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