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Management Benchmark Study-Book Summary Chapter 11-Literature, Summaries of Benchmarking

Levels of Organizational Culture (Adapted from Schein 1980; Schein 1985) Management Benchmark Study-Book Summary Chapter 11-Literature-Elizabeth L. Malone Organizational Culture, Kathryn A Baker, Theories of Organizational Culture, Cultural Change

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Ch 11 Organizational Culture 06.08.02.doc 06.08.02
Chapter 11. Organizational Culture1
By Kathryn A Baker
The literature on organizational culture is as relevant to public science management as it is to the
management of private sector business organizations. Given a rapidly changing environment and
continuing insights into organizational effectiveness, science organizations, as most other
organizations, are seriously rethinking what they do and how they can best define and accomplish
their goals and objectives. Once goals are defined, it is necessary to address the type of culture
that is necessary to advance these goals and objectives and ensure the successful implementation
of the necessary changes. In addition, the organizational effectiveness literature has been
increasingly emphasizing the importance of culture in motivating and maximizing the value of its
intellectual assets, particularly its human capital. This is particularly important in knowledge
intensive organizations, such as publicly funded scientific laboratories. This review of the
organizational culture literature makes it clear that (1) culture is essential for both successful
organizational change and maximizing the value of human capital (2) culture management should
become a critical management competency, and (3) while the right culture may be a necessary
condition for organizational success, it is by no means a sufficient condition. An important
challenge for managers is to determine what the most effective culture is for their organization
and, when necessary, how to change the organizational culture effectively.
Organizational culture became a business phenomenon in the early 1980s, triggered by four
seminal books:
Ouchi’s (1981) Theory Z: How American Business Can Meet the Japanese Challenge
Pascale and Athos’s (1982) The Art of Japanese Management: Applications for American
Executives
Deal and Kennedy’s (1982) Corporate Cultures: The Rites and Rituals of Corporate Life
Peters and Waterman’s (1982) In Search of Excellence: Lessons from America’s Best Run
Companies.
The first two books suggested that Japanese business success could be attributed in large part to
Japanese corporate culture. All four books suggested that corporate culture was key to
organizational performance and that corporate culture could be managed to improve a company’s
competitive advantage. They provided pragmatic prescriptions to American business leaders
desperate for answers to help them remain successful in the face of increasing Japanese
competition. These books were bestsellers; the last out sold all other non-fiction books for the
year.
The concept of organizational culture also appealed to organizational scientists and practitioners
who had grown disillusioned with the prevailing formalistic, quantitative organizational research.
The emphasis on organizational culture shifted attention away from the functional and technical
aspects (the so-called hard side) of management that could be more readily quantified and
empirically analyzed to the interpersonal and symbolic aspects (the soft side) of management that
required in-depth, qualitative studies of organizational life. This focus on the qualitative,
symbolic aspects of organizations and management stimulated a large literature on leadership. In
1 Related chapters include: Change Management; Knowledge Management; Competencies; Leadership;
Innovation; Creativity.
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Chapter 11. Organizational Culture 1

By Kathryn A Baker

The literature on organizational culture is as relevant to public science management as it is to the management of private sector business organizations. Given a rapidly changing environment and continuing insights into organizational effectiveness, science organizations, as most other organizations, are seriously rethinking what they do and how they can best define and accomplish their goals and objectives. Once goals are defined, it is necessary to address the type of culture that is necessary to advance these goals and objectives and ensure the successful implementation of the necessary changes. In addition, the organizational effectiveness literature has been increasingly emphasizing the importance of culture in motivating and maximizing the value of its intellectual assets, particularly its human capital. This is particularly important in knowledge intensive organizations, such as publicly funded scientific laboratories. This review of the organizational culture literature makes it clear that (1) culture is essential for both successful organizational change and maximizing the value of human capital (2) culture management should become a critical management competency, and (3) while the right culture may be a necessary condition for organizational success, it is by no means a sufficient condition. An important challenge for managers is to determine what the most effective culture is for their organization and, when necessary, how to change the organizational culture effectively.

Organizational culture became a business phenomenon in the early 1980s, triggered by four seminal books: ♦ Ouchi’s (1981) Theory Z: How American Business Can Meet the Japanese Challenge ♦ Pascale and Athos’s (1982) The Art of Japanese Management: Applications for American Executives ♦ Deal and Kennedy’s (1982) Corporate Cultures: The Rites and Rituals of Corporate Life ♦ Peters and Waterman’s (1982) In Search of Excellence: Lessons from America’s Best Run Companies.

The first two books suggested that Japanese business success could be attributed in large part to Japanese corporate culture. All four books suggested that corporate culture was key to organizational performance and that corporate culture could be managed to improve a company’s competitive advantage. They provided pragmatic prescriptions to American business leaders desperate for answers to help them remain successful in the face of increasing Japanese competition. These books were bestsellers; the last out sold all other non-fiction books for the year.

The concept of organizational culture also appealed to organizational scientists and practitioners who had grown disillusioned with the prevailing formalistic, quantitative organizational research. The emphasis on organizational culture shifted attention away from the functional and technical aspects (the so-called hard side) of management that could be more readily quantified and empirically analyzed to the interpersonal and symbolic aspects (the soft side) of management that required in-depth, qualitative studies of organizational life. This focus on the qualitative, symbolic aspects of organizations and management stimulated a large literature on leadership. In

(^1) Related chapters include: Change Management; Knowledge Management; Competencies; Leadership;

Innovation; Creativity.

addition, specialized literatures emerged around particular variants of organizational culture considered increasingly important for success in the modern business world, such as change- oriented culture, learning culture, innovating culture, team- and project-oriented cultures. More recently, attention has turned to identifying and creating an organizational culture that facilitates agility; promotes alliances, partnerships and networks; encourages knowledge management; fosters corporate responsibility and/or moral integrity; and embraces diversity. The concept of organizational culture has generated a massive literature with enormous popularity. By the 1990s, a literature search would generate over 2500 hits (Alvesson and Berg 1992). It is an extremely important literature because the concept of organizational culture has been central to much of the subsequent work on organizational effectiveness.

History

Although the concept of organizational culture was popularized in the early 1980s, its roots can be traced back to the early human relations view of organizations that originated in the 1940s. Human relations theorists viewed the informal, nonmaterial, interpersonal, and moral bases of cooperation and commitment as perhaps more important than the formal, material, and instrumental controls stressed by the rational system theorists (see Chapter 3: Overview of the Management and the Organizational Effectiveness Literatures ). The human relations perspective drew its inspiration from even earlier anthropological and sociological work on culture associated with groups and societies (see Geertz 1973; Mead 1934; Durkheim 1964; Weber 1947, 1958).

Attention to organizational culture lost ground as organizational science, and social science in general, became increasingly quantitative. To the extent that research on organizational culture survived, its focus shifted to its more measurable aspects, particularly employee attitudes and perceptions and/or observable organizational conditions thought to correspond to employee perceptions (i.e., the level of individual involvement, the degree of delegation, the extent of social distance as implied by status differences, and the amount of coordination across units). This research, referred to as organizational climate studies, was prominent during the 1960s and 1970s (Denison 1990). The renewed interest in organizational culture that emerged in the late 1970s and resulted in the four books mentioned above suggested that a deeper, more complex anthropological approach was necessary to understand crucial but largely invisible aspects of organizational life. This renewed interest in organizational culture represented a return to the early organizational literature but it went far beyond this literature in contributing important new insights and ways of thinking about the role, importance, and characteristics of organizational culture. Also, research on the effect of culture on organizational performance and investigations into how organizational cultures are created, maintained, and changed received greater attention. The main difference was that organizational culture was now viewed less as a natural, organically emergent phenomenon and more as a manipulable and manageable competitive asset.

What is Organizational Culture?

Definitions of organizational culture initially focused on distinguishing levels of organizational culture and strong versus weak cultures.

Knowledge Management”). This suggests a general trend toward more explicitly managing what previously was considered largely unmanageable.

Strong versus Weak Culture

Although all organizations have cultures, some appear to have stronger, more deeply rooted cultures than others. Initially, a strong culture was conceptualized as a coherent set of beliefs, values, assumptions, and practices embraced by most members of the organization. The emphasis was on (1) the degree of consistency of beliefs, values, assumptions, and practice across organizational members; and (2) the pervasiveness (number) of consistent beliefs, values, assumptions, and practices. Many early proponents of organizational culture tended to assume that a strong, pervasive culture was beneficial to all organizations because it fostered motivation, commitment, identity, solidarity, and sameness, which, in turn, facilitated internal integration and coordination. Some, however, noted that a strong culture might be more important for some types of organizations than others. For example, volunteer organizations may need to stress culture more than business organizations. Still others noted potential dysfunctions of a strong culture, to the point of suggesting that a strong culture may not always be desirable. For example, a strong culture and the internalized controls associated with it could result in individuals placing unconstrained demands on themselves, as well as acting as a barrier to adaptation and change. A strong culture could also be a means of manipulation and co-optation (Perrow 1979). It could further contribute to a displacement of goals or subgoal formation, meaning that behavioral norms and ways of doing things become so important that they begin to overshadow the original purpose of the organization (Merton 1957; March and Simon 1958).

Culture was initially seen as a means of enhancing internal integration and coordination, but the open system view of organizations recognized that culture is also important in mediating adaptation to the environment (see Chapter 3: Overview of the Management and the Organizational Effectiveness Literatures ). The traditional view of a strong culture could be contrary to the ability of organizations to adapt and change. Seeing culture as important for facilitating organizational innovation, the acceptance of new ideas and perspectives, and needed organizational change may require a different, or more nuanced, view of organizational culture.

Schein (1992) notes that, indeed, a strong organizational culture has generally been viewed as a conservative force. However, in contrast to the view that a strong organizational culture may be dysfunctional for contemporary business organizations that need to be change-oriented, he argues that just because a strong organizational culture is fairly stable does not mean that the organization will be resistant to change. It is possible for the content of a strong culture to be change-oriented, even if strong organizational cultures in the past typically were not. He suggests that the culture of modern organizations should be strong but limited, differentiating fundamental assumptions that are pivotal (vital to organizational survival and success) from everything else that is merely relevant (desirable but not mandatory). Today’s organizations, characterized by rapidly changing environments and internal workforce diversity, need a strong organizational culture but one that is less pervasive in terms of prescribing particular norms and behavioral patterns than may have existed in the past. This view was supported by Collins and Porras (1994) in their famous study ( Built to Last ) of companies that had strong and lasting performance.

Theories of Organizational Culture

Just as there are differing perspectives on what organizational culture is, there are differing perspectives regarding how it functions. Denison (1990) identifies four basic views of organizational culture that can be translated into four distinct hypotheses: ♦ The consistency hypothesis – the idea that a common perspective, shared beliefs and communal values among the organizational participants will enhance internal coordination and promote meaning and a sense of identification on the part of its members. ♦ The mission hypothesis – the idea that a shared sense of purpose, direction, and strategy can coordinate and galvanize organizational members toward collective goals. ♦ The involvement/participation hypothesis – the idea that involvement and participation will contribute to a sense of responsibility and ownership and, hence, organizational commitment and loyalty. ♦ The adaptability hypothesis – the idea that norms and beliefs that enhance an organization’s ability to receive, interpret, and translate signals from the environment into internal organizational and behavioral changes will promote its survival, growth, and development.

These hypotheses focus on different aspects of culture but more importantly, they stress different functions of culture. The first two hypotheses tend to encourage/promote stability; the second two allow for change and adaptability. The first and third hypotheses see culture as focusing on internal organizational dynamics; the second and fourth see culture as addressing the relation of the organization to its external environment.

Stability/Control Change/Flexibility

Internal Consistency Involvement/participation

External Mission Adaptability

These hypotheses about organizational culture correspond closely to Cameron and Quinn’s (1999) categorization of organizational effectiveness perspectives and associated types of organizations, as shown below.

Stability/Control Flexibility/Discretion

Internal Focus/ Integration

Hierarchy Clan

External Focus/ Differentiation

Market Adhocracy

Handy (1995), well-known for his characterization of four dominant types of leaders as corresponding to gods of Greek mythology, also distinguishes key types of organizational cultures that correspond to different organizational forms. He asserts that clearly distinguishable organizational cultures give rise to four types of leaders, which he characterizes as: Zeus, Apollo, Athena, and Dionysus. These distinct cultures (just as clan-based, hierarchy-oriented, market-

♦ Strategy innovation ♦ Process innovation and the ability to successfully introduce new technologies, such as information technology ♦ Effective management of dispersed work units and increasing workforce diversity ♦ Cross-cultural management of global enterprises and/or multi-national partnerships ♦ Construction of meta- or hybrid- cultures that merge aspects of cultures from what were distinct organizations prior to an acquisition or merger ♦ Management of workforce diversity ♦ Facilitation and support of teamwork.

In addition to a greater need to adapt to these external and internal changes, organizational culture has become more important because, for an increasing number of corporations, intellectual as opposed to material assets now constitute the main source of value. Maximizing the value of employees as intellectual assets requires a culture that promotes their intellectual participation and facilitates both individual and organizational learning, new knowledge creation and application, and the willingness to share knowledge with others. Culture today must play a key role in promoting ♦ Knowledge management (see Chapter 5) ♦ Creativity (see Chapter 15) ♦ Participative management (see Chapter 10) ♦ Leadership (see Chapter 12).

Effects of Organizational Culture

There has been a great deal of anecdotal evidence and some empirical evidence regarding the performance effects of organizational culture. Anecdotal evidence begins Peters and Waterman’s In Search of Excellence (1982). This book basically stimulated the now familiar business school case study approach. More recent anecdotal evidence regarding the most successful companies in the last several decades has also been proffered. According to Cameron and Quinn (1999), many of the most successful companies, including Southwest Airlines (21,775% return on investment [ROI]), Wal-Mart (19,807% ROI), Tyson Foods (18,118% ROI), Circuit City (16,410% ROI), and Plenum Publishing (15,689% ROI), score low on well-established critical success factors (i.e., entry barriers that prevent organizations from competing for the same market, nonsubstitutable products, low levels of bargaining power on the part of buyers due to customer dependence, low levels of bargaining power for suppliers because they have no alternative customers, a large market share that promotes economies of scale, and rivalry among the competition that deflects head-to-head competition with a potential dominator). These unlikely winners have strong leadership that promotes unique strategies and a strong culture to help them realize these strategies. There is also strong anecdotal support indicating that the primary cause of failure of most major change efforts (such as TQM and reengineering) has been the failure to successfully change the organizational culture (CSC Index 1994; Caldwell 1994; Goss et al. 1993; Kotter and Heskett 1992).

Kotter and Heskett (1992) have attempted to make this intriguing, but admittedly inconclusive, anecdotal evidence more systematic and empirical. They had financial analysts identify the firms they considered most successful and then describe the key factors discriminating these firms from those that were less successful. Seventy-four of the seventy-five analysts indicated that

organizational culture was a key factor. In addition, Denison (1990) found empirical support for the participation/involvement view of culture – higher levels of employee participation were correlated with better organizational performance.

In contrast to this supporting anecdotal and empirical evidence, it has become well known, and a point of great contention, that the exemplary companies identified by Peter and Waterman (1982) did not remain exemplary. The general explanation for this is that these companies failed to change with the times – perhaps the very strength of their culture and their past success prevented them from quickly and successfully adapting to new environmental requirements (Christensen 1997). This paradox suggested the need for more longitudinal investigations of the effects of organizational culture. Growing evidence that excellent companies do not remain excellent for long also suggests that the traditional notion of a strong culture may need to be replaced with a more discerning understanding of the types and role of culture and the need to change culture over the life cycle of the organization. For example, perhaps a strong consistent culture is useful in the beginning start-up phase of an organization but a mature organization may need to become more differentiated as well as more oriented to change and learning. What is important for long- term organizational success may not be a particular type of organizational culture per se but the ability to effectively manage and change the culture over time to adjust to changes in the situation and needs of the organization. This understanding has pointed to the need for a more dynamic understanding of culture and the role of organizational leaders in ensuring that the culture contributes both to the organization’s current and future success.

Schein (1992) argues that leadership today is essentially the creation, the management, and at times the destruction and reconstruction of culture. In fact, he says, “the only thing of importance that leaders do is create and manage culture” and “the unique talent of leaders is their ability to understand and work within culture” (1992:5). Leaders must be able to assess how well the culture is performing and when and how it needs to be changed. Assessing and improving organizational culture as well as determining when major cultural transformations are necessary is critical to long-term organizational success. Managing differentiated cultures and creating synergies across these cultures is also a critical leadership challenge. Effective culture management is also necessary to ensure that major strategic and organizational changes will succeed. Basically, culture management is a key leadership and management competency.

We are all aware of successful leaders (Herb Kellerher of Southwest Airlines, Lee Iacocca of Chrysler, Alfred P. Sloan of G.E., General Robert E. Wood of Sears, Roebuck & Co.) who have succeeded in transforming the culture of the organization. In addition, a study of U.S. presidents found that charismatic presidents had better performance on a variety of dimensions, including economic and social performance (House, Spangler, and Woycke 1991).^2 However, effective cultural management does not depend on great individual leaders and charisma. Charisma may be an advantage in times of crisis and change, but solid instrumental leadership can be as, or more, effective in more normal circumstances (Collins and Porras 1994:7-8). Critical instrumental mechanisms for changing and managing culture include ♦ Strategic planning and the identification of necessarily cultural requisites (see Chapter 3. “Strategy”) ♦ Ensuring consistency of culture with mission, goals, strategies, structures and processes ♦ Creating formal statements of organizational philosophy and values

(^2) Charismatic leaders were not more effective in international relation, however, indicating that charisma

may be more effective at home the abroad and/or that international relations may involve more factors outside of presidential control.

Cultural Change

Cultural change typically refers to radical versus limited change. It is not easy to achieve; it is a difficult, complicated, demanding effort that can take several years to accomplish. There are three basic types of cultural change (Trice and Beyer 1991):

♦ Revolutionary and comprehensive efforts to change the culture of the entire organization ♦ Efforts that are gradual and incremental but nevertheless are designed to cumulate so as to produce a comprehensive reshaping of the entire organizational culture ♦ Efforts confined to radically change specific subcultures or cultural components of the overall differentiated culture.

Strategies for effecting cultural change include (Schein 1999):

♦ Unfreezing the old culture and creating motivation to change ♦ Capitalizing on propitious moments—problems, opportunities, changed circumstances, and/or accumulated excesses or deficiencies of the past ♦ Making the change target concrete and clear ♦ Maintaining some continuity with the past ♦ Creating psychological safety through a compelling positive vision, formal training, informal training of relevant groups and teams, providing coaches and positive role models, employee involvement and opportunities for input and feedback, support groups, and addressing fears and losses head on ♦ Selecting, modifying, and creating appropriate cultural forms, behaviors, artifacts, and socialization tactics ♦ Cultivating charismatic leaders ♦ Having a realistic and solid transition plan ♦ Exercising risk management by understanding and addressing the risks and the benefits as well as the potential inequitable distribution of these risks and benefits.

The Application of Organizational Culture to Public Science Management

In understanding the role of organizational culture in achieving the desired changes in public science management, the various public science organizations will need to understand not only their internal culture but the cultural attributes best suited to promoting desired behaviors on the part of the science system as a whole. An important role for public science management is to help define and bring about the cultural orientations that will provide the context and promote the behaviors, values, and relationships that foster effective science, including scientific collaborations. This literature suggests it would be worthwhile to (1) identify how science funding and directing organizations could promote appropriate cultural orientations and a favorable cultural environment for publicly funded science organizations (laboratories, universities, and private R&D centers) and (2) determine the cultural orientations and cultural environment needed within the funding and directing organizations to make this happen. In organizations responsible for both science and national security, such as the US Departments of Energy and Defense, a significant challenge is to balance the cultural requirements of creativity and collaboration with those of regulatory compliance and the protection of classified information. Relevant questions for managers of publicly funded science include:

  1. Have the goals and strategies for effecting effective and efficient scientific development changed over time?
  2. What culture attributes are necessary to help achieve the goals and strategies on the part of publicly funded science organizations (public and private laboratories, universities, R&D centers, etc.) as well as the goals and strategies necessary to achieve effective and efficient scientific development for the system as a whole? Is there potential conflict between these two sets of goals and strategies? How could this conflict be addressed?
  3. How can public science funding and directing organizations (such as the National Science Foundation, the DOE Office of Science, etc.) contribute to bringing about desired cultural attributes in these publicly funded science organizations? What are the obstacles to doing this?
  4. Will the culture (and perhaps goals, strategies, structures, and practices) of public science funding and directing organizations need to change in order to for them to be successful in effecting desired change within the publicly funded science organizations? If so, what changes may be necessary?
  5. How can desired cultural (as well as strategy, structure, and practice) changes be identified by and promoted within the many public science funding and directing organizations? Will this require a collaborative effort among these organizations? If so, how can this collaboration be encouraged? What are the obstacles to successful cultural change?

References

Alvesson, Mats, and Per Olof Berg. 1992. Corporate Culture and Organizational Symbolism: An Overview. Berlin: Walter de Gruyter & Co.

Caldwell, Bruce. 1994. Missteps, Miscues: Business Reengineering Failures Have Cost Corporations Billions, and Spending is Still on the Rise. Information Week (June 20):50-60.

Cameron, Kim S., and Robert E. Quinn. 1999. Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework. Reading, MA: Addison-Wesley Publishing Co.

Christensen, Clayton M. 1997. The Innovator’s Dilemma. Boston: Harvard Business School Press.

Collins, James C. and Jerry I. Porras. 1994. Built to Last: Successful Habits of Visionary Companies. New York: HarperBusiness.

CSC Index. 1994. State of Reengineering Report (North America and Europe). Cambridge, MA: CSC Index.

Deal, Terrence E., and Allan A. Kennedy. 1982. Corporate Cultures: The Rites and Rituals of Corporate Life. Reading, MA: Addison-Wesley Publishing Co.

Denison, Daniel R., Robert Hooijberg, and Robert E. Quinn. 1995. Paradox and Performance: Toward a Theory of Behavioral Complexity in Managerial Leadership. Organizational Science 6(5):524-540.

Denison, Daniel R. 1990. Corporate Culture and Organizational Effectiveness. New York: John Wiley & Sons.

Wenger, E.C. and Snyder, W.M. 2000. Communities of Practice: The Organizational Frontier. Harvard Business Review 78(1):139-145.