BA105:
Organizational Behavior
Professor Jim Lincoln
Week 6: Lecture
• Last time: Leadership vision and charisma
as OB levers for change
• This week: Analyzing and managing
organizational culture
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Class business: exams next week
• Essay (Tuesday, March 2)
– You will analyze a case (announced Thursday) that
deals with structure, culture, and leadership
• One or more exam questions will guide your analysis
– See p. 2 in the syllabus on how the exam will be
evaluated.
– A model exam will be put on the website
• Objective: Thursday, March 4
– 25-30 true-false, multiple-choice questions over
required reading, lecture, and discussion material
• I will hold extended office hours on Thursday
(3:30-5:30) and Friday (to be announced).
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Class business: Thursday agenda
• Team project proposal due
• Mary Kay video
• Body Shop case
– What is the culture of the Body Shop and where did it come from?
– How (and how effectively) did TBS manage its culture?
– Was the Body Shop’s penchant for modelling itself on the opposite
of standard cosmetic industry practice a matter of core values or
smart business strategy?
– Is the story of the Body Shop chiefly one of culture or one of
leadership?
• Discuss upcoming exams
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Organizational Design
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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The nature of culture
Fuzzy, ephemeral, intuitive
• “No one can define the HP way. If it weren’t fuzzy,
it would be a rule” (HP Vice President)
– Emotional, charismatic, spiritual
• Takes “emotional intelligence” to navigate
– Holistic and enveloping
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The Berkeley Way
“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
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Where did the concept of
organization culture come from?
• Discovery of Japanese management in 80’s
– William Ouchi: Theory Z.
– Peters and Waterman: In Search of Excellence
– Richard Pascale and Anthony Athos: The Art of
Japanese Management.
– Ezra Vogel: Japan as No. 1.
– James Abegglen and George Stalk: Kaisha
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What is culture?
• Shared values, norms, beliefs/understandings
– Manifested in:
• Ritual, ceremony, tradition
• Folklore, heroes, legends, stories
– Channeled through:
• Informal networks
• Logos, slogans, PR, advertising, annual reports, websites
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Southwest Airlines’ Values
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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Cisco’s core values
•
•
•
•
•
Dedication to customer success
Innovation and learning
Partnerships
Teamwork
Doing more with less
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Kyocera:
“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 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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Is making money a value?
The culture paradox:
– An organization whose core values transcend making
money will make the most money
“Profits are to a corporation much like breathing is to
life. Breathing is not the goal of life, but without
breath, life ends. Similarly, without turning a profit, a
corporation, too, will cease to exist.”
Dennis Bakke, CEO, AES Corporation
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Other core organizational values
• Customer service (IBM, Nordstrom)
• Innovation, creativity (3M, Intel, HP)
• Competitiveness, aggressiveness (GE,
Motorola, Pepsi)
• Social responsibility (Ben and Jerry’s;
Levi’s; The Body Shop; Working Assets)
• Quality (Japanese companies; Ford?)
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Strong vs. weak cultures
– 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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Subcultures
• Around departments, occupations,
divisions, demographics
• Source of in-group cohesion, out-group
competition, conflict, and politics
• Is the overall organization culture strong
enough to subsume subcultures?
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Strong culture companies as cults,
tribes, cloisters, churches, the military
What do the Branch Davidians and Microsoft have
in common? Give up? Both organizations are
cults. No joke. The only difference is one is
religious (Davidians), while the other (Microsoft)
is corporate. So says David Arnott, author of
Corporate Cults: The Insidious Lure of the AllConsuming 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. For the Davidians, it
was the charismatic David Koresh; for Microsoft,
it's the world's richest man, Bill Gates.
Bob Weinstein, March 5, 2000
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Apple as tribe
“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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The church of IBM
"IBM, more than any other big company, has
institutionalized its beliefs the way a church does. They
are expounded in numerous IBM internal publications to
ensure that employees know what's expected of them. And
they are reflected in codes of behavior…(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
....the result is a company filled with ardent believers..
The IBM culture is so pervasive that, as one nine-year
former employee put it, “leaving the company is like
emigrating."
Secrecy is one of IBM's hallmarks. One IBM watcher told
Tim, if you understand the Marines, you can understand
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IBM."
What does culture do? It
provides:
•
•
•
•
Motivation and commitment
Vision and direction
Coordination and alignment
Ease of communication
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Culture may align and coordinate functional,
product, or regional divisions
General
Manager
Engineering
Manufacturing
Marketing
Product A Culture
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Can culture help the bottom line?
• Lower cost
– Fewer formal control systems
• Better quality/productivity/customer service
• Culture as branding
– Apple, Southwest, Saturn, Japanese firms
• Culture as sustainable competitive
advantage
– Hard-to-imitate capabilities
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Culture as Honda’s (Sony’s) competitive advantage and
Toyota’s (Matsushita’s) competitive disadvantage
Honda executives say Toyota's aggressive moves don't concern
them, arguing that their giant rival will have difficulty emulating
Honda's unique culture. "All Toyota is doing is aping us and
letting their money talk," says Ken Hashimoto, a senior Honda
R&D executive.
Some of Honda's fears are already playing out. Toyota, in spite
of its often-ridiculed "country boy" image, has been proving that
it can successfully woo young car buyers, thanks to designers
such as Takao Minai. Mr. Minai languished for a long time in
Toyota's hierarchical culture but had a sudden leap in
responsibilities two years ago. Under Mr. Okuda's guidance, the
ponytailed 36-year-old amateur video jockey took charge of
developing a dream car for male twentysomethings. Based on a
sketch by another young designer, the 11-member team
designed a small car shaped like a really clunky box. Toyota
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dubbed it "bB," short for black Box.
Are there downsides to strong culture?
•
•
•
•
•
•
•
Rigidity/inertia
Homogeneity
Overconformity
Narrowness/intolerance/xenophobia
Extremism/obsessiveness
Provincialism/insularity
Goal displacement; ends-means inversion
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SAS Institute
“Some people say that SAS Institute reeks of paternalism or
a plantation mentality in a world otherwise dominated by
marketlike labor market transactions. For instance, an 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 spells homogeneity at P&G
Few corporate cultures are as dominant as the
"Procter Way." "It's such a strong culture, they
really want sameness," says Ms. Beck, who later
worked as a brand manager for Dunkin Donuts
and as a vice president for Burger King. "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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“…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” or
the absence of culture?
The report (by three Enron non-executive directors)
into the collapse of Enron, once one of America's top
ten public companies, confirmed outsiders' suspicions
about how badly the firm was run. The management’s
aims, the directors concluded, were to minimise taxes,
maximise apparent profits and, in some cases, to line
their own pockets. The directors' report was described
by Senator Byron Dorgan, who is leading another
investigation into the company’s collapse, as
“devastating”, adding that “this is almost a culture of
corporate corruption.”
--The Economist, 2/12/02
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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)
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The Organization Man
(A)s more and more lives have been encompassed by the organization
way of life, the pressures for an accompanying ideological shift have been
mounting. The pressures of the group, the frustrations of individual creativity,
the anonymity of achievement: are these defects to struggle against--or are they
virtues in disguise? The organization man seeks a redemption of his place
on earth--a faith that will satisfy him that what he must endure has a
deeper meaning than appears on the surface. He needs, in short, something
that will do for him what the Protestant Ethic did once. And slowly, almost
imperceptibly, a body of thought has been coalescing that does that.
(I)t could be called an organization ethic, or a bureaucratic ethic;
more than anything else it rationalizes the organization's demands for
fealty and gives those who offer it wholeheartedly a sense of dedication in
doing so--in extremis, you might say, it converts what would seem in other
times a bill of no rights into a restatement of individualism.
But there is a real moral imperative behind it, and whether one inclines to
its beliefs or not he must acknowledge that this moral basis, not mere
expediency, is the source of its power. Nor is it simply an opiate for those who
must work in big organizations. The search for a secular faith that it represents
can be found throughout our society--and among those who swear they would
never set foot in a corporation or a government bureau.
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Managing & changing culture:
Step I: Study it
• Be culturally savvy (vs. clueless): pay attention
• Do a culture audit:
– Find key informants
• oral histories with tribal elders
• map genealogies
• learn folklore
– Be a “fly on the wall”
• Ethnography & participant observation
– Study texts
• Annual reports, websites, advertising
– Do value surveys
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Step II: understand its causes
• Leader/founder
– Family ownership
• Long history
– P&G
• Society
– Asia/Europe
• Region
– Northern California/Manhattan/South
– Small town vs. big city
• Amana, Cummins, Corning, Chase, Citibank
• Product
– Apple, Coke
• Industry
– High tech/railroads/investment banking
• Structure
– Functional/divisional; mechanistic/organic
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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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Step III: Align/realign the
organization
– People
– Formal organization
• Structure
• Information/incentive systems
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Aligning people
• Selection and socialization (buy or make)
• First, selection:
– Select for fit or “misfit” to the culture
• Intensive screening
37
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."
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Selection at Apple
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
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Selecting for “bad fit” at HP
(Wall Street Journal interview with former CEO Lew Platt)
WSJ: Did you feel constrained running a company that had legendary
founders and a culture enshrined in a book?
Platt: A little bit. There were certain constraints. There were certain
traditions they wanted upheld.
WSJ: Give me an example.
Platt: They were very conservative -- heavy investment in R&D, little
debt. I was asked not to question those things.
WSJ: Ms. Fiorina is a woman, a nonengineer and an outsider -- all firsts
for H-P. What should we read into that?
Platt: They wanted someone who could bring change, someone with a
higher visibility. Most H-P people are pretty low-key. David
[Packard] and Bill [Hewlett] were that way. I'm that way. Carly
comes in without some of those constraints. She will question some of
the thinking that I, as a 33-year employee, couldn't.
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Aligning people
• Socialization
–
–
–
–
–
Focus on firm-specific values and tacit skills
Invest heavily in training, including OJT
Mentoring
Participation
Rites of passage
• “Humiliating-inducing experiences”
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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. Memos, written in a
distinct P&G style, are valued over meetings. Employees
are expected to have facts and data at their fingertips -opinions and intuition are frowned upon.
Juelene Beck, who worked as P&G beverage brand
assistant from 1984 to 1986, says supervisors once
questioned whether a trendy haircut and suit were
"appropriate" for P&G. During performance reviews, she
says, she was asked why she preferred sailing to
socializing with co-workers.
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Cultural integration of acquisitions
through mentoring at Cisco
“Cisco’s acquisition identification process emphasizes
cultural compatibility…Cultural integration includes
the use of integration teams who explain and model
Cisco’s values, the holding of orientation sessions, and
the assignment of ‘buddies.” The buddy system
involves pairing each new employee with a seasoned
Cisco veteran of equal stature and similar job
responsibility. The buddy offers personalized
attention better suited to conveying the Cisco values
and culture.”
O’Reilly and Pfeffer, Hidden Value
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Hell Camp: Extreme resocialization
“Founded nine years ago in the foothills of Mt. Fuji, Hell Camp
claims to have subjected some 100,000 Japanese salarymen to 13
days of speed drills, speechifying and hazing rituals. Its main
message-- “100 liters of sweat; 100 liters of tears” was designed to
counteract a growing fear among Japan’s corporate and
government elite that the nation’s workers are becoming too
“Americanized”, too soft. The school’s solution, for nearly $3000
a pop: to crush the individual ego with mindless and humiliating
exercises and then rebuild it with a modern version of the Samurai
code of selfless servitude called bushido.”
“Japanese-style camp for managers is lost in translation in U. S.: Hazing
rituals and obeisance don’t make it in Malibu even among freeloaders.
WSJ, March 1, 1988.
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(Re)Align the organization
– Structure
• Divisional/functional/matrix
• Mechanistic/organic
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Ford: Changing culture by
restructuring
Since the hard-charging 51-year-old executive took over in
January (1999), he has picked up the whole organization by the
lapels and shaken it. His goal? To reinvent the 96-year-old
industrial giant as a nimble, growth-oriented consumer
powerhouse for the 21st century, when a handful of auto giants
will battle across the globe.
That's why Nasser has declared war on Ford's stodgy, overly
analytic culture. In its place, he envisions a company in which
executives run independent units--cut loose from a stifling
bureaucracy and held far more accountable for success and
failure. And with a consumer focus at the heart of his retooled
Ford, he's banking on a future in which designers, engineers,
and marketers someday will do a far better job of anticipating
the wants and needs of car buyers.
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Carly Fiorina’s culture-structure
realignment at HP
Most dramatically, she launched a plan to consolidate H-P's 83 businesses
into only 12. She also aligned the reduced number of divisions into
two "front-end" groups that would focus on customer activities, such
as marketing and sales, and two "back-end" organizations devoted
strictly to designing and making computer and printer products.
Old-time H-P executives were shocked. "I was a deer caught in the
headlights when she described the front and back end," says Carolyn
Ticknor, who now presides over the merged printer unit. Several of
these executives protested that employees weren't ready for a major
reorganization.
Some executives fretted that managers wouldn't wield "real" authority if
they couldn't control both product development and marketing. "It took
some of the glory, if you wish, out of the job," says Mr. Perez, the
departed executive.
Consternation rippled through the ranks. Managers who had long aspired
to run their own autonomous units, known as P&Ls, short for profit &
loss, suddenly saw most of those jobs disappear.
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WSJ, 8/22/2000
Changing the symbolism of
structure
• Southwest
– People Department
– Culture Committee
• Executive ranks at Chumbo Corp.
– Grand Pooh-Bah
– Web Goddess
– Director of Something
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(Re)align the organization
– HR systems
•
•
•
•
Career design
Long-term employment
Job rotation
Compensation design
– Reward group & long-term performance
– Reward conformity with core values
» Innovators head new product divisions at 3M and
HP
– Maintain equity, keep inequality low
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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
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Excessive culture-HR alignment at
Penney’s
To alter such deep-bred customer perceptions (that Penney’s clothes
are unfashionable) would require a feat of Herculean proportions, but
Penney's, with a notoriously insular corporate culture, is averse to
itinerant, superhero types. Of the company's top managers above the
senior vice president level, only two have not spent their entire careers
there.
"The norm is to be there your whole career, several are even second
generation," said Lucille Klein, who left as fashion director of
Penney's women's division three years ago, but still consults with the
company. "It leads to tunnel vision, like the Penney's way of doing
things is the only way."
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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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