UGBA105:
Organizational Behavior
Professor Jim Lincoln
Week 5: Lecture
Managing Organizational Culture
• Last time: Leadership vision and charisma
as OB levers for change
• This week: Analyzing and managing
organizational culture
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Where does culture fit in?
Informal
Organization
Input
(Culture, leadership,
networks, politics)
Environment
(Competition,
change)
Resources
(munificence)
History (age,
conditions at
founding)
Strategy
(diversification;
innovation)
Formal
Organization
Output
(job titles,
departments,
reporting hierarchy,
IT & HR systems
Systems
Tasks
(technologies,
work flows)
Unit
Individual
People
(ability, skills,
motivation,
biases)
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Where did the idea of
“organization culture” come from?
(1) The critique of 1950’s corporate culture:
Overconformity and alienation
• William H. Whyte’s
The Organization Man
(Doubleday, 1956)
• The Man in the Gray
Flannel Suit
(20th Century Fox, 1956)
4
(2) Then in the late 70’s came…
– William Ouchi: Theory Z
(1981)
– Tom Peters and Robert
Waterman: In Search of
Excellence (1979)
– Richard Pascale and Anthony
Athos: The Art of Japanese
Management (1983)
– Ezra Vogel: Japan as No. 1
(1985)
– James Abegglen and George
Stalk: Kaisha (1985)
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What’s the nature of culture?
“It's invisible but omnipresent. Most know it exists but few can
actually define it. Newcomers are perplexed by it. Confronting it head
on can be dangerous.”
“The name of this nebulous creature? It's known on campus as "The
Berkeley Way" -- an unwritten code of conduct that governs how
people go about their business.”
The Berkeleyan, February 16, 2000
“No one can define the HP way. If it weren’t fuzzy, it would be a
rule” (HP Vice President)
6
What are the components of
culture?
(1)
(2)
(3)
7
Is making $ a value?
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Southwest Airlines:
work and people
Value 1: Work should be fun…it can be play…enjoy it
Value 2: Work is important…don’t spoil it with seriousness
Value 3: People are important…each one makes a difference.
It used to be a business conundrum: “Who comes first? The employees,
customers, or shareholders?” That’s never been an issue to me. The
employees come first. If they’re happy, satisfied, dedicated, and energetic,
they’ll take real good care of the customers. When the customers are happy,
they come back. And that make the shareholders happy.”
Herb Kelleher
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Saturn: “Putting people first”
“Saturn was created with one simple idea: to put
people first. With the mission to create a different kind of
car company — one dedicated to finding new ways for
people to work together to design, build and sell cars —
Saturn has earned a reputation for superior customer
satisfaction.”
Saturn website
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Other examples of core values?
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What about foreign companies?
“Respect the divine and respect people”
“Our goal is to strive toward both the material and
spiritual fulfillment of all employees in the Company,
and through this successful fulfillment, serve mankind in
its progress and prosperity.
We are scientists constantly directing our efforts toward
perfecting our technology. But we must not forget that the
complete process of living requires devotion to humanity as
well as to science, to the emotional as with the rational, and
to love equally with reason.
Just as a family unites in a common bond of support
and affection, let us all unite in a bond of love and respect.”
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Examples of norms and beliefs
• HP: “Manage by wandering around”
• 3M: “Thou shalt not kill a new product idea”
• P&G: “Employees are expected to have facts and data at their
fingertips -- opinions and intuition are frowned upon.”
• “(S)alespersons wear dark business suits and white shirts;
that's no longer a strict regulation but most IBM salesmen
continue to dress that way”
• Apple: “Do you want to sell sugar water to children for the
rest of your life or do you want to change the world?”
• Xerox is a copier company
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So cultures vary in content.
They also vary in strength
– Strong: Consistent, persistent, intense, shared,
crystallized, consensual, consequential
– Weak: Vague, fragmented, inconsistent,
transitory, politicized, conflictual
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Dimensions of culture strength
Sharing
Intensity
Complacent
“country club”
culture
Strong, organizationwide culture
Absence of culture
(anomie)
Subcultures
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What about subcultures?
• Where do they grow?
• What do they do?
16
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Strong culture companies as
social institutions
"IBM, more than any other big company, has
institutionalized its beliefs the way a church does.
They are expounded in numerous IBM internal
publications..”
....the result is a company filled with ardent
believers..”
Bob Weinstein, March 5, 2000
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What do the Branch Davidians and Microsoft have in
common? Give up? Both organizations are cults.
So says David Arnott, author of Corporate Cults: The
Insidious Lure of the All-Consuming Organization
(AMACOM).
Both are classified as cults because the members of
these organizations are cut off from the real world
and are obsessed with achieving the mission of
their leaders.
Bob Weinstein, March 5, 2000
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“Apple is a lot like a tribe, with folklore
handed down from generation to
generation. The question is how can we
channel it? We are trying to shift away
from folk heroes and individualism in the
organization, but we have selected people
for this in the past, and we don’t punish
that kind of behavior.
--Apple executive
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What are the upsides to a
strong culture?
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Apple’s product-driven culture
“Here’s the most interesting thing
about our culture-- we are what we
make. I’ve never seen an
organization where the personality
of the organization is so intertwined
with the personality of the product-individualistic, pure, uncompromised,
ahead of everyone else, so elegant it
can’t fail. We are the Macintosh here.”
Apple Marketing Manager
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All of which help the bottom line
• Lower cost
– Fewer formal control systems
• Better quality/productivity/customer service
• Culture as branding
– Apple, Southwest, Saturn, Japanese firms
23
Culture as competitive strategy
Culture as a “core competence”
 “Sustainable competitive advantage” demands hard-toimitate capabilities
“Honda executives say Toyota's aggressive moves don't
concern them, arguing that their giant rival will have
difficulty emulating Honda's unique culture”
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What are the downsides to a strong culture?
25
Uniformity as SAS Institute
(A)n article in Forbes stated, “More than one observer calls
James Goodnight’s SAS Institute, Inc., “the Stepford
software company” after the movie The Stepford Wives.
In the movie people were almost robotlike in their
behavior, apparently under the control of some outside
force.
Another article noted “The place can come across as being
a bit too perfect, as if working there might mean
surrendering some of your personality.”
O’Reilly and Pfeffer: Hidden Value.
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Strong culture
low diversity
at P&G
Few corporate cultures are as dominant as the "Procter
Way." "It's such a strong culture, they really want
sameness."
"The way women think and the way we do business has
some inherently different qualities to it," Ms. Beck says.
"In retrospect, there was a gender aspect to [P&G's culture]
that was not intentional, but was very, very real.“
WSJ, 9/9/98
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Tunnel vision at Apple
“…at one point product
features became the
religion, not the
vision. This drove
prices up and closed
out individuals (as
customers).
--Apple executive
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Enron’s “culture of corruption”
The report (by three Enron non-executive directors)
confirmed …outsiders' suspicions about how badly
the (Enron) was run.
The management’s aims, the directors concluded,
were to minimise taxes, maximise apparent
profits and…to line their own pockets.
Senator Byron Dorgan (commented): “this is almost
a culture of corporate corruption.”
--The Economist, 2/12/02
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Managing & changing culture:
Step I: describe it
• Be culturally savvy (vs. clueless): pay attention
• Do a culture audit: study the signs of culture
–
–
–
–
Interview key informants
Be a “fly on the wall”
Study texts
Do value surveys
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Signs of culture: Heroes
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Ceremonies
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Contests, sports, recreational activities
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Office parties
34
Logos and symbols
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Language and jargon
• Southwest
– People Department
– Culture Committee
• Executive ranks at Chumbo Corp.
– Grand Pooh-Bah
– Web Goddess
– Director of Something
36
Peoplesoft’s people-lingo
Even by the standards of Silicon Valley, PeopleSoft is
famous for an aggressively informal and sensitive
corporate culture. Its staff routinely worked 70-hour weeks,
but for more than the stock options. There was a payoff in
PeopleSoft's in-house jokes and clubby code words -- in
company lingo, employees are "PeoplePeople," they feast
on company-funded "PeopleSnacks," (bought at the
“Peoplestore”), which causes them to gain
"PeoplePounds." Employees gave birth to "PeopleBabies."
WSJ May 5, 1999
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Chorus from the IBM Rally Song:
“EVER ONWARD”
EVER ONWARD – EVER ONWARD
That’s the spirit that has brought us fame
We’re big but bigger we will be,
We can’t fail for all can see
That to serve humanity has been our aim!
Our products now are known in every zone,
Our reputation sparkles like a gem!
We’ve fought our way through- and new
Fields we’re sure to conquer, too
For the EVER ONWARD IBM
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Step II:
Figure out where it comes from
•
•
•
•
•
•
•
Leader/founder
History
Society
Region/place
Product
Industry
Structure
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Step III: Align/realign the
organization
– Change the people
– Change the formal organization.
– Change the informal organization
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Aligning people
• Selection:
– Select for fit (or misfit) to the culture
• Socialization
–
–
–
–
Focus on firm-specific values and tacit skills
Invest in training, esp. OJT
Mentoring
Rites of passage
41
Selection at Microsoft
In 1999, the average age of the more than 31,000
Microsoft employees was only 34, and raw
intelligence matters more than judgment or
experience in determining who gets hired.
Craig Mundie, senior vice president for consumer
strategy, described Microsoft "as a company full
of a lot of high IQ people who have relatively
no experience."
42
Selection at Apple
(John) Sculley came to a company renowned for its
exciting and countercultural work environment, where
employees often wore T-shirts that proclaimed
“working 90 hours a week and loving it.”
Sculley described Apple as “the Ellis Island of
American business because it intentionally attracted
the dissidents who wouldn’t fit into corporate
America.”
Harvard Business School Press
43
Selection and socialization at P&G
Job candidates must pass a battery of tests
measuring aptitude and leadership skills. Once
hired, employees are schooled in all things
Procter, even attending training seminars
known as P&G College.
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(Re)Align the formal organization
– Formal structure
• From divisional to functional (HP)
• From functional to divisional (Ford)
– HR practice
• Long-term employment
• Compensation design
– Accounting systems
45
Aligning rewards at Cisco
“Chambers is adamant about rewards being
tied to customer satisfaction. He ties the
compensation of all managers to measures
of customer satisfaction– really listening to
the customer. “We are the only company of
anywhere near this size that does it.”
O’Reilly and Pfeffer: Hidden Value
46
Culture takeaways
• Culture is an extremely powerful force in
every organization
– It can lead to either success or to failure
• Culture may be “soft” but it can be
managed and changed
– It does take time, commitment, and consistency
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Class business: Wednesday agenda
Mary Kay video
Body Shop case
– What is the culture of the Body Shop, and
where did it come from?
– How did TBS manage its culture?
– Did the Body Shop’s business model directly
reflect its core values? Or was it just smart
business strategy?
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