rituals, and the choice of company heroes that embody the firm s values. Others may be largely unconscious processes such as the use of stories, language, and employee perception of the company s leadership style.

54 Management in Action Topics for Discussion and Action Discussion 1. How does organizational culture emerge? [LO3-1] 2. How do managers select the characteristics and dimensions to include in the culture? [LO3-2] 3. Discuss the different types of culture that could possibly be implemented in a firm. Explain how managers select one type over the others and analyze the factors that explain their choice. [LO3-2] 4. Why is culture so needed in a firm? How does it help the firm reach a good level of performance? [LO3-3] 5. How can organizational culture be managed through artifacts? Provide examples of these artifacts and discuss how they can be used to maintain and strengthen the culture. [LO3-4] Action 6. Interview a manager and identify the type of organizational culture that his organization has implemented. Why is the organization using this type of culture? Do you think other types might be more appropriate? Which one(s)? Explain. [LO3-2] 7. Interview some employees of an organization, and ask them about the organization s values and norms, the typical characteristics of employees, the organization s ethical values, cultural dimensions, and the artifacts. Using this information, try to describe the organization s culture and the way it affects how people and groups behave. [LO3-1, 3-2, 3-4] Building Management Skills Understanding Organizational Culture [LO 3-1, 3-2, 3-4] Think of an organization with which you are familiar, perhaps one you have worked for, such as a store, restaurant, bank, office, or school. Then answer the following questions: 1. Describe the dimensions of its organizational culture. Were innovation and risk-taking part of these dimensions? Be specific. 2. How did this organizational culture emerge? 3. What role did organizational culture play to guarantee the stability and performance of the company? 4. Different artifacts are used to manage organizational culture and perpetuate it. These artifacts include language, symbols, stories, heroes, rituals, and ceremonies. How were these artifacts used in the organization to maintain and manage organizational culture? 5. Can you think of any additional action that the managers could take to reinforce organizational culture or to change it? 6. Was the culture bureaucratic, clan-oriented, entrepreneurial, or more market-driven? Explain. 7. What made the company s managers decide to adopt a specific type of culture instead of another one? Explain. 8. How did the internal and the external environments of the firm influence organizational culture? Provide specific examples. 9. What advice would you give to the company s managers to help them improve the culture of their firm? 95

55 Managing Ethically [LO3-1, 3-2] Suppose an organization has just recruited a new management team and started laying off many of its middle managers. The new top managers decided to terminate all managers who disagree with the cultural change that the new top managers want to introduce. They want to move from a bureaucratic culture characterized by centralized decision making and low employee empowerment to a more entrepreneurial culture emphasizing more decentralized decision making and more employee empowerment. The new managers believe that all those who disagree with their vision have to leave the company. Some high performing middle managers who spent most of their careers in the company have been laid off. Think of the ethical issues involved in designing a hierarchy, and discuss the following issues. Questions Small Group Breakout Exercise Leena s Jewelry [LO3-1, 3-2, 3-3] 1. Do you think managers can decide to lay off high performing employees just because they disagree with their vision? Explain what you would have done if you were part of the new management team appointed in this company. 2. Some people argue that employees who have worked for an organization for many years have a claim on the organization at least as strong as that of its stakeholders. What do you think of the ethics of this position can employees claim to own their jobs if they have contributed significantly to the organization s past success? Form groups of three or four people, and appoint one member as the spokesperson who will communicate your findings to the class when called on by the instructor. Then discuss the following scenario: Leena s Jewelry sells and services high-end jewelry and luxury watches. Over the years, the company has developed a good reputation for the quality of its products and for its excellent customer service. However, the store was run as a small business and the owner Leena Munajed never thought of designing formal plans, of setting a formal structure, or devising a long-term vision for the company. While her experience in the field (as she worked in a jewelry store when she was a student) helped her succeed in the field, her lack of management skills prevented her from expanding the business rapidly. The deepening economic crisis and the fierce competition faced from more established jewelry stores are threatening the expansion and the longterm survival of Leena s Jewelry. You are a team of local consultants whom Leena has called in to advise her as she tries to learn about how to manage her business. She asked you to help her answer these questions: 1. How can she build an organizational culture and how does she pick the right one? 2. How can she improve effectiveness and efficiency by picking the right culture for her firm? 3. Leena wants to expand to one of the neighboring GCC countries. She thinks that expanding could help generate more revenues and profits. She is asking you to help her figure out whether the culture of the new branch should be similar or different from the original one and the advantages and disadvantages of having dissimilar cultures in the different branches. Exploring the World Wide Web [LO3-1, 3-2] Go to the website of the Emirates Group ( Click on Our Vision and Values. Explore the values promoted by the group. 1. What values are promoted by the Emirates Group? How do you think promoting these values has helped the group be successful? Browse the group s website and identify the type of organizational culture used. Is it the best culture to use? Is there any other alternative culture that could be used by the Emirates Group? Explain.

56 Be the Manager [LO3-1, 3-2, 3-3, 3-4] You have been hired as a middle manager in a large multi-branch furniture store. The company is seeking to expand internationally and is in the process of selecting foreign suppliers to lower its dependence on local suppliers and diversify its supply sources. The company s top managers delegated their powers to you and charged you to negotiate and to sign on their behalf the contracts with the new suppliers. The top managers briefed you on how crucial these contracts are to secure the firm s expansion and asked you not to disappoint them even when sealing the deal requires bribery and binding the rules. The company promotes a clanoriented and ethical culture and managers do their best to act as role models for the rest of the employees. Bribing and acting unethically are not part of the values you personally support. However, you know how important these deals are for your company and for your future career in the company. 1. How do you think you should act? Follow the guidelines that were given by your bosses or follow your values and beliefs? Why? 2. Do you think the culture should reflect the values and beliefs of the top managers? Are there inconsistencies between the way cultural values are outlined and the way the top managers act? 3. If top managers keep separating between written values and actions, the company would most probably fail in the long run. What cultural changes do you suggest to make the values more aligned with the actions? 97