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AND ETHICS
Organisations play a major and increasingly important role in
the lives of us all. In addition to the provision of some goods
or services, organisations have a responsibility to multiple
stakeholders. The power and influence of a business organisation
must be tempered by decisions relating to its broader social
obligations and ethical responsibilities. Corporate social
responsibilities and business ethics are important features
in the study of management and organisational behaviour.
Learning outcomes
After completing this chapter you should be able to:
■
explain the significance of organisational ideologies and principles;
■
review the nature and value of mission statements;
■
examine the importance of the profit objective;
■
assess the concepts of corporate social responsibilities and
organisational stakeholders;
■
explore approaches to the consideration of values and ethics in
organisations;
■
evaluate the nature and scope of codes of business conduct;
■
review the importance of ethics and corporate social responsibilities for
the effective management of a work organisation.
Critical reflection
‘The most successful and enduring business organisations are also those
that give the greatest attention to the well-being of their staff and to their
broader social and ethical responsibilities.’
To what extent do you agree? What examples can you quote to support your
view? What would you say about your own organisation?
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ORGANISATIONAL IDEOLOGIES AND PRINCIPLES
The importance of corporate strategy and the goals and objectives of the organisation (discussed in Chapter 14) give rise to the consideration of corporate social responsibilities and
ethical business behaviour. The goals of the organisation may be pursued in accordance with
an underlying ideology, or philosophy, based on beliefs, values and attitudes. This organisational ideology determines the ‘culture’ of the organisation and provides a set of principles that govern the overall conduct of the organisation’s operations, codes of behaviour, the
management of people and its dealings with other organisations.1 These sets of principles may
be recognised and implemented informally as ‘accepted conventions’ of the organisation or
they may be stated formally in writing.
Certain aspects of an organisation’s philosophy may be so dominant that they become
the ‘hallmark’ of that organisation and place constraints on other areas or forms of activities.
Examples include the highest-quality hallmark of Rolls-Royce cars that would presumably
prevent entry into the cheaper mass-production market, and the John Lewis ‘never knowingly undersold’ pricing promise. In the case of the Walt Disney Company, quality service is
embedded deeply within its corporate culture. With The Body Shop, promotion of their products is based on ethical trading, and linking their products to a political and social message.2
Organisational values and beliefs
More than thirty years ago, Brech wrote about the ideology of an organisation related to the
idea of both an ethical foundation and an organisational or operational foundation.
■
■
Ethical foundation embodies the basic principles which govern the external and internal
relations of the organisation. External relations concern standards of fair trading and
relations with, for example, customers, suppliers and the general public. Internal relations
are concerned with fair standards of employment and relations with members of the
organisation, including authorised union representatives.
Organisational or operational foundation is concerned with the structure, operation,
and conduct of the activities of the organisation. External aspects relate to, for example,
methods of trading and channels of distribution. Internal aspects include methods of
production, use of equipment and managerial practices relating to organisational performance, productivity and profitability.3
In more recent years organisations have given growing attention to a set of stated corporate values displayed prominently for all to see. Lucas questions whether such grand statements of corporate principles really mean anything and concludes that they actually have a
point and values can be used with success. ‘A set of values is obviously a nice thing for an
organisation to have; something to pin on the notice board. But for those organisations that
have learned to walk the talk, deeply embedded values can attract the right people, underpin the business in times of crisis and provide direction for the future.’4
Dainty and Anderson point out that values are the guidelines a person uses to make choices
and within organisations, basic beliefs affect what decisions are made, how people interact,
and the kind of work practices that are pursued and developed. They form the glue that
binds an organisation’s culture. ‘Building an understanding of values that are shared within
an organisation will be as important in the 21st century as it is today. In fact, many feel
that organisations and people should be returning to more fundamental values, rather than
moving away from them. Increasingly, organisations are spending time working out and
agreeing the values by which they want their organisation to be managed.’5
Integrity and trust
Cloke and Goldsmith contend that organisations can increase their integrity, coherence,
and integration and improve their performance by reaching consensus on shared values.
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They can bolster value-based relationships by recognising and encouraging behaviours
that uphold their values; communicate and publicise their values, and encourage individual
and team responsibility for implementing them; and develop methods for monitoring compliance with values, providing feedback and identifying potential conflicts of interest. Most
importantly consensus on shared values means organisations can accomplish these goals
without moralising, preaching, excusing or imposing their values on others.6
According to Coppin, in addition to pressure from governments and investors, a major
reason for maintaining responsible business is that staff – the people who make the business
successful – will have strong views on the issue. ‘They provide their most precious asset, their
time, to the firm and they expect to be rewarded with more than just money. They increasingly believe that the organisation’s values should match their own.’7
Gratton refers to ‘signature’ processes of highly successful companies such as Nokia
and BP that are a direct embodiment of the history and values of the company and its
top executive team, and their potential to create the energy to drive high performance.
These signature processes, which differ significantly from general views of best practice,
are acceptable within the companies in which they develop because of their association
with the passion and value of the executive team, and are part of the fabric and ways of
behaving.8
Morrish reports on the importance of trust and honesty to Tata Consultancy Services, part
of India’s Tata Group, quoting marketing director Keith Sharp.
‘We’re increasingly seeing that our prospects and customers want to be dealing with, and seen to be
dealing with, a company that is trustworthy, reliable, ethical and honest.’ . . . It helps if that reputation is rooted in a company’s history and culture. The group has a detailed code of conduct, developed
over the firm’s history, that every employee is obliged to adopt . . . Honesty leads to trust, which is at
the root of good business relationships.9
Gidoomal maintains that we have taken it for granted that the ethical values and norms
of society are there but they need to be spelled out.
It’s almost a pity to say we need training in ethics. We should be brought up with it through the
education system and the values taught at home and church. When you learn ethics and values as a
kid you have learnt them for life. We have to be proud of our integrity and blow the whistle when things
don’t go right.
Gidoomal also maintains that the ethical business dimension cannot be separated
from the diversity issue (discussed in Chapter 4) and whilst acknowledging that more
and more companies now have diversity policies wonders if they are just lying on a shelf
gathering dust.10
Ethical leadership
The importance of ethical behaviour, integrity and trust calls into question the extent to
which managers should attempt to change the underlying values and beliefs of individual
followers. For example, Yukl discusses the controversy that whereas some writers contend
that this type of leader influence is clearly unethical, a contrary view is that it is an important
responsibility of leaders to help in large-scale change that would not be successful without
some changes in member beliefs and perceptions.
The traditional perspective is that managers in business organizations are agents who represent the
interests of the owners in achieving economic success for the organization. From this perspective,
ethical leadership is satisfied by maximizing economic outcomes that benefit owners while not doing
anything strictly prohibited by laws and moral standards . . . A very different perspective is that
managers should serve multiple stakeholders inside and outside the organization.11
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Barker points out that ethical issues are complex and do not lend themselves to black and
white analysis. The integrity ethics approach requires recognition that this is an issue based
entirely on trust and responsibility. Questions of professional ethics cannot be resolved by
rules and codes. It is leaders who are significantly more likely to set a tone and influence
behaviour in an organisation.
Companies are legal persons with separate identities. However, companies themselves cannot be ethical.
It is the leaders of the company who give a company an ethical culture. If leaders do not behave in an
ethical way and do not encourage ethical discourse in decision-making, they will effect no conversion
of their staff and colleagues. Simply stating and imposing values does not work – it creates moral robots
by establishing elaborate codes and regulations which are widely avoided.12
A summary outline of corporate social responsibility and ethical behaviour is set out in
Figure 18.1.
Figure 18.1
Corporate social responsibility and ethical behaviour
MISSION STATEMENTS
In recent years it has become increasing popular for an organisation to produce a
mission statement and/or its ‘vision’ that sets out the purpose and general direction for the
organisation. There is sometimes an apparent uncertainty over the distinction between the
terms ‘mission’ and ‘vision’. It seems to be generally accepted that the vision provides
the overall frame of reference within which mission statements are written and goals
selected. ‘If vision is ill formed, mission statements will be vague and goal achievement hard
to measure.’13
Mission statements vary in length, the extent of specific or general content, and according
to the type of organisation. For example, the mission statement of Amazon is barely more
than ‘To build a place where people can come to find and discover anything they might
want to buy online’. By contrast, the mission statement and guiding principles of the John
Lewis Partnership are as shown below.
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The John Lewis Partnership – mission statement and principles
Mission statement
The John Lewis Partnership’s reputation is founded on the uniqueness of our ownership
structure and our commercial success. Our purpose is ‘the happiness of all our members,
through their worthwhile, satisfying employment in a successful business’, with success
measured on our ability to sustain and enhance our position both as an outstanding retailer
and as a thriving example of employee ownership. With this in mind our strategy is based on
three interdependent objectives Partners, customers and profit.
Defining principles
There are seven principles which define how we run our business:
Purpose – The Partnership’s ultimate purpose is the happiness of all its members, through
the worthwhile and satisfying employment in a successful business. Because the Partnership
is owned in trust for its members, they share the responsibilities of ownership as well as its
rewards, profit, knowledge and power.
Power – Power in the Partnership is shared between three governing authorities: the
Partnership Council, the Partnership Board and the Chairman.
Profit – The Partnership aims to make sufficient profit from its trading operations to sustain
its commercial vitality, to finance its continued development and to distribute a share of those
profits each year to its members, and to enable it to undertake other activities consistent with
its ultimate purpose.
Members – The Partnership aims to employ people of ability and integrity who are committed
to working together and to supporting its Principles. Relationships are based on mutual
respect and courtesy, with as much equality between its members as differences of
responsibility permit. The Partnership aims to recognise their individual contributions and
reward them fairly.
Customers – The Partnership aims to deal honestly with its customers and secure their
loyalty and trust by providing outstanding choice, value and service.
Business relationships – The Partnership aims to conduct all its business relationships with
integrity and courtesy and to honour scrupulously every business agreement.
The community – The Partnership aims to obey the spirit as well as the letter of the law and
to contribute to the wellbeing of the communities where it operates.14
Source: The John Lewis Partnership (www.johnlewispartnership.co.uk).
The vision and mission of the Chartered Management Institute is:
The vision that inspires us is a world where we see:
First-class management and leadership driving up personal and corporate performance,
national productivity and social well-being.
In order to help deliver this vision we are committed to our mission:
To promote the art and science of management
■
encourage and support the lifelong development of managers
raise the level of competence and qualification of management
■ initiate, develop, evaluate and disseminate management thinking, tools, techniques and
practices
■ influence employers, policy makers and opinion formers on management issues.15
■
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Value of mission statements
The desire to identify with as many stakeholders as possible means that many mission statements are all-embracing with bland and abstract wording. The value of a mission statement
is dependent, however, upon the extent to which it is understood and accepted throughout
the organisation, and translated in meaningful terms to all members of staff including those
at the operational level. Perrin and Tavakoli raise doubts over managers who have a naïve
notion that the production and dissemination of a well-crafted statement will create a sense
of mission:
The picture will remain gloomy while managers and consultants believe that creating a mission
statement is synonymous with creating a sense of mission. You only create the latter if your mission
statement is understood, believed and acted upon by a majority of organisation members.16
A mission statement is only likely to be of any value if the organisation actually practices
what it preaches. Reeves maintains that the problem with vision statements is that they are
just that – statements, and typically they are disconnected from those they are meant to
inspire. However, when mission and values are aligned to behaviour, this has an enormous
impact on the productivity of organisations.17
A similar point is made by Gratton:
How often do corporate plans and mission statements remain simply that: senior executive
rhetoric with little meaning to those people whose job it is to deliver customer satisfaction or
bring complex products rapidly to the marketplace? Employees may hear corporate mission
statements extolling the virtues of customer satisfaction or product innovation, but when the
communication fanfare is over, the customer-focus workshops completed, and the lights dim on
the business video, what is left? A group of employees trying to make sense and create meaning from the many messages and cues they have received.18
Critical reflection
‘Mission statements may appear to be a good idea in theory but the majority fail to
deliver and are no more than a meaningless public relations exercise. The only thing
a grandiose mission statement is likely to achieve is a cynical reaction from members
of staff.’
How far do you agree with this statement? What has been your reaction to the mission
statement of any organisation known to you?
THE PROFIT OBJECTIVE
In order to be successful, the primary objectives of the business organisation may be seen as:
■
■
■
to continue in existence – that is, to survive;
to maintain growth and development; and
to make a profit.
All three objectives are inextricably linked and it is a matter of debate whether the organisation survives and develops in order to provide a profit, or makes a profit by which it can
survive and develop. Note however, that strictly speaking there are times when closure and
liquidation is the best deal for the business owners, rather than continuing to make losses.
At other times, a board may recommend selling to an acquirer, perhaps because the price
offered is greater than the present management feels able to promise.
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Summers and Nowicki suggest that using a Maslow-like hierarchy of needs (discussed in
Chapter 7), the first concern for organisations is survival. After organisational survival is
ensured, managers then have considerable latitude in what they want the organisation to be
and do.19
If we accept survival as the ultimate objective of the business organisation, this involves
the need for a steady and continuous profit. Organisations must be prepared to accept the
possibility of a reduction in short-term profitability in order to provide for future investments.
The profit goal is achieved through the process of management and the combined efforts of
members of the organisation in perceiving and successfully seizing opportunities in the
business environment. In times of economic recession the survival objective takes on particular
importance, especially for small businesses.
Managers today have a problem. They know their companies must grow. But growth is hard, especially
given today’s economic environment where investment capital is difficult to come by and firms are
reluctant to take risks. Managers know innovation is the ticket to successful growth. But they just can’t
seem to get innovation right.20
Not a sufficient criterion
Although the objective of profit maximisation is undoubtedly of great importance, it is not,
by itself, a sufficient criterion for the effective management of a business organisation. In
practice, there are many other considerations and motivations which affect the desire for the
greatest profit or maximum economic efficiency and the accompanying assumptions which
underlie the economic theory of the firm. The meaning of ‘profit maximisation’ is not, by
itself, very clear. Consideration has to be given to the range and quality of an organisation’s
products or services, to the costs of its operations and to environmental influences. Reducing
attention to longer-term ‘investments’ such as quality and after-sales service, research and
development, sales promotion, management development, satisfaction of staff and their
employment conditions may increase profitability in the short term, but is likely to jeopardise
future growth and development, and possibly even the ultimate survival of the organisation.
This argument can be clarified to some extent by redefining the business goal as the
maximisation of owner (shareholder) value, instead of ‘profit’. The concept of value is
defined as incorporating the short, medium and long term through the process of discounting (reducing the value of ) future cash flows back to a present value. Thus managers seeking
to maximise value have good reason to make investments in business activities that will yield
profit in the future, even if the costs are immediate and the benefits are some years away.
Indeed, many businesses would be unmanageable on any other basis. Two examples may
help to make the point. Firstly, the value of a global brand is that of an asset that is expected
to continue to benefit the business well into the future and long after the end of the present
accounting period. If the brand is well established, it will contribute to profit in the present
period, but continuing investment in the brand is judged against the maximisation of the
long- as well as the short-term value of the brand. Similarly, a start-up company in, say,
biotechnology may amass a substantial business value before selling a single item, if investors
are persuaded of the promise of future rewards from the investments being made.
A business organisation has to provide some commodity or service by which it contributes
to the economic and/or social needs of the community. It also has broader social responsibilities to society. (Corporate social responsibilities are discussed later in this chapter.) Profit
can be seen as the incentive for an organisation to carry out its activities effectively. Profit
does at least provide some broad measure of effectiveness and highlights the difficulty in
evaluating the effectiveness of not-for-profit organisations, such as National Health Service
hospitals, prisons or universities.
Furthermore, as discussed in Chapter 14, members of the organisation will have their own
personal goals and their own perception of the goals of the organisation.
Coppin refers to the bottom-line argument of some managers that in difficult times the
business needs to focus on the core and that responsible business (an expensive luxury) and
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profitable business are mutually exclusive. However, Coppin does not share this view and
maintains that profit enhancement should result from a properly implemented, responsible
business plan.
A responsible business approach, embedded in the overall business strategy and applied with basic
common sense, is good for business in times of both feast and famine. It can be a source of real competitive advantage. In the tough times that we face, strong leaders must make the case that responsible
business is not an optional extra but the only way to do business.21
Fallacy of the single objective
The reality is that managers are usually faced with the challenge of several, often competing
and/or conflicting objectives. Drucker has referred to the fallacy of the single objective of
a business. The search for the one, right objective is not only unlikely to be productive, but
is certain to harm and misdirect the business enterprise.
To emphasize only profit, for instance, misdirects managers to the point where they may endanger
the survival of the business. To obtain profit today they tend to undermine the future . . . To manage
a business is to balance a variety of needs and goals . . . the very nature of business enterprise requires
multiple objectives which are needed in every area where performance and results directly and vitally
affect the survival and prosperity of the business.22
Drucker goes on to suggest eight key areas in which objectives should be set in terms of
performance and results:
1 Market standing – for example: share of market standing; range of products and markets;
distribution; pricing; customer loyalty and satisfaction.
2 Innovation – for example: innovations to reach marketing goals; developments arising
from technological advancements; new processes and improvements in all major areas of
organisational activity.
3 Productivity – for example: optimum use of resources; use of techniques such as operational research to help decide alternative courses of action; the ratio of ‘contributed value’
to total revenue.
4 Physical and financial resources – for example: physical facilities such as plant,
machines, offices and replacement of facilities; supply of capital and budgeting; planning
for the money needed; provision of supplies.
5 Profitability – for example: profitability forecasts and anticipated time scales; capital
investment policy; yardsticks for measurement of profitability.
6 Manager performance and development – for example: the direction of managers and
setting up their jobs; the structure of management; the development of future managers.
7 Worker performance and attitude – for example: union relations; the organisation of
work; employee relations.
8 Public responsibility – for example: demands made upon the organisation, such as by
law or public opinion; responsibilities to society and the public interest.
THE BALANCED SCORECARD
The balanced scorecard (BS) is an attempt to combine a range of both qualitative and
quantitative indicators of performance which recognise the expectations of various stakeholders and relates performance to a choice of strategy as a basis for evaluating organisational
effectiveness. Citing the work of Kaplan and Norton in a year-long study of a dozen US companies,23 Anita van de Vliet refers to the approach of a ‘balanced scorecard’ and the belief that
relying primarily on financial accounting measures was leading to short-term decision-making, overinvestment in easily valued assets (through mergers and acquisitions) with readily measurable returns,
and under-investment in intangible assets, such as product and process innovation, employee skills or
customer satisfaction, whose short-term returns are more difficult to measure.
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Van de Vliet suggests that in the information era, there is a growing consensus that financial indicators on their own are not an adequate measure of company competitiveness or
performance and there is a need to promote a broader view.
The balanced scorecard does still include the hard financial indicators, but it balances these with other,
so-called soft measures, such as customer acquisition, retention, profitability and satisfaction; product
development cycle times; employee satisfaction; intellectual assets and organisational learning.24
According to Bourne and Bourne most people think about the balanced scorecard in
terms of key performance indicators (KPIs) and target-setting, but it is about aligning actions
to strategy and showing people what is important. A well-constructed scorecard tells
everyone in the organisation where it is going and what they are trying to achieve. It clarifies
objectives and communicates them widely.25 Bourne and Bourne also give an example of
a version of the balanced scorecard called the steering wheel used by Tesco to manage the
business. The steering wheel has five perspectives: customer, financial, operations, people,
community. There is a cascade of the steering wheel with a global, UK, store group and
individual wheel for each store. The steering wheel is central to how Tesco run their business
and is a tool used to roll out their strategy, manage performance and reward people.26
The balanced scorecard can also be used in the public sector where there is an increasing
need for organisations to improve their performance and to be seen as more businesslike in
the delivery of services (including an employee perspective).
Given that the public sector has the difficult task of fulfilling a wide range of very different objectives,
the BS could help in formal recognition and measurement of these objectives.27
Critical reflection
‘The single, most important objective for the business organisation is profit maximisation
combined with high monetary rewards for members of staff. This is the only realistic
criterion by which organisational effectiveness can reasonably be judged.’
How would you attempt to challenge this assertion? How would you attempt to define
the single, most important objective for the business organisation?
CORPORATE SOCIAL RESPONSIBILITIES (CSRs)
Organisations play a major and increasingly important role in the lives of us all, especially
with the growth of large-scale business and expanding globalisation. The decisions and actions
of management in organisations have an increasing impact on individuals, other organisations and the community. The power and influence that many business organisations now
exercise should be tempered, therefore, by an attitude of responsibility by management.
Reeves, for example, refers to companies that increasingly reply on supply chains that stretch
around the globe. Reeves reminds us of the ramifications, in 2007, from lead paint applied
to some children’s toys by the Chinese supplier – a story that ran in every market where
parents buy toys for their children.28
In striving to satisfy its goals and achieve its objectives, the organisation cannot operate
in isolation from the environment of which it is part. The organisation requires the use of
factors of production and other facilities of society. The economic efficiency of organisations
is affected by governmental, social, technical and cultural variables. In return, society is in
need of the goods and services created and supplied by organisations, including the creation
and distribution of wealth. Organisations make a contribution to the quality of life and to
the well-being of the community.
Organisational survival is dependent upon a series of exchanges between the organisation
and its environment. These exchanges and the continual interaction with the environment
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give rise to a number of broader responsibilities to society in general. These broader
responsibilities, which are both internal and external to the organisation, are usually referred
to as corporate social responsibilities (CSRs). These social responsibilities arise from the
interdependence of organisations, society and the environment. According to the All Party
Parliamentary Group on Management, there are varying definitions of what CSR stands for,
but in general terms, it refers to:
The comprehensive approach organisations take to meet or exceed the expectations of stakeholders beyond such measures as revenue, profit and legal obligations. It covers community
investment, human rights and employee relations, environmental practices and ethical conduct.29
The recognition of the importance of social responsibilities can be gauged in part by the
extent of government action and legislation on such matters as employment protection, equal
opportunities and diversity, Companies Acts, consumer law, product liability and safeguarding
the environment. This has formalised certain areas of social responsibilities into a legal requirement. It is doubtful, however, whether legislation alone is sufficient to make management,
or other members of an organisation, behave in what might be regarded as a ‘proper’ manner.
Growing attention to social responsibilities
There has been growing attention given to the subject of CSR and an increasing amount of
literature on the subject and on a new work ethic. The importance of CSR can also be gauged
by the extent of its coverage included in the annual reports of most major companies. Many
businesses, both in the UK and in other parts of Europe, are attempting to provide a more
open and transparent view of their operations.30 The European Commission is encouraging
firms to assess their performance not on profit margins alone but also on the welfare of their
workforce and care for the environment.31
Ann Chant, Director General, HM Revenue & Customs, suggests that rather than worrying
about exactly what it is, CSR might simply be one of those things where it is best to get on
and try it. Chant argues that CSR should be a two-way partnership.
I believe the key to understanding CSR in the community is to recognise that when done properly, it is
a partnership. Both parties – the organisation and the section of the community or group of individuals
that the organisation is linking with – should have something to give and something to gain.32
Global responsibilities
Today there is also greater concern for business communities to accept their global responsibilities. This is recognised, for example, in the foreword to a book by Grayson and Hodges,
by HRH The Prince of Wales.
For the business community of the twenty-first century, ‘out of sight’ is no longer ‘out of mind’.
Global communications and media operations can present every aspect of a company’s
operations directly to customers in stark, unflattering and immediate terms. Those customers
increasingly believe that the role of large companies in our society must encompass more than
the traditional functions of obeying the law, paying taxes and making a profit. Survey after
survey reveals that they also want to see major corporations helping ‘to make the world a
better place’. That may be in some respects a naïve ambition, but it is, nevertheless, a clear
expectation, and one that companies ignore at their peril . . . It is immensely encouraging to find
that there are business leaders who recognise the challenge of running their companies in ways
that make a positive and sustainable contribution to the societies in which they operate. It is a
huge task, not least in finding ways of reaching out to the thousands of managers at the ‘sharp
end’ of the business who, every day, take the decisions that have real impact on employees, on
whole communities and on the environment.
HRH The Prince of Wales33
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ORGANISATIONAL STAKEHOLDERS
We have seen that social responsibilities are often viewed in terms of organisational stakeholders – that is, those individuals or groups who have an interest in and/or are affected
by the goals, operations or activities of the organisation or the behaviour of its members.34
Managers, for example, are likely to have a particular interest in, and concern for, the size
and growth of the organisation and its profitability, job security, status, power and prestige.
Stakeholders, meanwhile, include a wide variety of interests and may be considered, for
example, under six main headings of:
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■
■
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employees;
providers of finance;
customers;
community and environment;
government; and
other organisations or groups.
Employees
People and organisations need each other. Responsibilities to employees extend beyond terms
and conditions of the formal contract of employment and give recognition to the worker as
a human being. People today have wider expectations of the quality of working life, including
justice in treatment, democratic functioning of the organisation and opportunities for
consultation and participation, training in new skills and technologies, effective HRM policies
and practices, and provision of social and leisure facilities. Responsibilities to employees
involve considerations of the new psychological contracts discussed in Chapter 1.
Providers of finance
Joint stock companies are in need of the collective investments of shareholders in order
to finance their operations. Shareholders are drawn from a wide range of the population.
The conversion of a number of building societies and insurance companies from mutual
societies to public companies extended significantly the range of share ownership and stakeholding among private individuals. Many people also subscribe indirectly as shareholders
through pension funds and insurance companies. Shareholders expect a fair financial return
as payment for risk bearing and the use of their capital. In addition, social responsibilities
of management extend to include the safeguarding of investments, and the opportunity for
shareholders to exercise their responsibility as owners of the company, to participate in
policy decisions and to question top management on the affairs of the company. In the case
of public sector organisations, finance may be provided by government grants/subsidies –
which are funded ‘compulsorily’ by the public through taxation and rates – as well as loans,
and charges for services provided. There is, therefore, a similar range of responsibilities to the
public as subscribers of capital.
Customers
To many people, responsibilities to consumers may be seen as no more than a natural outcome of good business. There are, however, broader social responsibilities including:
■
■
■
■
■
■
■
714
providing good value for money;
the safety and durability of products/services;
standard of after-sales service;
prompt and courteous attention to queries and complaints;
long-term satisfaction – for example, serviceability, adequate supply of products/services,
and spare and replacement parts;
fair standards of advertising and trading;
full and unambiguous information to potential consumers.
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Increasing concern for the rights of and social responsibilities to consumers can be seen
by the activities of such bodies as the Consumers’ Association and the Office of Fair Trading
and by the number of television and radio programmes devoted to this subject. In the case
of public corporations there are users’ national councils or consumers’ regulatory bodies
which are independent and look after the interests of customers. In the case of local government there is a system of Commissioners for Local Administration (popularly referred to as
‘Ombudsmen’), designed to provide an independent investigation of citizens’ complaints
over alleged maladministration.
Community and environment
It is in the area of concern for the community at large that social responsibilities can be seen
most clearly. Organisations have a responsibility not to misuse the scarce factors of production upon which the wealth of the country depends. Organisations have a responsibility to
society, to respect environmental considerations and take care of amenities. Some examples
under this heading include:
■
■
■
■
the effects and potential dangers of pollution, noise, disposal of waste;
the siting and appearance of new buildings;
transportation policies, such as the routing of heavy vehicles through narrow village
roads; and
avoidance of excessive packaging and more use of biodegradable materials.
Government
Another important area of social responsibility could arguably be to the government.
Organisations should, of course, respect and obey the law even where they regard it as not
in their best interests. What is debatable, however, is the extent to which organisations
should co-operate voluntarily with actions requested by the government. Some examples
are restraint from trading with certain overseas countries, and the acceptance of controls
over imports or exports; actions designed to combat inflation, such as limits on the level
of wage settlements; and assisting in the control of potential social problems – for example,
controlling the sale of tobacco or alcohol and the display of health warnings.
Other organisations or groups
The potential range of social responsibilities is substantial. Other organisations or groups to
whom organisations might be regarded as having a social responsibility, or obligation, are
suppliers, trade unions, business associates and even competitors. Examples of social
responsibilities might include fair standards of trading, honouring terms and conditions of
purchase or sale, and settlement dates (for example, payment of accounts), assistance to
smaller organisations, engagement only in fair competition, and respect for copyright and
patents. Some organisations extend the range of social responsibilities even further – for
example, by giving recognition to the needs of developing countries; limiting the extent of
political involvement or campaigning; donations to, or sponsorship of, the arts, educational
or research institutions, sporting organisations or charities.
A blurred distinction
It should be recognised, however, that the distinction is blurred between the exercise of a
genuine social responsibility, on the one hand, and actions taken in pursuit of good business
practice and the search for organisational efficiency on the other. One approach is that attention to social responsibilities arises out of a moral or ethical motivation and the dictates of
conscience – that is, out of genuine philanthropic objectives. An alternative approach is
that the motivation is through no more than enlightened self-interest and the belief that, in
the long term, attention to social responsibilities is simply good business sense. In practice,
it is a matter of degree and balance, of combining sound economic management with an
appropriate concern for broader responsibilities to society.
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Whatever the view of corporate social responsibility, management has as its priority the
need to ensure the survival and effective performance of the organisation. As Drucker puts it:
The first responsibility to society is to operate at a profit, and only slightly less important is the necessity for growth. The business is the wealth-creating and wealth-producing organ of our society.
Management must maintain its wealth-producing resources intact by making adequate profits to offset
the risk of economic activity. And it must besides increase the wealth-creating and wealth-producing
capacity of these resources and with them the wealth of society.35
The attention given to social responsibilities must involve weighing the costs of meeting
these responsibilities against the benefits derived. Provided the cost/benefit analysis is not
detrimental to economic and/or competitive performance, management must then determine the extent to which, and the manner in which, the organisation will attempt to satisfy
its social responsibilities. The recognition of social responsibilities should form an integral
part of strategy and the establishment of objectives and policies of the organisation.
It is inevitable that sometimes there will be a tension between a business’ obligation to be
ethical and its desire to be financially successful: the question is how these conflicts are dealt
with . . . In order for business leaders to win back the trust they have lost, ethics must be more
than a quick bolt-on or a new-fangled job title. It has to go to the heart of the way in which they
create wealth.36
Critical reflection
‘A National Health Service Trust chairperson was heavily criticised for maintaining that
the primary loyalty of doctors was owed to their employers and that their duty to
patients came third, after themselves.’
What is your reaction to this point of view? Do you believe that owing first loyalty to
the organisation for which you work is such a bad thing?
THE UN GLOBAL COMPACT
The UN Global Compact is a strategic policy initiative for businesses that are committed to
aligning their operations and strategies with ten universally accepted priorities in the area
of human rights, labour, the environment and anti-corruption. By doing so, business, as
a primary agent driving globalisation, can help ensure that markets, commerce, technology
and finance advance in ways that benefit economies and societies everywhere.
The ten principles of the UN Global Compact are:
Human rights
1 Businesses should support and respect the protection of internationally proclaimed human
rights; and
2 make sure that they are not complicit in human rights abuses.
Labour standards
3 Businesses should uphold the freedom of association and the effective recognition of
the right to collective bargaining;
4 the elimination of all forms of forced and compulsory labour;
5 the effective abolition of child labour; and
6 the elimination of discrimination in respect of employment and occupation.
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Environment
7 Businesses should support a precautionary approach to environmental challenges;
8 undertake initiatives to promote greater environmental responsibility; and
9 encourage the development and diffusion of environmentally friendly technologies.
Anti-corruption
10 Businesses should work against corruption in all its forms, including extortion and bribery.
VALUES AND ETHICS
In the last few years, there have been more and more reports of UK and US service sector jobs
being transferred to lower-cost Anglophone locations elsewhere in the world (India, Sri
Lanka and others). Financial services organisations have provided notable examples of this
‘offshoring’, as have IT helpdesk services and many other customer service offices. It is now
commonplace for customers in the UK to find themselves talking to someone thousands of
miles away: the scenes in Danny Boyle’s Oscar-winning 2009 film Slumdog Millionaire in
which call centre employees are briefed on UK geography and weather conditions in order
to appear more ‘local’ are based on a common practice in this industry.
The availability of much cheaper, high-capacity international telecommunications is
obviously a prime driver of this prominent feature of globalisation, as is the availability of
educated English-speakers to perform these services. Like so many other aspects of globalisation, however, the development of offshoring also raises a range of ethical issues. For those
who may be made redundant as jobs in the UK are moved offshore, for example, the news
– at least in the short term – is mainly bad. For UK customers, the effects of lower costs
in the new locations may be favourable, but there are reports of customer dissatisfaction in
some cases, with some companies choosing to bring this type of work back to the UK.37
There have also been reports of security lapses and even fraud in some financial services
offshore operations38 and of possibly serious errors in the transcription of medical notes
carried out in offshore locations for UK NHS Trusts.39
In Indian cities, by contrast, the arrival of this type of work has had a mainly positive
effect: for all that the pay rates may appear to be low by UK standards, many of these
opportunities are very attractive in the local labour market, to the extent that concerns have
been expressed about qualified professionals abandoning their work to seek call centre
work. Shareholders in the offshoring companies will expect to benefit if the same quality
of service can be delivered at lower cost, while there will also be indirect effects in both
countries due to changes in things like demand for local services, tax revenues and social
security payments.
Ethical complexity
Ethics is to do with good and bad (or right and wrong): it seeks to understand what makes
good things good, for example, in ways that can be generalised to other similar cases. The
example of offshoring shows how complex these questions can be – goodness or badness
appears to depend on where you stand. But ethical questions are important because of their
effect on people in organisations, as well as people outside organisations who are affected
by the choices made by the people in organisations. Ethical complexity is probably the rule
in real life, but the ethical aspects of organisational behaviour are too important to ignore.
In this section, we outline the influence of ethical considerations in terms of the actions
taken by the organisation in pursuit of its strategic objectives, together with the ethical implications of interpersonal interaction, both inside the organisation and between individuals
across organisational boundaries.
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Ethics and business
Ethics is concerned with the study of morality: practices and activities that are considered to
be importantly right or wrong, together with the rules that govern those activities and the
values to which those activities relate.40 Business ethics can be seen as an example of applied
ethics – just as medical ethics is about the application of general ethics to the human
activity called medicine, business ethics seeks to explore the implications of general ethics
for the conduct of business. This apparently obvious point is important: by taking this
stance, one rejects the view that moral principles have no bearing on business, or that ‘the
business of business is business’, as the common saying has it.
This is not to say that it is easy, or uncontroversial, to apply ethics to business: on the
contrary, this fast-growing subject is characterised by a range of sharply contrasting views.
Some of this controversy is inherent in ethics itself – as will be discussed below, there is no
single clear view of how to judge good and bad, and this must impact on any application
such as business ethics. This particular application of ethics, however, is also complicated
by the fact that ethics mainly deals with good or bad conduct on the part of individuals,
resulting in possible difficulties in applying these ideas to impersonal corporate entities
like companies. Is it appropriate to regard companies as if they were individual people
and if not, what allowances should be made? Or, can the subject be satisfactorily seen as
relating to the conduct of individuals as employees of businesses? Clearly, for very small
businesses, the two views merge into one, but for larger, corporate entities, the position is
more complex.
A discussion of ethics in business organisations has to take account of the purpose of the
organisation, as well as its strategy: what it is trying to achieve, usually in competition with
other similar businesses. (Corporate strategy is discussed in Chapter 14.) These two factors
are important because of their influence on what the organisation chooses to do and thus on
the consequences for people inside and outside the organisation. A decision by an airline,
for example, to pursue a low-cost strategy will have significant impacts on what is required
of its staff and how well that business fares in the market. A successful implementation of
such a strategy may mean fast growth, with attractive career development opportunities for
some staff, but also more negative consequences for others. Yet, the failure of a strategy can
lead to the end of the organisation as an independent entity, with more widespread adverse
consequences for the organisation’s people.
ETHICS AND CORPORATE SOCIAL RESPONSIBILITY
One illustration of the complexity of issues in business ethics is the diversity of opinion on
the issue of corporate social responsibility (discussed earlier in this chapter). On one side of
the debate are those who would share Milton Friedman’s view that the social responsibility of
business is to make as much money as possible for the shareholders, within the rules of the
game (fair competition, no deception or fraud, and so on).41 This shareholder-centred view
sees the directors of a company as agents of the owners, who are duty bound to act so as to
maximise the interests of those owners, this being taken as the reason for owners having
made the investment in the first place.
A more recent development of this general approach is that of Sternberg who proposes
a teleological view of business ethics, based upon the pursuit of the business purpose – that
of maximising long-term owner wealth by selling products and services.42 Actions by a firm
that are consistent with this aim and which satisfy the additional tests of common decency
(for example refraining from stealing, cheating, coercion, and so on) and distributive justice
(that is ensuring that rewards are proportional to contributions made) are ethical. Actions
that fail any one of these three tests are, in this model, unethical.
At the other end of the spectrum are some forms of stakeholder theory, which emphasise
a much broader set of social responsibilities for business. Cannon suggests that:
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There exists an implicit or explicit contract between business and the community in which it operates.
Business is expected to create wealth; supply markets; generate employment; innovate and produce
a sufficient surplus to sustain its activities and improve its competitiveness while contributing to the
maintenance of the community in which it operates. Society is expected to provide an environment in
which business can develop and prosper, allowing investors to earn returns while ensuring that the
stakeholders and their dependants can enjoy the benefits of their involvement without fear of arbitrary
or unjust action. The interdependence between society and business cannot be overstated.43
Differing assumptions about a business
The two perspectives provide very different views of how a business should act, because of
their differing assumptions concerning what a business is for. In the shareholder-centred
view, a business is principally for the shareholders and its actions should mainly be judged
on the criterion of maximising their interests. In the stakeholder view quoted above, a business is for its stakeholders (who are potentially a very large and diverse group) and its actions
should be designed to balance stakeholder interests. From the point of view of business
ethics – the study of good and bad conduct in business – this distinction is very important.
The use of company resources to support a local community project, for example, might be
seen as admirable in the stakeholder view but unethical in the shareholder-centred view, in
that it would be a misapplication of funds that belong to the owners (unless, of course, such
an investment could be shown to be consistent with the shareholders’ best interests).
‘Goodness’ of proposed fit
Each of the two approaches adopts a different yardstick for judging the ‘goodness’ of
a proposed action by a company. In the shareholder-centred view, the action has to be shown
to be consistent with the duty of maximising owner wealth, which is conceptually relatively
simple, but which necessarily involves assumptions concerning the likely effect of the
proposed action. In the stakeholder view (or, at least in those versions of the stakeholder
view that emphasise an accountability to stakeholders), the task of management is to
balance stakeholder interests. However, managers seeking to do this – often in the face of
loud opposing claims from the various interests – will very quickly encounter the practical
problem of how that ‘balance’ should be defined and recognised.
Although difficult to reconcile in practice, the two approaches are not completely incompatible: to a stakeholder theorist, shareholders count as one type of stakeholder, but not
the only type to which duties are owed by the firm. Likewise, Sternberg acknowledges the
importance of understanding and remaining aware of the various stakeholder groups and of
actively managing relationships between the company and these groups, because doing so is
likely to be consistent with maximising owner wealth. As she points out, however, ‘taking
account’ of something is importantly different from ‘being accountable’ to it.44
Intelligent self-interest
It is also worth emphasising that a company seeking to maximise its owners’ long-term
wealth may well do very good things for its ‘stakeholders’, not necessarily through any direct
intent but in pursuit of its main duty. Providing customers with excellent products and
services is the central example, of course, but this form of intelligent self-interest may also –
for example – drive a firm to build strong, trusting relationships with its suppliers and
distributors (because it will be better off as a result), or an attractive working environment
for its employees (because it wishes to recruit and keep the best, in order to be able to
compete more effectively).
Even beyond its immediate commercial relationships, an intelligently self-interested
company may deliberately set out to build strong relationships with other stakeholders, or
to take a principled stance on an issue such as the use of child labour, because to do so is to
maximise owner value. The ‘value’ in question is not just next year’s dividends, but refers to
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the value of the investment as a whole and thus obliges the management to think long-term
as well as short-term and to consider the impact of company actions as broadly as possible.
Offshoring example
In the ‘offshoring’ example at the beginning of the previous section, the shareholder-centred
view would place emphasis on the unit cost savings to be achieved by moving the operation
to a lower-cost area, provided that the required quality of service can be maintained. Other
things being equal, lower unit costs obviously allow higher margins and improved rewards
to shareholders. However, the assessment would also take into account the possibility of
additional risks to be managed, such as security and quality control issues. Furthermore, this
view would also consider the competitive implications of the decision: if other suppliers all
outsource and reduce their prices to customers, a decision not to do the same could damage
the company. Yet, being different could be a viable competitive stance for one or more competitors, particularly if some customers are concerned about reduced quality of service from
offshoring: at one point, NatWest in the UK seemed to take this stance in its advertising.
A stakeholder-centred company would place more emphasis on the impacts of the decision
on the various stakeholder groups, notably including UK employees in this case. Although
the decision to offshore might still be seen as competitively necessary by such a company, it
might feel impelled to make more generous arrangements for those whose jobs are to be
replaced, both out of a sense of long-term obligation and also to preserve its image in the
UK labour market. The question as to whether the group defined as ‘those that the company
has not yet recruited in the offshore location’ should also be considered to be a stakeholder
group – with a legitimate claim for attention – is one of the numerous judgements to be
made in this approach.
In the UK, the report of the RSA inquiry ‘Tomorrow’s Company’ referred to the concept
of an imaginary ‘operating licence’ granted to a company by the public, which can be
effectively suspended or withdrawn if a company appears to be behaving badly.45 Doing
business effectively and well relies upon hundreds, sometimes thousands of transactions
every day of the year. If some of these transactions become more difficult because trust has
been squandered and co-operation has been withdrawn, then the firm will start to lose out
to its better-behaved competitors and its owners’ wealth will start to suffer.
Global financial crisis
These questions have been thrust into the spotlight since 2007 as the global financial crisis
known as the ‘credit crunch’ has taken hold. As a result of this crisis, many very large global
banks and other financial services institutions have been brought to their knees – bailed out,
hurriedly merged with larger banks, nationalised or even in some cases left to fail altogether.
The results for the real economy around the world have been dire: bankruptcies, unemployment, repossession and uncertainty have brought the high-growth years of the start of the
century to an abrupt halt. The process of globalisation, which had seemed to be gathering
pace as the new century started, faltered in 2009 with the rapid decline in world trade and
the re-emergence of concerns about economic protectionism. In funding the rescue of the
world financial system, taxpayers have been obliged to take on levels of debt that would have
been unthinkable just a short while ago. Senior bankers – and their very high rewards – have
become pariahs in the public mind, a far cry from the respected, if slightly boring image
presented by the bank manager thirty years ago.
Ethics and corporate purpose
How do these issues relate to the question of ethics and the corporate purpose? At the time
of writing, there is much lively discussion of what went so badly wrong and what should
be done in the future, but there is a general agreement that global banks under ‘light-touch’
regulation did not manage to act in ways that were consistent with their shareholders’
interest (to put it mildly). In the years leading up to the autumn 2008 crisis, many banks
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grew rapidly and took risks that with hindsight were not well managed. When these risks
turned bad – triggered by the problems in the US housing market – the damage turned out
to be uncontainable for some and also exposed the extra risk represented by the interconnectedness of modern global financial services institutions. One notable quote came
from Alan Greenspan, the former Chairman of the US Federal Reserve:
I made a mistake in presuming that the self-interest of organisations, specifically banks and others, were
such that they were best capable of protecting their own shareholders and their equity in the firms . . .
Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity
(myself especially) are in a state of shocked disbelief.
These comments were made by Greenspan to a Congressional committee in October
2008.46 They are notable because Greenspan had been a lifelong believer in free markets
and the leading advocate of light-touch regulation, and had been widely admired as such
during the good years. His frank admission of a mistaken assumption about the behaviour
of senior executives is particularly telling because it appears to cast doubt on one of the main
foundations of Friedman’s view of the corporate purpose – that society is best served by
encouraging businesses to compete with each other within the law, with minimal further
regulation.
Whether the problems alluded to by Greenspan are particular to the financial services
industry or apply more widely is one of a number of things that are still unclear. Many are
now calling for more active and intrusive regulation of financial services in future, with greater
global co-ordination of regulatory efforts. One further comment can be made in passing – it
is not entirely clear that a greater stakeholder focus on the part of banks would have led to
a very different outcome. Many of the banks badly damaged by the crisis were engaged in
significant Corporate Social Responsibility programmes, as their websites at the start of
2009 made clear. With the benefit of hindsight, many stakeholders might have opted for
better-managed banks, rather than the benefits of their CSR programmes. Increasingly, the
phrase Corporate Social Responsibility (CSR) is being replaced by Corporate Responsibility
(CR) – if this signifies a more comprehensive assessment of a corporation’s effect on society,
then this seems to be a welcome step forward.
Critical reflection
‘The stakeholder view of how a business should act may sound attractive and make
ethical sense but is too simplistic. The shareholder-centred view consistent with
maximising owner wealth makes more sense. Without this wealth people would be
reluctant to invest in a business and it would not be possible to satisfy fully the demands
of the diverse group of stakeholders.’
What do you see as the criticisms of this point of view? How would you prepare
a counter argument?
BUSINESS ETHICS
The large-scale issues of corporate social responsibility are to do with how a company should
conduct itself within society: these questions certainly have an ethical aspect, as has been
discussed, but they are not the whole of business ethics. Day-to-day decisions made by
individual managers are not usually made on the basis of some detailed calculation of the
consequences for shareholder value (however theoretically desirable that might be) and
more general ethical considerations must play a part in resolving the dilemmas that sometimes arise in practice.
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The scope of business ethics is very broad, because anything done by a company or
its employees can be done ethically or unethically. The following list is not intended to
be exhaustive, but rather to illustrate the all-pervasive nature of ethical questions in
business:
■
■
■
■
■
behaviour towards customers, suppliers, distributors and competitors: for example, marketing and selling, fair competition, intelligence gathering, inducements and incentives;
treatment of employees: for example, recruitment, rewards, training, promotion, dismissal,
employee and employer rights and duties;
treatment of other stakeholder groups: for example, local communities, governments,
interest groups;
effect on the natural environment: for example, pollution, recycling, sustainability;
conduct in international operations: for example, use of power, respect for human rights,
respect for local cultural values, offshoring, and so on.
No single view of right or wrong
These questions can be complex, since there is no single view in general ethics of what makes
something right or wrong. One school of thought emphasises duties, things that must be
done (or refrained from) irrespective of the consequences. This deontological point of view
holds that goodness or badness is evident only in the action itself: that, for example, lying is
bad because it is bad in itself. By contrast, a consequentialist view of ethics holds that the
goodness or badness of a proposed action is evident only in the consequences of that action:
whether a lie is good or bad depends upon the consequences of that particular lie at the
time. Utilitarianism, for example, is a consequentialist theory, in that it seeks to maximise
the net happiness for everyone affected by a particular action (‘the greatest good for the
greatest number’, as it is sometimes expressed). Both of the perspectives on corporate social
responsibility discussed in the previous section are also to some extent consequentialist,
in that they are mainly concerned with an assessment of the effects of a firm’s actions.
Both duties and consequences (or ‘means’ and ‘ends’ in the familiar Machiavellian saying
about the latter justifying the former) are plainly important in the way we deal with ethical
issues in everyday life. Unfortunately, however, they are very different ways of reasoning,
which can lead to contradictory outcomes in some cases. An exclusively duty-based view
of ethics, for example, must sooner or later run into problems such as absolutism, or the
difficulty of deciding which duty should take precedence over others in a particular situation.
If, for example, both lying and killing are held to be inherently wrong, is it acceptable to lie
in order to avoid a killing? And whatever answer is given, how do we know?
Informing our views
Nonetheless, duties and principles clearly do inform our views of how people should treat
each other at work. An exclusively consequentialist view of ethics also entails methodological
problems of forecasting reliably what the consequences of an action may be and of deciding
how to measure those consequences. Some forms of utilitarianism can be very unjust to
small minorities, by allowing their unhappiness (i.e. as a result of some proposed action) to
be offset by the increased happiness of a much larger number. Again, however, we can hardly
deny that our assessment of the likely consequences of different actions plays a part in our
view of acceptable and unacceptable behaviour in an organisation.
By way of illustration, a deontological approach to the ethics of offshoring would focus
on aspects of the proposal that might be in breach of clear principles and duties. While no
business can reasonably accept a general duty to keep existing employees on the payroll for
ever (or not ever to relocate operations), a contemplation of duties might cause a company
to do as much as possible to soften the impact of the job losses, including the possibility of
internal transfer, retraining, outplacement and more-than-minimum redundancy packages.
A utilitarian analysis would seek to identify all who would be affected – anywhere in the
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world – by the proposed offshoring decision and then assess the impact (positive or
negative) on each person (or, more realistically, group).
This would allow a sort of ‘trial balance’ of the consequences to be drawn up and an evaluation of the net impact on aggregate happiness. Necessarily in this method, the reduction
in happiness for others, such as those who are made involuntarily redundant, is offset by the
extra happiness created for some – those who get the offshore jobs, for example. Obviously,
this is of little comfort to the former group, which illustrates one of the important criticisms
of the utilitarian approach.
Further approaches
Nor is the choice restricted to means and ends in ethics: several further approaches can be
distinguished in Western thought, including the following:
■
■
■
Virtue ethics, based upon an analysis of desirable human qualities that lie between
undesirable extremes (the virtue of ‘courage’, for example, lies between the undesirable
extremes of ‘cowardice’, at one end and ‘foolhardiness’ at the other). We might want
to explore, for example, what virtues are found in good chief executives, and whether
different virtues apply to good entrepreneurs.
Ethical relativism, which holds that goodness and badness are largely or entirely determined
by the prevailing values of the time in question and may thus change from one period to
another, or one culture to another. Although it is clearly true that values and standards have
changed over time (in the attitude towards child labour, for example), pure relativism is
an uncomfortable stance for most people, who have intuitive conscience-based convictions
that some things are just plain wrong.
Emotivism, which suggests that statements about ethics are essentially statements
about the speaker’s attitudes, and that it is therefore futile to search for any ethical ‘truths’.
The statement ‘lying is bad’ is, from this point of view, saying little more than ‘I don’t
like lying’.
Ethical decision-making at work
How, then, are ethical choices to be made by people working for organisations? No simple
and universal answer is available – ethical awareness is something that can be cultivated
and the different perspectives will often help to shed light on a particular dilemma. Some
perspectives may appear to be better suited to particular situations: whereas, for example,
it is difficult to avoid some sort of consequentialist component in thinking about how a
company should act, it is also clear that duty-based arguments must also weigh heavily in
thinking about the ethical treatment of people such as employees. The German philosopher
Kant’s view that we should always treat other people as ends in themselves and never
simply as means is surely an important principle for decent human resource management
and one that would often be seen as more important than the prospect of short-term gain.47
Personal integrity and individual values are important elements in ethical decisionmaking at work, but the increasingly common company, professional or industry codes of
conduct may also provide support and guidance. This is not to say that these ethical ‘resources’
will always provide clear and comfortable guidance – sometimes, people in organisations will
experience tension between the conflicting demands of, say, their own personal values and
the demands placed on them by their organisation. If these conflicts become intolerable
and cannot be resolved through normal means, then an individual may decide to become
a ‘whistleblower’ in the public interest, by taking the high-risk approach of placing the
problem in the public domain for resolution. Codes of conduct can help to reduce the risk
of painful situations like this by providing a published set of values to which the individual
can appeal, rather than taking the risk wholly personally.48
A concept map outlining some issues of ethics at work is given in Figure 18.2.
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Concept map of ethics at work
Source: Copyright © 2008 The Virtual Learning Materials Workshop. Reproduced with permission.
Figure 18.2
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CODES OF BUSINESS CONDUCT (OR ETHICS)
In American and Canadian organisations, codes of conduct are very common and in many
cases members of the organisation are required to sign to indicate formally their acceptance.
Codes may be updated on a regular basis.
Pearson has a detailed Code of Business Conduct covering: people; the company; suppliers,
associates and other partners; customers; government and laws; responsibility to society.
Employees are held accountable for maintaining the principles contained in the code.
Corporate governance rules require that we monitor and certify whether we’ve complied with this code
of conduct. In our case, this code embodies behaviour that is integral with our culture and our way of
doing business. Each year Pearson’s CEO sends everyone in the company an e-mail strictly about the
code, highlighting some areas, making sure everyone is paying attention to it and understands it; and
each member of staff has to reply.49
In the UK an increasing number of organisations, of all types, are also now publishing
a code of ethics (or code of conduct). The Chartered Management Institute has a Code of
Professional Conduct and Practice, which is binding on all members of the Institute, and sets
out the professional standards of conduct and competence, as well as the personal values,
which members are expected to exemplify.
At the heart of best practice in management is the maintenance of high standards of professional
conduct and competence, underpinned by the principle of honesty and integrity. These standards apply
equally to the personal behaviour of the manager or individual, the working relationships forged
with team members and other colleagues, management activities undertaken on behalf of employing
organisations, and actions which have an impact on society at large.50
IBM publishes a document of business conduct guidelines relating to the ethical practices
and values of the company. The document includes a comprehensive set of guidelines on:
■
■
■
You and Your Job in IBM;
Conducting IBM’s Business; and
On Your Own Time.
At one level, the IBM Business Conduct Guidelines are a document of conduct we establish for ourselves
to help us comply with laws and good ethical practices. We regularly review and update it as business
and the world at large become more complex, and as the need for such guidelines becomes greater.
But this is not just about compliance with the law and general standards of ethics. By establishing
these guidelines and giving them the weight of a governing document, we are acknowledging that our
choices and actions help define IBM for others. We are ensuring that our relationships – with clients,
investors, colleagues and the communities in which we live and work – are built on trust.
In other words, the Business Conduct Guidelines are a tangible example of our values and an expression of each IBMer’s personal responsibility to uphold them.51
In the public sector, the Local Government Act 2000 specifies the following principles to
govern the conduct of members of relevant English authorities and Welsh police authorities:
selflessness, honesty and integrity, objectivity, accountability, openness, personal judgement,
respect for others, duty to uphold the law, stewardship and leadership. These principles are
intended to underpin the mandatory provisions of the model codes of conduct for English
local authorities.52
A matter of degree and balance
Allen, however, questions whether the emphasis on the caring sharing company of the
new millennium and social responsibility is all going a bit far. There is scarcely a company
without a loftily worded mission statement and high-minded references to shareholders.
There are now numerous codes and standards; any company wishing to keep up to date with
latest developments in social responsibility needs to look in many directions at once, and
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companies are talking of ‘codemania’. While many codes offer voluntary guidelines,
companies that fail to meet these can see themselves receiving a bad press or disinvestments.
Nevertheless, the burden of social responsibilities can be seen as part of the response to
ever-changing social conditions.53 And, according to Cook, although it is easy to be cynical
following the fall of big companies there are many organisations which are ‘putting something back’. There is evidence about reversing the decline in public trust and that, in response
to stakeholder and customer attitudes, corporate values are changing.54
According to Philippa Foster Back, OBE (Director, Institute of Business Ethics), the globalisation of business has raised questions of applying ethical values to the different cultures and
societies in which organisations operate. The challenge for everyone concerned with ethics
now is to ensure that values are embedded throughout an organisation. A code of ethics needs
to be translated into reality through training and enforcement and driven from the top.55
Make ethics part of your heritage
We need to develop a corporate code of conduct, a formal, articulated and well-defined set of
principles which all global businesses agree to live up to. A broadly kept code of conduct would
shut down the excuse about the competition making ethical behaviour impossible once and for
all. We must all agree not to compete in ways that destroy communities or the environment.
We must all embrace the principles of socially responsible business, because the decisions of
business leaders not only affect economies, but societies. Unless businesses understand that
they have responsibilities they must live up to, in terms of world poverty, the environment and
human rights, the future for us all is pretty bleak.
Anita Roddick
56
Related legislation
As part of the growing attention to the concept of corporate social responsibilities there are
a number of pieces of recent legislation that arguably relate to the concept of business ethics
and organisational accountability. Although it is not in the scope of this book to provide
detailed aspects of legal provisions, we should recognise the existence of such legislation,
including the Human Rights Act 1998, the Public Interest Disclosure Act 1998, the Local
Government Act 2000, the Freedom of Information Act 2000, and also arguably the
Corporate Manslaughter and Corporate Homicide Act 2007.
The Human Rights Act 1998 came into force on 2 October 2000 and incorporates into
English law rights and liberties enshrined in the European Convention on Human Rights.
The provisions apply to the acts of ‘public authorities’ and make it unlawful for them to act
in a way incompatible with a right under the Convention. The Act is designed to provide
greater protection for individuals, and to protect them from unlawful and unnecessary interference. Everyone has the right to respect for their private and family life, their home and
their correspondence. The Act has a significant effect on people both as citizens and at work.
The Public Interest Disclosure Act 1998, which has become known widely as the
‘Whistleblower’s Act’, is designed to protect people who expose wrongdoing at their
workplace, to provide reassurance that there is a safe alternative to silence and to provide a
safeguard against retaliation. Employers need to establish clear internal procedures by which
members of staff can raise any matters of personal concern.
The Local Government Act 2000, the so-called ‘New Ethical Framework’, requires all
local authorities to provide codes of conduct to promote high standards of behaviour. The
government has distinguished between general principles of conduct in public service and
the code of conduct containing specific actions and prohibitions that demonstrate the
principles are being observed.
The Freedom of Information Act 2000 gives the public one simple right to access information held by public authorities. Under the Act, the public have a ‘right to know’.
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CORPORATE RESPONSIBILITY AND ETHICS
The Corporate Manslaughter and Corporate Homicide Act 2007, which came into force
on 6 April 2008, clarifies the criminal liabilities of companies including large organisations
where serious failures in the management of health and safety result in a fatality. For the first
time, companies and organisations can be found guilty of corporate manslaughter as a result
of serious management failures resulting in a gross breach of a duty of care.
An integrated approach
McEwan summarises the separate histories of corporate social responsibility, business ethics
and corporate governance, and suggests a method of inquiry that attempts to integrate these
different perspectives on business through three broad levels of inquiry:
■
■
■
a descriptive approach that draws attention to the values and beliefs of people from
different cultures and societies that influence their attitudes towards the various activities
of business in their home countries and abroad;
a normative approach that identifies sets of values and beliefs as a basis for making
ethical decisions at the individual, group, or senior management level in an organisation;
an analytical approach that attempts to explore the relationship between these normative
values and beliefs and other value-systems or ideologies such as political or religious
beliefs and culture or other social customs.57
Critical reflection
‘The truth is that without EU intervention, government legislation and the threat of
adverse press or television reports, the majority of business organisations would give
little regard to their social responsibilities or to business ethics.’
To what extent do you support this contention? What has been your experience of
genuine concerns by organisations for their social responsibilities?
SYNOPSIS
■ The importance of corporate strategy, and the goals
and objectives of the organisation, give rise to the
consideration of corporate social responsibilities and
ethical behaviour. The goals of the organisation may
be pursued in accordance with an underlying ideology
or philosophy that determines the culture of the
organisation and governs the overall conduct of its
operations. Organisational values and beliefs draw
attention to the importance of integrity and trust and
ethical leadership.
■ Organisational survival is dependent upon a series
of exchanges between the organisation and its
environment. In recent years it has become increasingly
popular for organisations to produce a mission statement and/or vision of their purpose and general direction. Such statements vary in length and the extent
of specific or general content. The value of mission
statements appears to be in doubt and they are only
likely to have any positive effect if the organisation
actually practises what it preaches.
■ In order to be successful the primary objectives of
the organisation may be seen as survival, growth and
development, and profitability. Although the objective
of profit maximisation is undoubtedly important, it
is not by itself a sufficient criterion for the effective
management of a business organisation. In practice,
there are many other considerations and motivations
which affect the desire for the greatest profit or maximum economic efficiency. The balanced scorecard is
an attempt to combine a range of both qualitative and
quantitative measures of performance.
■ In striving to satisfy its goals and achieve its objectives, the organisation cannot operate in isolation from
the environment of which it is part. The power and
influence of business organisations should be tempered
with its broad corporate social responsibilities (CSRs).
These responsibilities are often viewed in terms of
organisational stakeholders. There is growing attention
to the subject of CSR, including concerns for global
responsibilities. There is, however, a blurred distinction
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between the exercise of genuine social responsibilities
and actions taken in pursuit of organisational efficiency.
■ The importance of CSR and how a company should
conduct itself within society draws attention to values
and ethics. There are differing assumptions about how a
business should act, such as a shareholder-centred view
or a stakeholder view. An example is the debate over the
increasing number of organisations ‘offshoring’ activities
to locations elsewhere in the world. The scope of business ethics is very broad and gives rise to a number of
questions with no single view of what is right or wrong.
■ Inevitably there is some debate about the emphasis
on the caring sharing company, social responsibilities
and loftily worded mission statements An increasing
number of organisations, of all types, now publish
a code of business (or professional) conduct, or code
of ethics, but the challenge is to ensure that such
values are embedded throughout the organisation and
translated into reality. There are a number of pieces of
recent legislation that arguably give support to the
importance of corporate social responsibilities and
business ethics.
REVIEW AND DISCUSSION QUESTIONS
1 What do you see as the importance of organisational ideology or philosophy? Explain the extent to which
there is a clear ideology or set of principles that govern the overall conduct of your organisation.
2 To what extent do you believe that profit maximisation is a sufficient criterion for the effective management of
a business organisation? What other indicators might be applied in terms of organisational performance and
results?
3 Assess critically the practical relevance of the balanced scorecard.
4 Discuss critically the extent to which you accept the concept of corporate social responsibilities.
5 How would you attempt to explain the meaning and significance of organisational values and business ethics?
6 Compare and contrast the shareholder-centred and stakeholder theories of social responsibilities for business.
7 Comment critically on the code of ethics (or code of conduct) for your organisation; or if one does not exist,
draw up your own suggested code.
8 Debate the extent to which you believe government legislation brings about a genuine advancement in
the social responsibilities of organisations.
MANAGEMENT IN THE NEWS
Trade-offs in the moral maze
FT
Adam Jones
In today’s climate of corporate scandal and
recrimination, there is a tendency to look at business
ethics in black or white terms. Not in Michel Anteby’s
classroom. An assistant professor of organisational
behaviour at Harvard Business School, he specialises
in looking at moral grey areas in the workplace.
Building on an innovative study of an aerospace
factory he carried out in France, Professor Anteby
is adept at exploring situations in which employees
break house rules with the tacit or explicit agreement
of their supervisors.
Such shady behaviour can sometimes benefit an
organisation, he argues – a conclusion that evades the
polarised, good or evil certainties of the post-Madoff
age. The aerospace study examined a tradition found
728
in many factories in which craftsmen pinched raw
materials from their employer in order to make objects
for personal use in company time, using company
tools. The objects they made at the factory –
retirement gifts, lamps, stools, chandeliers – were
examples of what the French call perruques, which is
also the word for ‘wig’ (the two usages have
concealment in common).
‘Under the eye of supervisors, the more desirable
discounted items are removed from the shop floor
and hidden for purchase later.’
Higher-ups tended to turn a blind eye because, far
from damaging the company, the perruques helped to
make the workforce more cohesive by providing an
CHAPTER 18
outlet for individual flair that could not always flourish
in the rigidly controlled manufacture of aircraft engines.
‘They were gaining identity and gaining recognition
as craftsmen,’ says Professor Anteby. ‘For them, it
is who they are.’
Moreover, he adds, the practice involved an implicit
social contract between workers and supervisors that
meant the skilled perruque-makers were particularly
flexible and helpful during exceptionally busy periods
at the plant.
But, when Professor Anteby helps to teach the
first-year leadership and organisational behaviour
component of the Harvard MBA, the Frenchman is not
trying to topple entirely the conventional view that staff
pilfering is to be discouraged. When he goes through
examples of grey areas, Professor Anteby is instead
trying to make his students alive to the nuances of
each situation, so they are better equipped to figure
out if flexibility is appropriate when they encounter
their own morally tangled situations. In addition, he
recognises that grey areas of the type that seemed to
work well in the French aerospace factory can also
make participants vulnerable to disciplinary action if
the prevailing mood of indulgence changes. For that
CORPORATE RESPONSIBILITY AND ETHICS
reason, some French unions advise their members not
to make perruques even if they are unofficially
tolerated by their employer, he says.
Professor Anteby’s current research project takes
his fascination with moral ambiguity into a new realm:
the supply of corpses for medical training. He is
looking at what medical faculties do when they realise
that they do not have enough bodies for students to
dissect. Are they willing to source them through a
third party? It is another grey area – and one most
managers will be grateful to have avoided in their
own careers.
Source: Jones, A. ‘Trade-offs in the Moral Maze’, Financial Times,
9 March 2009. Copyright © 2009 The Financial Times Limited,
reproduced with permission.
Discussion questions
1 Explain what sort of ethical reasoning is used by
the supervisors in the example of the aerospace
company to justify ignoring ‘perruques’.
2 What are the arguments for and against
managers tolerating this type of behaviour? On
balance, would you personally ‘turn a blind eye’
to such conduct or not, and why?
ASSIGNMENT 1
Obtain the mission/vision statements for three different organisations (including your university, college or work
organisation).
Critically evaluate the extent to which each of these statements:
■
gives a clear indication of the main purpose and general direction of the organisation;
■
is written in clear, specific, substantial and meaningful language; and
■
appears likely to inspire members of the organisation.
In the case of your own organisation, comment critically with supporting examples on the perceived value of the
mission statement and the extent to which the wording is put into practice at the operational level. Explain what
changes, if any, you would make to the mission statement.
What conclusions do you draw from this assignment?
ASSIGNMENT 2
a Detail fully what you believe are the social responsibilities or obligations of your own, or some other work
organisation of your choice, and identify the major stakeholders.
b Give specific examples of the ways in which the organisation has attempted to satisfy, and/or has failed to
satisfy, responsibilities or obligations to these stakeholders.
c Specify the extent to which attention has been given to values in the organisation, and to the principles,
standards and expected practices or judgements of ‘good’ (ethical) behaviour.
d Compare your observations with those of your colleagues and summarise what conclusions you draw.
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PERSONAL AWARENESS AND SKILLS EXERCISE
Objectives
Completing this exercise should help you to enhance the following skills:
■
Clarify the work values and beliefs that are important to you.
■
Examine your sensitivity to, and dealings with, other people.
■
Debate and justify with colleagues the nature of your values and beliefs.
Exercise
You are required to:
a rate the following items according to the scale
5 (extremely important for me);
4 (very important for me);
3 (average importance for me);
2 (not important for me);
1 (I would oppose this).
What is required is your genuine beliefs and feelings about each item, not what others think or believe, but what
you personally and honestly believe and feel about each item.
1 There should be clear allocation of objectives and accountability for them
______
2 We should be open and honest in all our dealings with each other
______
3 People’s talents should be recognised, developed and correctly utilised
______
4 One should give acknowledgement and praise to those in authority
______
5 There are clear rules about what we should and should not do in getting the job done
______
6 Conflicts should be surfaced and resolved rather than allowed to simmer
______
7 The causes of problems should be directed away from oneself
______
8 Encouragement and support should be placed above criticism
______
9 Problems should be tackled and resolved in co-operation with others
______
10 What is right should be placed above who is right
______
11 Clear standard procedures should be in place for all important jobs
______
12 One should become visible and build up one’s personal image
______
13 Equity and fairness should be applied to all regardless of status or standing
______
14 Excellence should be our aim in all that we do professionally and administratively
______
15 We give close attention to codes of conduct since this is what builds character
______
16 We should keep each other informed and practise open and friendly communication
______
17 We know who should be making the decisions and refer decisions to the right person
______
18 Everyone and their contribution should be treated with respect and dignity
______
19 We should meet all our commitments to one another – we do what we say we will do
______
20 One should form networks of support among those with influence
______
21 There are clear reporting relationships – who reports to whom – and we stick to them
______
22 People should take responsibility for their own decisions and actions
______
23 Everyone should be committed to personal growth and lifelong learning
______
24 Situations or events should be created so as to justify the advancement of one’s goals
______
25 Performance should be assessed against objectives and standards declared up-front
______
26 Policies should be clear and not changed until there is proof that they need changing
______
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CORPORATE RESPONSIBILITY AND ETHICS
27 Everyone’s needs should be given equal standing regardless of their position or status
______
28 We should be committed to the service of others rather than ourselves
______
29 Positive relationships should be established with those who have influence
______
30 Warmth and affection should be demonstrated in our work relationships
______
31 Individual productivity and performance should be encouraged and actively promoted
______
32 We all know what our jobs are and we stick to our defined responsibilities
______
33 Those from disadvantaged backgrounds should be helped to catch up with others
______
34 One should expect to get support from those to whom we have given past support
______
35 Goals should be challenging and stretch people to higher levels of achievement
______
b In small groups, compare and discuss, frankly and openly, your ratings with those of your colleagues.
Be prepared to justify your ratings but also listen with an open mind to the views of your colleagues.
Further information will be provided by your tutor.
Source: Misselhorn, A. The Head and Heart of Management, Organization Development Consultants (SA) (2003), p. 36.
Discussion
■
How difficult was it for you to complete your ratings?
■
How much agreement was there among members of your group? Did this surprise you?
■
To what extent were you influenced to rethink your values or beliefs?
CASE STUDY
Over the last decade, the ideals of fair trade have
become prominent in UK retailing. The story of how
this has come about shows how an organisation can
make progress towards its own objectives through
developing effective networks with other organisations,
about the trade-offs that have to be managed along the
way and about the realities of achieving improvements
in business ethics. The general concerns about
unfairness in world trade are easy enough to set out.
First, the gap between the living standards of the richest
and the poorest is distressingly wide and the scale of
poverty enormous: as the UN Development Program
points out, more than a billion people around the
world live on the equivalent of a US dollar a day and
most of them go to bed hungry at night.58
Second, the fact that this gap is so wide and may
even be worsening is felt to be something to do with
the way in which international trade operates (although
the definition of the actual problem is something on
which experts differ sharply). Finally, there seems to be
a growing sense that these are not just abstruse highlevel policy problems, to be addressed by governments,
Source: Simon Rawles/Alamy
The Fairtrade Foundation
As the popularity of fairtrade increases, is its growth sustainable or
has commercialisation resulted in a ‘cleanwashing’ of an idealistic
movement?
experts and suchlike, but rather processes in which we
all take part as a result of the choices we make when we
buy and consume products and services. On the negative
side, our demand for value for money in the shops may
have unseen negative consequences for people in other
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countries who are in a much more parlous position
than we are. More positively, consumer power may
provide us with the means – if we take the trouble – to
reduce the harm we do further along the supply chain
and perhaps even create change for the better. The fair
trade movement has sought to address these problems.
The fair trade movement is an international network
of partners, who define fair trade as follows:
Fair trade is a trading partnership, based on dialogue,
transparency and respect that seeks greater equity in
international trade. It contributes to sustainable
development by offering better trading conditions to, and
securing the rights of, marginalised producers and workers
– especially in the South.59
In a 2008 survey, almost two-thirds of the UK public
were familiar with the idea that ‘Fairtrade is about getting
a better deal for producers in the developing world’.60 In
the UK, the movement is centred around the Fairtrade
Foundation, which was formed in 1992 by five
prominent charities, later joined by the Women’s
Institute. Today, the Foundation has four main streams
of activity:
■
■
■
■
providing the independent certification of trade
chains to underpin the consumer guarantee provided
by the Fairtrade mark on products;
helping the market for Fairtrade products to grow by
enabling producer/retailer contacts;
working with partners to support producer
organisations;
raising public awareness and understanding of the
Fairtrade mark.
Launching the concept
Fairtrade’s website sets out the highlights of its rapid
growth since 1992, from the first certified product
(Green & Black’s Maya Gold chocolate), through growth
to include a wider range of products and then entry into
the catering trade. From 2000 onwards the mark gained
an increasing presence in mainstream supermarkets.
With increasing availability came rapidly increasing
sales, from £32.9m61 in 2000 to £712.6m in 2008.
In 2007, UK sales were about 30 per cent of the global
total of £1.6bn. Over this period, awareness of the
distinctive Fairtrade Mark also grew rapidly from
20 per cent in 2002 to 70 per cent in 2008.
The evolution of the Fairtrade approach has been
the subject of a number of studies. Davies suggests that
three ‘eras’ can so far be distinguished:
■
The ‘solidarity’ era (1970–1990), in which sales were
mainly in craft products, making use of alternative
trading organisations such as not-for-profit and
charity shops, specialist mail order and religious
organisations. Product quality was inconsistent
and sometimes poor and branding very limited.
732
■
■
The ‘niche market’ era (1990–2002) which saw
a broadening of the range, with the growth of
recognisable Fairtrade labelling and an appeal
directed mainly at the ethical consumer, based upon
public relations and press campaigns.
The ‘mass-market’ era (from 2002 onwards)
distinguished by a rapid expansion of (mostly) food
products into a wider range of mainstream outlets –
most notably supermarkets, but also major chains of
cafes and restaurants. Critically, Fairtrade decided to
include large organisations in the scheme, allowing
them to broaden the appeal to the mass-market
customer.62
In an earlier paper, Jones et al.63 discussed some of
the problems that had to be overcome when expanding
into mass-market retail. For example, supermarkets
need to secure adequate, consistent and regular supplies
to maintain stocks, without which the growing
consumer awareness will come to nothing. This is
sometimes a challenge for smaller producers in the UK,
but when the producer of the Fairtrade product lives
in a remote part of a country with underdeveloped
infrastructure, then the problem can be far greater. In
the early stages, the willingness of a wider section of the
market to pay a small price premium for a Fairtrade
product was an area of uncertainty. Supermarkets had
to play their part in consumer education in the early
days via in-store leaflets and display materials and
advertising campaigns.
Davies also addresses the question of how this
development might continue in future, suggesting
the possibility of more or less complete
‘institutionalisation’, in which the qualities of Fairtrade
products become the norm for mainstream sales, rather
than a specialised niche. Of course, this possibility only
exists because Fairtrade products are now prominent in
mass-market outlets. In future we may approach a
tipping point where the average consumer will start to
wonder why a particular brand on the supermarket shelf
has no Fairtrade label. This could present a major
management challenge for the Fairtrade Foundation:
the label only works because it is widely recognised,
understood and – above all – accepted as a trustworthy
guarantee. That basic credibility is just as important for
the supermarket retailer as for the consumer: if the
reality starts to fall short of the promise in any respect,
then things could quickly get difficult for the brand.
The issue of trust and credibility is becoming more
complex for Fairtrade as its business grows: the Fairtrade
logo has been joined in consumer consciousness by
a number of other certification schemes. This increased
emphasis on the ethics of products is in many respects
a welcome development. For Fairtrade, it means greater
competition for the public’s attention, but it may also
broaden the risk for the organisation and its image,
since problems with any of these labelling schemes
CHAPTER 18
may damage credibility in ethical consumption more
generally. Also, the range of issues covered by these
schemes is more extensive than fair trade alone, raising
the prospect of confusion about what exactly an
individual label does guarantee and hence the risk of
disappointment as a result of mistaken expectations.
Good or not – who decides?
As the Fairtrade movement has grown it has attracted
criticism from both political wings. Low and
Davenport,64 for example, suggest that there are two
dangers inherent in this growth: that of appropriation
of the organisation by commercial interests in the
process that the authors call ‘cleanwashing’; and the
transformation of the Fairtrade message into one of
‘shopping for a better world’, in which the movement’s
original radical values are watered down. A different
critique arrived from the right in 2008 when the Adam
Smith Institute, champion of the free market, published
its report ‘Unfair Trade’.65 Acknowledging the good
intentions of the movement, it argued that the Fairtrade
approach was far less effective in reducing poverty than
global free trade would be, if rich countries would
abolish the trade barriers and domestic subsidies that
make it hard for poor countries to sell to them.
Those who work under a hot sun for low rates of
pay could be forgiven a degree of impatience with these
theoretical arguments: does it really matter if some of
the greatly increased number of buyers of Fairtrade
products do not fully grasp or agree with the radical
CORPORATE RESPONSIBILITY AND ETHICS
agenda of the early days? Is it really better for poor
people to wait for the arrival of the benefits of true
free trade, given the glacial progress of international
negotiations towards that end? As Voltaire remarked,
are we not in danger of letting the best be the enemy of
the good? Those who benefit from the Fairtrade system
seem to have little doubt of the improved benefits it
brings.66
The Fairtrade movement has managed to achieve
a very rapid growth from a specialised niche into
the mainstream. It has created and communicated
a prominent brand identity that provides consumers
with a specific guarantee about the value chain that has
brought the product to the shelf. To achieve and sustain
this credibility, the Fairtrade Foundation has had to
specify and manage what happens upstream, in order
to use the immense power of the supermarkets to
bring these products to the mainstream market. Many
supermarkets have enthusiastically joined in the process
of consumer education about Fairtrade products,
possibly for normal commercial reasons of self-interest.
Yet they have undoubtedly helped the idea to become
firmly established in the minds of their customers. As
the Fairtrade Foundation Executive Director Harriet
Lamb recently commented:
Of course, fair trade is only one piece in the jigsaw that
we all need to put together to tackle poverty. But it is
one piece in which each and every one of us can play
a part. . . .67
Your tasks
1 Who are the stakeholders of the Fairtrade Foundation? Using the information in the chapter, identify
examples of each type of stakeholder. Who are the most powerful? Who are the most important? Identify
areas where the interests of stakeholders conflict as well as those where they coincide.
2 Explain what you think Low and Davenport mean by the term ‘cleanwashing’ and why this might be a danger
to the values of the Fairtrade Foundation.
3 With reference to the decision to include major supermarkets and other large-scale retailers in the scheme,
discuss whether you think that ‘good’ acts can result from selfish motives or not. Present the arguments on
both sides.
4 How do you think the Fairtrade Foundation should present its message during an economic recession, when
Western consumers might well be more motivated by price than other considerations?
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Notes and references
1 See, for example, Brown, A. ‘Organizational Culture:
The Key to Effective Leadership and Organizational
Development’, Leadership and Organization Development
Journal, vol. 13, no. 2, 1992, pp. 3–6.
2 Roddick, A. Business As Unusual, Thorsons (2000), p. 78,
and http://valuesreport.thebodyshop.net (accessed
17 May 2009).
3 Brech, E. F. L. (ed.) The Principles and Practice of
Management, third edition, Longman (1975).
4 Lucas, E. ‘Believe It Or Not, Values Can Make a Difference’,
Professional Manager, November 1999, pp. 10–12.
5 Dainty, P. and Anderson, M. ‘Mindsets for Managers’, in
Chowdhury, S. (ed.) Management 21C, Financial Times
Prentice Hall (2000), p. 110.
6 Cloke, K. and Goldsmith, J. The End of Management and the
Rise of Organizational Democracy, Jossey-Bass (2002).
7 Coppin, A. ‘In My Opinion’, Management Today, October
2008, p. 12.
8 Gratton, L. Hot Spots, Financial Times Prentice Hall (2007).
9 Morrish, J. ‘Come On, Be Honest’, Management Today,
June 2008, pp. 44–7.
10 Mann, S., in conversation with Gidoomal, R. ‘We Have to
Be Proud of Our Integrity’, Professional Manager, vol. 17,
no. 5, September 2007, pp. 18–21.
11 Yukl, G. Leadership in Organizations, sixth edition, Pearson
Prentice Hall (2006), pp. 423–4.
12 Barker, P. ‘A Question of Integrity’, Chartered Secretary,
December 2006, p. 19.
13 Mills, D. Q. and Friesen, G. B. ‘Empowerment’, in
Crainer, S. and Dearlove, D. Financial Times Handbook of
Management, second edition, Financial Times Prentice Hall
(2001), p. 334.
14 www.johnlewispartnership.co.uk (accessed 15 April 2009).
15 www.managers.org.uk (accessed 19 May 2009).
16 Perrin, L. and Tavakoli, I. ‘Mission Impossible Without
Commitment’, Professional Manager, July 1997,
pp. 14–15.
17 Reeves, C. ‘Making Vision Statements Meaningful’,
Manager, British Journal of Administrative Management,
April/May 2006.
18 Gratton, L. Living Strategy: Putting People at the Heart of
Corporate Purpose, Financial Times Prentice Hall (2000),
p. 55.
19 Summers, J. and Nowicki, M. ‘Achievement and Balance:
What Do Managers Really Want?’, Healthcare Financial
Management, vol. 56, no. 3, March 2002, pp. 80–4.
20 Christensen, C. M., Raynor, M. E. and Anthony, S. D.
‘Six Keys to Creating New-Growth Businesses’, Harvard
Management Update, 2003, p. 3.
21 Coppin, A. ‘In My Opinion’, Management Today,
October 2008, p. 12.
22 Drucker, P. F. The Practice of Management, Heinemann
Professional (1989), p. 59.
23 Kaplan, R. S. and Norton, D. P. The Balanced Scorecard:
Translating Strategy into Action, Harvard Business School
Press (1996).
24 Van de Vliet, A. ‘The New Balancing Act’, Management
Today, July 1997, pp. 78–80.
25 Mann, S. in conversation with Bourne, M. and Bourne,
P. ‘Insights into Using Strategy Tool’, Professional Manager,
vol. 16, no, 6, November 2007, pp. 30–3.
734
26 Bourne, M. and Bourne, P. Balanced Scorecard, Chartered
Management Institute (2007).
27 Tonge, R. and Callaghan, C. ‘Using the Balanced Scorecard
in the Public Sector’, Chartered Secretary, October 1997,
pp. 18–19.
28 Reeves, R. ‘Ethical Evangelists’, Management Today,
October 2007, pp. 34–7.
29 Cable, V. (MP) ‘Hard-Nosed Case for CSR’, Professional
Manager, vol. 14, no. 3, May 2005, p. 11.
30 See, for example, Piggott, G. ‘Open Relationships’, Holland
Herald, January 2003, pp. 54–64.
31 Harris, J. ‘EU Acts to Promote More Socially Responsible
Companies’, Social Agenda, October 2002, pp. 3–4.
32 Chant, A. ‘In My Opinion’, Management Today, May 2005,
p. 12.
33 HRH The Prince of Wales, Foreword to Grayson, D. and
Hodges, A. Everybody’s Business: Managing Global Risks and
Opportunities in Today’s Global Society, Financial Times
(2001), pp. 8–9.
34 See, for example, Worthington, I. and Britton, C. The
Business Environment, fifth edition, Financial Times Prentice
Hall (2006).
35 Drucker, P. F. The Practice of Management, Heinemann
Professional (1989), p. 380.
36 Reeves, R. ‘Do the Right Thing’, Management Today,
July 2005, p. 549.
37 BBC News, ‘Powergen Shuts India Call Centres‘, 15 June
2006.
38 BBC News, ‘Man Held in HSBC India Scam Probe’, 28 June
2006; BBC News, ‘Overseas Credit Card Scam Exposed’,
19 March 2009.
39 The Guardian, ‘Overseas Transcription Errors “Putting
Patients’ Lives at Risk”’, 21 June 2006.
40 De George, R. T. Business Ethics, fifth edition, Prentice Hall
(1999).
41 Friedman, M. ‘The Social Responsibility of Business Is to
Increase Its Profits’, New York Times Magazine, 13
September 1970, pp. 32, 122–6.
42 Sternberg, E. Just Business, Little Brown (1994).
43 Cannon, T. Corporate Responsibility, Pitman (1994), pp. 32–3.
44 Sternberg, E. Just Business, Little Brown (1994).
45 RSA, Tomorrow’s Company – The Role of Business in
a Changing World, Royal Society for Arts, Manufactures
and Commerce (1995).
46 Guardian, 24 October 2008, at http://www.guardian.co.uk/
business/2008/oct/24/economics-creditcrunch-federalreserve-greenspan (accessed 14 January 2010).
47 For a discussion, see De George, R. T. Business Ethics,
fifth edition, Prentice Hall (1999).
48 I am grateful to my colleague, Richard Christy, Department
of Human Resource and Marketing Management,
University of Portsmouth for providing this information
on Values and Ethics.
49 For full details, see http://www.pearson.com.
50 For full details, see www.managers.org.uk.
51 Palmisano, S. ‘IBM Business Conduct Guidelines’, IBM,
December 2008.
52 Dobson, N. ‘Prejudicial Interests?’, Chartered Secretary,
May 2003, pp. 22–4.
53 Allen, A. ‘Up the Moral Mountain’, Chartered Secretary, May
2001, pp. 21–2.
CHAPTER 18
54 Cook, S. ‘Who Cares Wins’, Management Today, January
2003, pp. 40–7.
55 Back, P. F. ‘Taking a Proactive Approach to Ethics’,
Professional Manager, vol. 15, no. 3, May 2006, p. 37.
56 Roddick, A. Business As Unusual, Thorsons (2000),
p. 269.
57 McEwan, T. Managing Values and Beliefs in Organisations,
Financial Times Prentice Hall (2001).
58 http://www.undp.org/poverty/propoor.htm (accessed
29 June 2009).
59 http://www.fairtrade.org.uk/what_is_fairtrade/
fairtrade_foundation.aspx (accessed 29 June 2009).
60 http://www.fairtrade.org.uk/what_is_fairtrade/
facts_and_figures.aspx (accessed 29 June 2009).
61 UK retail sales value.
62 Davies, I. A. ‘The Eras and Participants of Fair Trade: An
Industry Structure/Stakeholder Perspective on the Growth
INSTANT ACCESS TO INTERACTIVE LEARNING
63
64
65
66
67
CORPORATE RESPONSIBILITY AND ETHICS
of the Fair Trade Industry’, Corporate Governance, vol. 7,
no. 4, 2007, pp. 455–70.
Jones, P., Comfort, D. and Hillier, D. ‘Developing
Customer Relationships through Fair Trade: A Case Study
from the Retail Market in the UK’, Management Research
News, vol. 27, no. 3, 2003, pp. 77–87.
Low, W. and Davenport, E., ‘Has the Medium (Roast)
Become the Message? The Ethics of Marketing Fair Trade
in the Mainstream,’ International Marketing Review, vol. 22,
no. 5, 2005, pp. 494–511.
http://www.adamsmith.org/publications/economy/
unfair-trade-20080225961 (accessed 2 July 2009).
See, for example, William Sutcliffe’s 2004 Guardian article
at http://www.guardian.co.uk/lifeandstyle/2004/aug/07/
foodanddrink.shopping2.
http://www.smith-institute.org.uk/pdfs/free_trade.pdf
(accessed 2 July 2009).
Now that you have finished reading this chapter, visit MyManagementLab at
www.pearsoned.co.uk/mymanagementlab to find more learning resources
to help you make the most of your studies and get a better grade.
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19
ORGANISATION CULTURE AND CHANGE
A central feature of the successful organisation is the diagnosis of
its culture, health and performance, and the ability of the
organisation to adapt to change. It involves the applications of
organisational behaviour and recognition of the social processes
of the organisation. The manager needs to understand the nature
and importance of organisational culture and climate, employee
commitment, and the successful implementation and
management of organisational change.
Learning outcomes
After completing this chapter you should be able to:
■
outline the meaning and nature of organisation development;
■
examine the nature, types and main features of organisational culture;
■
evaluate influences on the development of culture and the importance
of culture;
■
detail the characteristics of organisational climate and employee
commitment;
■
explore the nature of organisational change and reasons for resistance
to change;
■
examine the management of organisational change, and human and
social factors of change;
■
review the importance of organisational culture and the ability of
the organisation to adapt to change.
Critical reflection
‘An organisation cannot develop, or change. It is the people comprising the
organisation who determine the culture of the organisation, develop and
change. The study of organisation culture and change should therefore
concentrate on the actions, behaviour and effectiveness of individuals.’
What is your view? What does organisation development mean to you?
CHAPTER 19
ORGANISATION CULTURE AND CHANGE
ORGANISATION DEVELOPMENT, CULTURE AND CHANGE
Organisation development (OD) is a generic term embracing a wide range of loosely defined
intervention strategies into the social processes of an organisation. These intervention
strategies are aimed at the development of individuals, groups and the organisation as a total
system. In a very general sense, OD is concerned with attempts to improve the overall
performance and effectiveness of an organisation. Essentially, it is an applied behavioural
science approach to planned change and development of an organisation. A goal of OD can
be seen as the transformation of an organisation into a learning organisation, discussed in
Chapter 20.
The broad nature of OD means that many interrelated topics could be included under this
heading or ‘label’. Given the importance of people, topics that are normally included under
the heading of organisational behaviour can also be seen as relevant to the study of OD.
However, the emphasis of OD is more on the development of the organisation than the actual
processes of organisation and management. Organisational culture and organisation change
are two major topics that are central and critical features of OD.
Organisation culture
An example of a comprehensive definition of OD in the behavioural science sense of the
term is given by French and Bell:
Organization development is a long-term effort, led and supported by top management, to improve an
organization’s visioning, empowerment, learning, and problem-solving processes, through an ongoing,
collaborative management of organization culture – with special emphasis on the culture of intact work
teams and other team configurations – utilizing the consultant-facilitator role and the theory and
technology of applied behavioral science, including action research.1
French and Bell include culture prominently in their definition as they believe that culture
is the bedrock of behaviour in organisations. They summarise the primary distinguishing
characteristics of organisation development in terms of the following:
■
■
■
■
■
a focus on culture and processes with specific encouragement of collaboration between
leaders and members;
a focus on the human and social side of the organisation, the importance of teams of all
kinds, and participation and involvement in problem-solving and decision-making;
a focus on total system change with organisations viewed as complex social systems;
OD practitioners as facilitators, collaborators and co-learners with the overarching goal to
make the client able to solve problems on their own;
a reliance on an action research model and the adoption of a developmental view that
seeks betterment of both individuals and the organisation.2
Organisation change
The relationship between OD and change is emphasised by Hamlin, Keep and Ash, who
maintain that ‘For organisations that do manage change effectively, change itself becomes
the driving force that perpetuates future success and growth. In these organisations, every
change becomes welcomed as an opportunity for increasing efficiency and building new
organisational success.’3
According to Church, OD ought to be about large-scale organisational change that is based
on people’s perceptions and behaviours – human data.
I would draw the line at that kind of work. I would say that downsizing is not OD. I would say that a
lot of training and development is not OD. Process consultation is, in my way of thinking, not OD. It’s
a skill that OD practitioners have, but it’s not doing OD. I really think of OD as being systematic
organisational change.4
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The implementation of OD
In order to bring about effective change, OD makes use of a number of approaches – often
referred to as intervention strategies – including survey research and feedback, T-groups,
team building and grid training.
■
■
■
■
Survey research and feedback involves the use of questionnaire surveys to help determine
the attitudes of members to the functioning of the organisation. Results of the surveys
are fed back to top management and then to work groups for interpretation and analysis.
Group members participate in discussions on the implications of the information, the
diagnosis of problems and the development of action plans to help overcome the problems
identified.
T-groups (or sensitivity training) involve small, unstructured, face-to-face groupings
who meet without a planned agenda or set activities. Training is intended to concentrate
on process rather than content: that is, on the feeling level of communication rather than
the informational value of communication. With the guidance of the trainers, participants’
patterns of behaviour become the focus of attention for the group. The objectives are
usually to increase participants’ sensitivity to the emotional reactions in themselves and
others, their diagnostic ability, and their behavioural flexibility and effectiveness. (T-groups
are discussed in Chapter 9.)
Team building is the process of diagnosing task procedures and patterns of human interaction within a work group. The basic objective is to improve the overall performance of
the organisation through improvements in the effectiveness of teams. Attention is focused
on work procedures and interpersonal relationships, and especially the role of the leader
in relation to other members of the group.
Grid training is a development from the Blake and Mouton Managerial Grid® approach
(discussed in Chapter 12). An implied goal of grid training is that changes are aimed at
attaining a 9,9 orientation (maximum concern for both production and people) on the
Grid.5
There are, however, a number of other possible intervention strategies. Naylor refers also
to the following ‘OD techniques’:
■
■
■
■
role analysis – the systematic clarification of roles and allocation of them among group
members;
life and career planning – people are encouraged to develop and express personal goals
with strategies for integrating these goals with those of the organisation;
quality of work life – links between quality of work life and career planning, and a
philosophy of improving the climate in which work occurs; and
counselling – to help individuals better understand what it is like to work with them and,
through this, assist them to attain their goals.6
A pluralistic approach
No two organisations are the same. Each organisation has its own types of problems and most
appropriate remedies. OD is action-oriented and tailored to suit specific needs. It takes a
number of forms with varying levels of intervention. OD concerns itself with the examination of organisational health and the implementation of planned change. This may include
training in interpersonal skills, sensitivity training, and methods and techniques relating to
motivational processes, patterns of communication, styles of leadership and managerial
behaviour.
Although an OD programme is legitimised by the formal system, it focuses on both
the formal and the informal system. The initial intervention strategy is usually through the
informal system, which includes feelings, informal actions and interactions, group norms
and values, and forms part of the culture of an organisation. In Chapter 1, it was suggested
that the term ‘organisational behaviour’ is a misnomer. The same caveat also applies to the
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term ‘organisation development’. An organisation is made up of people. When we talk about
organisation development it is important to emphasise a pluralistic approach and remember
that, in practice, we are referring to the development and performance of those individuals
and groups of people who comprise the organisations.
The ethical nature of OD
Although the OD approach should care about people as the instrument of improved
productivity, the wide range of activities and attention to organisation change, values and
attitudes inevitably give rise to questions about the ethical nature of OD. In addition to
organisational issues, the interventions target interpersonal behaviour and the development
of individuals and teams. Critics may view OD as serving the best interests of management
and little more than an exercise in the manipulation of employees. For example, Woodall
notes that most culture change initiatives assume that strong cultures are associated with
successful organisations and that the values held by employees should match with the
management vision.7
ORGANISATIONAL CULTURE
Although most of us will understand in our own minds what is meant by organisational
culture, it is a general concept with many different meanings and difficult to define or
explain precisely. The concept of culture has developed from anthropology. Although
people may not be aware consciously of culture, it still has a pervasive influence over their
behaviour and actions. There is, however, no consensus on its meaning or its applications
to the analysis of work organisations.8 Furthermore, there is sometimes confusion over the
difference between the interpretation of organisational culture and organisational climate
(discussed later in this chapter). A popular and simple way of defining culture is ‘how things
are done around here’. For example, Atkinson explains organisational culture as reflecting the
underlying assumptions about the way work is performed; what is ‘acceptable and not
acceptable’; and what behaviour and actions are encouraged and discouraged.9
A more detailed definition is:
The collection of traditions, values, policies, beliefs, and attitudes that constitute a pervasive context for
everything we do and think in an organisation.10
The culture of an organisation is also often likened to the personality of an individual11 (see
Assignment 1 at the end of this chapter).
Charters questions the extent to which the concept of ‘folklore’ offers the potential to
explore the existence of company myths and legends. Dictionary definitions, and discussions
of the term in research papers, point to its close connection with culture.
Elements of folklore include myths and legends, and hence the concept of folklore appears to validate
the exploration of organisational stories as part of cultural research . . . If folklore really is an expression of culture, then it could be argued that it should be possible to discern aspects of the culture of an
organisation through the legends and myths of that organisation, the stories told which may or may not
have a foundation in history.12
System of management authority
Cartwright sees culture as a system of management authority. When accepted by employees,
cultural values increase the power and authority of management in three ways. Employees
■
■
■
identify themselves with their organisation and accept its rules when ‘it is the right thing
to do’;
internalise the organisation’s values when they believe they are right; and
are motivated to achieve the organisation’s objectives.13
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Levels of culture
Schein suggests a view of organisational culture based on distinguishing three levels of culture,
from the shallowest to the deepest: artefacts and creations; values; and basic assumptions.14
■
■
■
Level 1: Artefacts. The most visible level of the culture is artefacts and creations – the
constructed physical and social environment. This includes physical space and layout,
the technological output, written and spoken language and the overt behaviour of group
members.
Level 2: Espoused values. Cultural learning reflects someone’s original values. Solutions
about how to deal with a new task, issue or problem are based on convictions of reality.
If the solution works, the value can transform into a belief. Values and beliefs become part
of the conceptual process by which group members justify actions and behaviour.
Level 3: Basic underlying assumptions. When a solution to a problem works repeatedly
it comes to be taken for granted. Basic assumptions are unconsciously held learned
responses. They are implicit assumptions that actually guide behaviour and determine
how group members perceive, think and feel about things.
Schein suggests that the basic assumptions are treated as the essence – what culture really
is – and values and behaviours are treated as observed manifestations of the culture essence.
TYPES OF ORGANISATIONAL CULTURE
There are a number of ways to classify different types of organisational culture. Developing
the ideas of Harrison,15 Handy describes four main types of organisational cultures: power
culture; role culture; task culture; and person culture.16
■
■
■
■
740
Power culture depends on a central power source with rays of influence from the central
figure throughout the organisation. A power culture is frequently found in small entrepreneurial organisations and relies on trust, empathy and personal communications for
its effectiveness. Control is exercised from the centre by the selection of key individuals.
There are few rules and procedures, and little bureaucracy. It is a political organisation
with decisions taken largely on the balance of influence.
Role culture is often stereotyped as a bureaucracy and works by logic and rationality. Role
culture rests on the strength of strong organisational ‘pillars’ – the functions of specialists
in, for example, finance, purchasing and production. The work of, and interaction between,
the pillars is controlled by procedures and rules, and co-ordinated by the pediment of
a small band of senior managers. Role or job description is often more important than
the individual, and position is the main source of power.
Task culture is job-oriented or project-oriented. In terms of structure the task culture can
be likened to a net, some strands of which are stronger than others, and with much of the
power and influence at the interstices. An example is the matrix organisation. Task culture
seeks to bring together the right resources and people, and utilises the unifying power of
the group. Influence is widely spread and based more on expert power than on position
or personal power.
Person culture is where the individual is the central focus and any structure exists to serve
the individuals within it. When a group of people decide that it is in their own interests
to band together to do their own thing and share office space, equipment or clerical
assistance, then the resulting organisation would have a person culture. Examples are
groups of barristers, architects, doctors or consultants. Although it is found in only a
few organisations, many individuals have a preference for person culture, for example
university professors and specialists. Management hierarchies and control mechanisms
are possible only by mutual consent. Individuals have almost complete autonomy and
any influence over them is likely to be on the basis of personal power.
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ORGANISATION CULTURE AND CHANGE
Every organisation will have its own unique culture and most large businesses are likely
to be something of a mix of cultures with examples for each of the four types in varying
areas of the organisation. Different people enjoy working in different types of organisation
culture and they are more likely to be happy and satisfied at work if their attributes and
personalities are consistent with the culture of that part of the organisation in which they are
employed.
Four generic types of culture
From an examination of hundreds of business organisations and their environments, Deal
and Kennedy categorise corporate cultures according to two determining factors in the
marketplace:
■
■
the degree of risk associated with the organisation’s activities; and
the speed at which organisations and their employees receive feedback on the success of
decisions or strategies.
These factors give rise to four generic types of culture: the tough-guy, macho culture; the
work-hard/play-hard culture; the bet-your-company culture; and the process culture.17
■
■
■
■
Tough-guy, macho culture – an organisation of individualists who frequently take high
risks and receive quick feedback on the right or wrong of their actions. Examples cited
include police departments, surgeons, construction, cosmetics, management consulting
and the entertainment industry. Financial stakes are high and there is a focus on speed.
The intense pressure and frenetic pace often results in early ‘burn-out’. Internal competition and conflict are normal, stars are temperamental but tolerated. A high staff turnover
can create difficulties in building a strong cohesive culture.
Work-hard/play-hard culture – characterised by fun and action where employees take
few risks, all with quick feedback. There is a high level of relatively low-risk activity.
Examples include sales organisations such as estate agents and computer companies,
mass consumer companies such as McDonald’s, office equipment manufacturers and
retail stores. Organisations tend to be highly dynamic and the primary value centres on
customers and their needs. It is the team who produce the volume, and the culture
encourages games, meetings, promotions and conventions to help maintain motivation.
However, although a lot gets done, volume can be at the expense of quality.
Bet-your-company culture – where there are large-stake decisions with a high risk but
slow feedback so that it may be years before employees know if decisions were successful.
Examples include oil companies, investment banks, architectural firms and the military.
The focus is on the future and the importance of investing in it. There is a sense of deliberateness throughout the organisation typified by the ritual of the business meeting. There
is a hierarchical system of authority with decision-making from the top down. The culture
leads to high-quality inventions and scientific breakthroughs, but moves only very slowly
and is vulnerable to short-term fluctuations.
Process culture – a low-risk, slow-feedback culture where employees find difficulty in
measuring what they do. Typical examples include banks, insurance companies, financial
services and the civil service. The individual financial stakes are low and employees get
very little feedback on their effectiveness. Their memos and reports seem to disappear
into a void. Lack of feedback forces employees to focus on how they do something, not
what they do. People tend to develop a ‘cover your back’ mentality. Bureaucracy results
with attention to trivial events, minor detail, formality and technical perfection. Process
cultures can be effective when there is a need for order and predictability.
Note, however that in a subsequent publication, Deal and Kennedy suggest revisions to
the original typology. For example, under process cultures, banks might not yet fit into the
work-hard/play-hard culture but have evolved more into sales-type organisations.18
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Critical reflection
‘Attempting to analyse culture in terms of different levels or generic typologies is too
simplistic and prescriptive and serves no useful purpose in evaluating applications of
management and organisational behaviour.’
What do you think? How would you analyse organisation culture?
INFLUENCES ON THE DEVELOPMENT OF CULTURE
The culture and structure of an organisation develop over time and in response to a complex
set of factors. We can, however, identify a number of key influences that are likely to play an
important role in the development of any corporate culture. These include history, primary
function and technology, strategy, size, location, management and leadership, and the
environment.19
■
■
■
■
■
■
742
History. The reason, and manner in which, the organisation was originally formed, its age,
and the philosophy and values of its owners and first senior managers will affect culture.
A key event in the organisation’s history such as a merger or major reorganisation, or a new
generation of top management, may bring about a change in culture. Corporate history
can be an effective induction tool to assist a growth programme, and to help integrate
acquisitions and new employees by infusion with the organisation’s culture and identity.20
Failure in mergers and acquisitions can arise from cultural clashes and failure to integrate
different cultures.21
Primary function and technology. The nature of the organisation’s ‘business’ and its
primary function have an important influence on its culture. This includes the range and
quality of products and services provided, the importance of reputation and the type of
customers. The primary function of the organisation will determine the nature of the technological processes and methods of undertaking work, which in turn also affect structure
and culture.
Strategy. Although a business organisation may pursue profitability, this is not by itself
very clear or a sufficient criterion for its effective management. For example, to what
extent is emphasis placed on long-term survival or growth and development? How much
attention is given to avoiding risks and uncertainties? Or how much concern is shown for
broader social responsibilities? The organisation must give attention to objectives in all
key areas of its operations. The combination of objectives and resultant strategies will
influence culture, and may itself be influenced by changes in culture. (See also Chapter 14
and Chapter 18.)
Size. Usually larger organisations have more formalised structures and cultures. Increased
size is likely to result in separate departments and possibly split-site operations. This may
cause difficulties in communication and inter-departmental rivalries with the need for
effective co-ordination. A rapid expansion, or decline, in size and rate of growth, and
resultant changes in staffing will influence structure and culture.
Location. Geographical location and the physical characteristics can have a major
influence on culture – for example, whether an organisation is located in a quiet
rural location or a busy city centre can influence the types of customers and the staff
employed. An example could be a hotel or restaurant. Location can also affect the nature
of services provided, the sense of ‘boundary’ and distinctive identity, and opportunities
for development.
Management and leadership. Top executives can have considerable influence on the
nature of corporate culture. Examples are the key roles played by Sir Richard Branson,
Anita Roddick, founder of The Body Shop,22 and Marjorie Scardino and her change of
style when she took over as the new chief executive of Pearson.
CHAPTER 19
ORGANISATION CULTURE AND CHANGE
Her candour works . . . As an example of straight talking winning over a sceptical City and press,
it is brilliant. As an example of just how much a company’s culture can change under a new chief
executive, it is breathtaking.23
■
Another example is Louis Gerstner, who defined a strategy for the computing giant IBM
and remade the ossified culture bred by the company’s success, rebuilt the leadership
team and gave the workforce a renewed sense of purpose.24
However, all members of staff help to shape the dominant culture of an organisation,
irrespective of what senior management feel it should be. Culture is also determined by
the nature of staff employed and the extent to which they accept management philosophy
and policies or pay only ‘lip service’. Another important influence is the match between
corporate culture and employees’ perception of the psychological contract (discussed in
Chapter 1).
The environment. In order to be effective, the organisation must be responsive to external environmental influences. For example, if the organisation operates within a dynamic
environment it requires a structure and culture that are sensitive and readily adaptable to
change. An organic structure is more likely to respond effectively to new opportunities
and challenges, and risks and limitations presented by the external environment.
THE CULTURAL WEB
In order to help describe and understand the culture of an organisation, Johnson, Scholes and
Whittington present a cultural web, which brings together different aspects for the analysis of
organisational culture (see Figure 19.1).
Figure 19.1
The cultural web of an organisation
Source: Johnson, G., Scholes, K. and Whittington, R. Exploring Corporate Strategy, seventh edition, Financial Times Prentice Hall (2005),
p. 202. Reproduced with permission from Pearson Education Ltd.
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■
■
■
■
■
■
■
■
Routine behaviours – the ways in which members of the organisation behave towards
each other and towards those outside the organisation and which make up how things are
done or how things should happen.
Rituals – the particular activities or special events through which the organisation
emphasises what is particularly important; can include formal organisational processes
and informal processes.
Stories told by members of the organisation that embed the present and flag up important
events and personalities, and typically have to do with successes, failures, heroes, villains
and mavericks.
Symbols – such as logos, offices, cars, titles, type of language or terminology commonly
used – which become a shorthand representation of the nature of the organisation.
Power structures – the power of the most powerful individuals or groups in the organisation may be based on management position and seniority, but in some organisations
power can be lodged with other levels or functions.
Control systems – the measurement and reward systems that emphasise what it is important to monitor, and to focus attention and activity upon – for example, stewardship of
funds or quality of service.
Organisation structure – which reflects power structures and delineates important
relationships and activities within the organisation, and involves both formal structure
and control and less formal systems.
The paradigm of the organisation, which encapsulates and reinforces the behaviours
observed in other elements of the cultural web.25
Other interpretations of culture
There are, however, many other ways in which people attempt to describe and understand
what constitutes organisational culture, and different areas of attention for analysing the
elements of culture. Wilson suggests that culture is a characteristic of the organisation, not of
individuals.
One way of examining the culture of an organization is to look at its corporate image to see what and
who is valued in the organization. A corporate image is the mental picture the clients, customers,
employees, and others have of an organization. The impression is the combination of unconscious,
unintended, conscious, and intended factors that arise.26
ACAS distinguishes two different organisation cultures and different ways of doing things:
■
■
Control culture with the emphasis on rules and procedures, control and compliance with
precedent providing guidelines; and
Quality of working life culture with the emphasis on core values, with mission statements
providing guidance and commitment via shared goals, values and traditions.27
Naylor suggests that seeing quite what forms organisational culture is difficult, and to
make a start we need to recognise both the visible and invisible layers. On the surface is
the visible layer made up of elements such as artefacts, symbols, languages, stories and
activities which can be collected, compared and assembled into a description of the organisation. Underpinning this ‘visible culture’ is the invisible layer of beliefs, values, norms,
basic assumptions and understanding.28
THE IMPORTANCE OF CULTURE
Applications of organisational behaviour and the effective management of human resources
are dependent not only upon the nature of the industry or business, but also upon the
characteristic features of the individual organisation – and its culture. The pervasive nature
of culture in terms of ‘how things are done around here’ and common values, beliefs and
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attitudes will therefore have a significant effect on organisational processes such as decisionmaking, design of structure, group behaviour, work organisation, motivation and job satisfaction, and management control. For example, many managers claim that their organisation’s
culture contributes considerably to their stress.29
Harrison and Stokes maintain that organisational culture influences the behaviour of all
individuals and groups within the organisation.
Culture impacts most aspects of organizational life, such as how decisions are made, who
makes them, how rewards are distributed, who is promoted, how people are treated, how the
organization responds to its environment, and so on.30
A similar point is made by Reigle, who refers to culture as an important factor in successful
technology implementation, innovation, mergers, acquisitions, job satisfaction, organisational
success and team effectiveness, and to the importance of determining whether organisations
exhibit organic or mechanistic cultures.31
Culture and organisation control
Egan refers to culture as the largest organisational control system that dictates how crazy
or idiosyncratic people can be. Companies and institutions have both an overt and covert
culture that influences both business and organisational behaviour.
The covert set can be quite dysfunctional and costly. Culture – the assumptions, beliefs, values and
norms that drive ‘the way we do things here’ – is the largest and most controlling of the systems because
it affects not only overt organisational behaviour but also the shadow-side behaviour . . . Culture lays
down norms for the social system. In one institution you had to be an engineer to rise to the top. There
was no published rule, of course, it was just the way things were. In one bank you could never be made
an officer of the company if you wore polyester clothes. Culture tells us what kind of politics are allowed
and just how members of an organisation are allowed to play the political game.32
Egan also distinguishes between the ‘preferred culture’ which serves the business and the
‘culture-in-use’. This culture-behind-the-culture carries the real beliefs, values and norms that
drive patterns of behaviour within the company. These remain unnamed, undiscussed and
unmentionable and these covert cultures lie outside ordinary managerial control. The first
step in changing such limiting behaviour features is to identify the preferred culture and to
ensure that the company’s way of operating effectively serves the business right now.33
Culture and work ethic
Culture can influence people’s attitudes and behaviour at work. For example a report
from the Chartered Management Institute found that one in three managers felt that in
their organisation there was a culture of not taking time off for sickness and nearly half felt
they would not be treated sympathetically if they took sick leave.34 Bunting draws attention
to the link between work ethic (discussed in Chapter 1) and culture, and the extent to which
people have a choice over how hard they work. Although some people have no choice,
for the vast majority of people there is a degree of choice but the choices are not made in
isolation:
they are the product of the particular organisational culture of our workplaces, which promote concepts
of success, of team spirit so that we don’t let colleagues down, and a powerful work ethic. We are also
influenced by a culture that reinforces that work ethic and its cycle of continual achievement and
consumption as measures of self-worth.
Bunting maintains that it is through work that we seek to satisfy our craving for a sense of
control, mastery and security and that clever organisations exploit this cultural context by
designing corporate cultures that meet the emotional needs of their employees.35
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Culture in short-life organisations
The importance of culture raises interesting questions relating to its nature and influence in
‘short-life’ organisations – that is, organisations created to run for only a short period of time
such as arts festivals or national garden festivals. For example, how does culture develop
when the organisation has little or no prior history, has short-term goals and objectives and
has only limited time for top management to exercise influence? How do managers in such
organisations attempt to inculcate culture? From a study of Garden Festival Wales, Meudell
and Gadd found that success in creating a culture occurred as a direct result of their recruitment and training initiatives. However, it is not only culture but climate that is important
for organisational effectiveness.
Rigorous training in customer care/corporate culture might produce an automatic ‘Have a nice day’ but
only the engendering of a suitable climate will encourage people to say it and mean it.36
Culture and organisational performance
Culture is clearly an important ingredient of effective organisational performance. In
commenting, in a study of Europe’s top companies, on Heineken’s superiority in world
markets, Heller makes the point that it rests in part on its remarkable corporate culture:
There is nothing accidental about cultural strengths . . . There is a relationship between an organisation’s culture and its performance.37
In their original study of highly successful companies, Goldsmith and Clutterbuck identified
eight characteristics built into the day-to-day culture of the organisation. From their subsequent study of the world’s top companies, it appears that a key characteristic of highperforming companies is a challenge culture. All the companies are very demanding of the
people who work for them but this is balanced by a nurturing culture that shows that they
also care for their employees in numerous ways.38
And according to Cummings and Worley:
An organization’s culture is the pattern of assumptions, values and norms that are more or less shared
by an organization’s members. A growing body of research has shown that culture can affect strategy
formulation and implementation as well as a firm’s ability to achieve high levels of excellence.39
Use of managerial tools
Chatman and Cha suggest that every company has a culture – good or bad. However, there is
more to a good culture than happy staff. In order to aid long-term performance, there are
three main criteria needed to develop a suitable culture:
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it must be strategically relevant;
it needs to be strong in order that people care about what is important; and
the culture must have an intrinsic ability to adapt to changing circumstances.
In order that leaders can develop, manage and change their culture for better performance,
Chatman and Cha refer to the use of three managerial tools:
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Recruitment and selection – hire people who fit the company’s culture even if this may
involve overlooking some technical skills for a better cultural fit. Look carefully at the
characteristics of your recruiters and consider your selection decision in the light of
culture.
Social tools and training – develop practices that enable new people to understand the
values, abilities, expected behaviour and social knowledge in order to participate fully as
an employee, and to create strong bonds among members.
Reward system – culture is an organisation’s informal reward system but it needs to be
intricately connected to formal rewards. Examples include staff meetings where the seating arrangement is in accordance with level of sales, name badges that include inventory
losses, and payments of large commissions in front of customers and other staff.40
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Culture change
The pervasive nature of organisational culture means that if change is to be brought about
successfully, this is likely to involve changes to culture. For example, Stewart makes the
following comment on the relationship between culture and change:
In recent years attention has shifted from the effects of the organization of work on people’s behavior
to how behavior is influenced by the organizational culture. What is much more common today is
the widespread recognition that organizational change is not just, or even necessarily mainly, about
changing the structure but often requires changing the culture too.41
A similar view is held by Naylor, who points out that ‘In the holistic system, any change
will affect the culture and the culture will affect or constrain the change . . . Cultural change
is intimately bound up with the process of organisational change.’42
However, although attention is often given to shifting the prevailing activities and
atmosphere of an organisation to a brighter future, changing the ethos and culture of an
organisation is not easy. In practice, organisations usually appear to alter their underlying
ethos only on a gradual basis and the complexity of environmental pressures may itself
hinder rapid change. Culture is often deep-rooted and commitment to the objectives and
policies of the organisation, people’s cognitive limitations and their uncertainties and fears,
may mean a reluctance to accept a change in behaviour. Culture is reinforced through the
system of rites and rituals, patterns of communication, the informal organisation, expected
patterns of behaviour and perceptions of the psychological contract.
Clearly most organisations are not the stable, predictable structures of the past. Keeping
followers motivated and committed in an era of unrelenting change, means that leaders must be
able to create organisational cultures that foster not only performance, but also a sense of pride
and fun. Because cultures evolve over many years and are usually deep-rooted, they can be
difficult to change. Some commentators have observed that it is easier to change behaviour by
changing processes and systems in an organisation than it is to change people’s attitudes. While
goals change in the course of a person’s life, values tend to remain constant and help determine
an employee’s attitudes to their employer.
DTI (2004)43
The nature of organisational change is discussed later in this chapter.
National and international culture
Culture helps to account for variations among organisations and managers, both nationally
and internationally. It helps to explain why different groups of people perceive things in
their own way and perform things differently from other groups.44 With greater international
competition, an understanding of national culture has become of increasing importance for
managers. According to Siddall, for example, ‘International business, the issue of culture and
the need for better understanding have become major parts of organisational behaviour.’45
Cultural practices vary widely among different countries and because of our own values may
be difficult to understand.
Schneider and Barsoux suggest that cultural beliefs and values influence the meaning
of management and also show up differences in conceptions of organisations. National
differences and cultural reasons raise concerns about the transferability of organisational
structures, systems and processes and question the logic of universal ‘best practice’.46 Cheng,
Sculli and Chan also question the universality of theories of management and organisational
behaviour on the grounds that they have not adequately addressed the factor of culture.47
Those fortunate enough to have shared the experience of the author in visiting both Walt
Disney World Resort in Florida and Disneyland Resort Paris would probably have witnessed
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the cultural differences in the attitudes to, and acceptance of, the Disney approach and procedures between American and French employees.
According to Francesco and Gold, culture has recently been accepted as an explanation of
organisational behaviour. One reason is the increase in competitiveness of nations and a
second reason is that managers encounter different cultures in their contacts with people
from other nations. However, there are limits to the use of culture to explain organisational
behaviour, and the relationship between national cultural values and actual behaviour in
organisations is complex.48
Recall also the discussion on the international context of management and organisational
behaviour in Chapter 1.
Critical reflection
‘The proliferation of definitions and explanations of culture, its anthropological origins
and lack of clarity undermines its value to our understanding of organisational behaviour.
It is too ambigious a concept for the effective day-to-day management of the
organisation.’
Do you agree? What role do you think culture plays in the management of modern work
organisations?
ORGANISATIONAL CLIMATE
In addition to arrangements for the carrying out of organisational processes, management
has a responsibility for creating a climate in which people are motivated to work willingly
and effectively. Organisational climate is another general concept and difficult to define
precisely. It is more something that is felt. It can be likened to our description of the weather
and the way in which the climate of a geographical region results from the combination of
environmental forces. Some of these forces are better understood than others. In a similar
way that culture was defined simply as ‘how things are done around here’, climate can be
defined as ‘how it feels to work around here’.
Applied to organisations, climate can be said to relate to the prevailing atmosphere surrounding the organisation, to the level of morale, and to the strength of feelings of belonging,
care and goodwill among members. Climate will influence the attitudes that members of the
organisation bring to bear on their work performance and personal relationships. The extent
to which employees accept the culture of the organisation will have a significant effect on
climate. Whereas organisational culture describes what the organisation is about, organisational climate is an indication of the employees’ feelings and beliefs of what the organisation
is about. Climate is based on the perceptions of members towards the organisation.
Organisational climate is a relatively enduring quality of the internal environment of an organisation
that (a) is experienced by its members, (b) influences their behavior, and (c) can be described in terms
of the values of a particular set of characteristics (or attributes) of the organisation.49
From a detailed study of approaches to organisational climate, Moran and Volkwein
conclude that:
since climate operates at a more accessible level than culture, it is more malleable and, hence, the more
appropriate level at which to target short-term interventions aimed at producing positive organisational
change . . . [however,] interventions to change climate must consider the deeper patterns embedded in
an organisation’s climate.50
Climate also relates to the recognition of the organisation as a social system and the
extent to which membership is perceived as a psychologically rewarding experience. It can
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be seen as the state of mutual trust and understanding among members of the organisation.
For example, Rentsch suggests that ‘One assumption of climate theory is that organizational
members perceive and make sense of organizational policies, practices, and procedures in
psychologically meaningful terms’.51
Characteristics of a healthy organisational climate
Organisational climate is characterised, therefore, by the nature of the people–organisation
relationship and the superior–subordinate relationship. These relationships are determined
by interactions among goals and objectives, formal structure, the process of management,
styles of leadership and the behaviour of people. Although similar types of organisations will
share certain common features and norms, each organisation will have its own different and
distinctive features. In general terms, however, a healthy organisational climate might be
expected to exhibit such characteristic features as:
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the integration of organisational goals and personal goals;
the most appropriate organisation structure based on the demands of the socio-technical
system;
democratic functioning of the organisation with full opportunities for participation;
justice in treatment with equitable HRM and employment relations policies and practices;
mutual trust, consideration and support among different levels of the organisation;
the open discussion of conflict with an attempt to avoid confrontation;
managerial behaviour and styles of leadership appropriate to the particular work situations;
acceptance of the psychological contract between the individual and the organisation;
recognition of people’s needs and expectations at work, and individual differences and
attributes;
concern for flexibility and the work/life balance;
opportunities for personal development and career progression;
a sense of identity with, and loyalty to, the organisation and a feeling of being a valued
and important member.
Climate and organisational performance
If organisational climate is to be improved, then attention should be given to the above
features. A healthy climate will not by itself guarantee improved organisational effectiveness.
However, an organisation is most unlikely to attain optimum operational performance
unless the climate evokes a spirit of support and co-operation throughout the organisation,
and is conducive to motivating members to work willingly and effectively. Gray maintains
from his research to have found a clear correlation between successful workplace outcomes
and a range of climate characteristics and that a climate conducive to successful outcomes
also tends to be conducive to individual happiness. The climate of an organisation has a
significant impact on the quality and quantity of work that gets done and on the well-being
of employees.52
EMPLOYEE COMMITMENT
Among the factors that contribute to a healthy organisational climate is the extent to which
members of staff have a sense of commitment to the organisation. The extent of their
commitment will have a major influence on the level of work performance. The concept of
employee commitment itself, and the manner in which it is actually created, is not easy to
describe. There does, however, appear to be a growing acceptance of the notion of engagement or attachment and loyalty. O’Reilly refers to the term ‘organizational commitment’ as
‘typically conceived of as an individual’s psychological bond to the organization, including
a sense of job involvement, loyalty, and a belief in the values of the organization’.53
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People clearly differ in what motivates them and what they are seeking from work. But
unless people feel fully engaged with the organisation they will not be intellectually and
emotionally committed or motivated to give willingly of their best. Walton suggests that
a significant change in approaches to the organisation and management of work is from
organisational control to commitment in the workplace. The evidence is well grounded
that underlying all the policies of commitment strategy is a management philosophy at
the centre of which ‘is a belief that eliciting employee commitment will lead to enhanced
performance’.54
Securing the commitment of staff
Genuine commitment requires not just a recognition or understanding of what the organisation expects but an emotional and behavioural response from staff. After the downsizing,
de-layering, streamlining and outsourcing of recent years, Altman, Cooper and Garner question whether companies can continue to count on commitment from employees when they
are no longer seen to be committed to them. The more companies downsize, the more they
are seen to be breaking the psychological contract. A new psychological contract needs to
consider the organisation of the future.
The old ‘command and control’ interpretation of loyalty in the workplace needs to be replaced with
an attitude of commitment by both sides which leads to a more pragmatic relationship within the
limited horizons against which businesses are being managed today worldwide. Employers will still
commit themselves to their employees but employment can no longer be guaranteed.55
Galunic and Weeks suggest that with the demise of job security, companies need other strategies to encourage commitment. Examples include paying more attention to compensation,
flexible working, spending to support telecommuting and lifestyle-friendly perks. However,
while such initiatives may encourage employees to work hard, they are no substitute for job
security. In order to help restore commitment without again offering job security, Galunic
and Weeks propose that in addition to company-specific training, there is a programme
of investment in generic training that focuses on general skills and education to raise
the professional level of employees. By developing ‘employability’ and the ability to earn
a living through professional or occupational – not job – security, employees are in turn
likely to respond with greater commitment to the company.56
According to Gratton, the obligations of the firm to individual members are expressed
continuously and the first obligation is true commitment to people.
On the face of it ‘true commitment to people’ is an overused phrase, appearing as it does on
every CEO’s annual business report. The obligation or ‘true commitment’ is tested, not when
times are good, but when times are hard.57
Circle of employee engagement
De Vita suggests that after the cost-cutting and downsizing of the 1990s, how we feel about
work is becoming the prime concern of a growing number of companies. Employee engagement should not be written off as just another HR fad but neither should it be viewed as
a quick fix. Engagement relates to the core of a business – its values, culture and way of managing, and changing that is a tall order. But a truly engaged company is likely to be a ‘great’
one. As an example De Vita quotes the success of the John Lewis Partnership as a result of its
co-ownership by employees combined with a collective management approach and the full
engagement of employees.58 The positive behaviour of a deeply engaged employee will rub
off on clients, customers and colleagues. A highly engaged company is known to perform
better; enjoy high staff retention; sustain long-term success; display energy, productivity and
innovativeness; and win regard as an attractive place to work. See Figure 19.2.
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Figure 19.2
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Virtuous circle of employee engagement
Source: De Vita, E. ‘Get Engaged’, Management Today, April, 2007, p. 40. Reproduced from Management Today magazine with the
permission of the copyright owner, Haymarket Business Publications Limited.
Underlying influences
In addition to the above, there are a number of underlying influences on the extent of
employees’ commitment to the organisation.
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■
People differ in their work ethic and the manner of their involvement with, and concern
for, work and the extent to which they have an instrumental, bureaucratic or solidaristic
orientation. Some people may well have a set attitude to work, whatever the nature of the
work environment.
People’s behaviour and the level of their commitment is also influenced by the nature
of the psychological contract and the degree to which it is perceived as fair by both the
individual and the organisation.
In terms of their relationship with the work organisation, employees may reasonably have
the approach of ‘what’s in it for me?’. An important influence on the strength of commitment
is the nature of the reward system and the satisfaction of needs and expectations at work
in terms of economic rewards, intrinsic satisfaction or social relationships (see Chapter 7).
THE NATURE OF ORGANISATIONAL CHANGE
Change is an inevitable and constant feature. It is an inescapable part of both social and
organisational life and we are all subject to continual change of one form or another.
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Like it or not, change happens. Change is also a pervasive influence and much of the
following discussion provides links with other topics in other chapters. The effects of change
can be studied over different time scales, from weeks to hundreds of years, and studied
at different levels. Change can be studied in terms of its effects at the individual, group,
organisation, society, national or international level. However, because of its pervasive
nature, change at any one level is interrelated with changes at other levels, and it is difficult
to study one area of change in isolation. At the individual level there could for example, be
a personal transformational change where circumstances have not changed but because
of some emotional or spiritual happening the individual was transformed or changed. This
transformation may have some effect on their behaviour and actions at work and relationships with colleagues. But our main focus of attention is on the management of organisational change. Organisational change can be initiated deliberately by managers, it can evolve
slowly within a department, it can be imposed by specific changes in policy or procedures or
it can arise through external pressures. Change can affect all aspects of the operation and
functioning of the organisation.59
The forces of change
An organisation can perform effectively only through interactions with the broader external
environment of which it is part. The structure and functioning of the organisation must
reflect, therefore, the nature of the environment in which it is operating. There are factors
which create an increasingly volatile environment, such as:
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uncertain economic conditions;
globalisation and fierce world competition;
the level of government intervention;
European Union social legislation;
political interests;
scarcity of natural resources;
rapid developments in new technologies and the information age.
In order to help ensure its survival and future success the organisation must be readily
adaptable to the external demands placed upon it. The organisation must be responsive to
change. Other major forces of change include:
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■
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■
increased demands for quality and high levels of customer service and satisfaction;
greater flexibility in the structure of work organisations and patterns of management;
the changing nature and composition of the workforce; and
conflict from within the organisation.
According to a survey from the Management Consultancies Association, four interrelated
forces are driving change, each of which brings organisations and individuals into conflict:
1 outsourcing and the continual redefinition of what constitutes an organisation’s core
business;
2 the distribution of work across different people, organisations and locations, and the
extent to which this makes work fragmented;
3 changing demographics and expectations that create an employees’, rather than employers’,
market;
4 the double-edged sword of technology, which enables people to do more but tempts
organisations to do too much.60
Change within the organisation
Change also originates within the organisation itself. Much of this change is part of a
natural process of ageing – for example, as material resources such as buildings, equipment
or machinery deteriorate or lose efficiency; or as human resources get older, or as skills
and abilities become outdated. Some of this change can be managed through careful planning
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– for example, regular repairs and maintenance, choice of introducing new technology or
methods of work, effective human resource planning to prevent a large number of staff
retiring at the same time, and management succession planning – training and staff development. However, the main pressure of change is from external forces. The organisation must
be properly prepared to face the demands of a changing environment. It must give attention
to its future development and success; this includes public sector organisations and the
armed forces.61
Public sector executives face unique obstacles in leading organisational change, in part because of
entrenched civil service bureaucracies, procedural constraints such as managing performance and firing
employees, and dealing with many different stakeholders with competing priorities.62
A concept map of needs and drivers of organisational change is presented in Figure 19.3.
Critical reflection
‘Change is nothing new and a simple fact of life. Some people actively thrive on new
challenges and constant change, while others prefer the comfort of the status quo and
strongly resist any change. It is all down to the personality of the individual and there is
little management can do about resistance to change.’
To what extent do you accept this contention? What is your attitude to change?
PLANNED ORGANISATIONAL CHANGE
Most planned organisational change is triggered by the need to respond to new challenges
or opportunities presented by the external environment, or in anticipation of the need to
cope with potential future problems, for example, uncertain economic conditions, intended
government legislation, new product development by a major competitor or further technological advances. Planned change represents an intentional attempt to improve, in some
important way, the operational effectiveness of the organisation.
The basic underlying objectives can be seen in general terms as:
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■
modifying the behavioural patterns of members of the organisation; and
improving the ability of the organisation to cope with changes in its environment.
ACAS refers to initiating and maintaining a Quality of Working Life (QWL) change
programme. Such initiatives could stem from a variety of issues that might provide
‘a window for change’ to management and/or worker representatives. Examples include:
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a general sense that the organisation could perform better;
the need to improve organisation flexibility, quality or to develop new customer concern;
a sense that skills and abilities of people are under-utilised or concerns about a lack of
commitment from employees;
the need to introduce changes in technology or working practices;
workers feeling over-controlled by supervision or by the process or jobs seen as being
boring;
concerns about ineffective communications or poor performance indicators;
fractious relationships between managers and the managed.63
Behaviour modification
A programme of planned change and improved performance developed by Lewin involves
the management of a three-phase process of behaviour modification:
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Concept map of organisational change – needs and drivers
(Note that the examples are illustrative and not exhaustive.)
Source: Copyright © 2008 The Virtual Learning Materials Workshop. Reproduced with permission.
Figure 19.3
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ORGANISATION CULTURE AND CHANGE
unfreezing – reducing those forces which maintain behaviour in its present form,
recognition of the need for change and improvement to occur;
movement – development of new attitudes or behaviour and the implementation of
the change;
refreezing – stabilising change at the new level and reinforcement through supporting
mechanisms, for example policies, structure or norms.64
French, Kast and Rosenzweig list eight specific components of a planned-change effort
related to the above process (see Figure 19.4).65
Figure 19.4
Stages in a planned-change effort
Unfreezing
Movement
Refreezing
1
2
3
4
5
6
7
8
Initial problem identification
Obtaining data
Problem diagnosis
Action planning
Implementation
Follow-up and stabilisation
Assessment of consequences
Learning from the process
Source: Adapted from French, W. L., Kast, F. E. and Rosenzweig, J. E. Understanding Human Behavior in Organizations, Harper and Row
(1985), p. 9.
Changes in managerial work
Change is reciprocal and changing organisations will affect the nature of managerial work.
In Chapter 11 we referred to the major study by the Chartered Management Institute on what
the world of work and management will be like in 2018. To repeat a key finding of the study:
The working population will be more diverse. Changing expectations of work and the impact of new
technologies will require managers and leaders to develop a range of skills that focus on emotional and
spiritual intelligence, judgement and the ability to stimulate creative thinking to improve productivity.66
(Recall also the discussion in Chapter 3 on the future world of work and the ‘Y’ factor.)
According to Gratton, ‘understanding the soul of the organisation and building trust and
commitment is crucial to ongoing adaptation and change’.67 And Lockhead maintains that
‘most successful organisations develop a culture that welcomes change and the opportunities it brings’.68 However, according to Crainer, many managers refuse to accept the necessity
of change. Instead of being proactive, change is often reactive, the last resort.
Research repeatedly shows that it is managers who are the chief stumbling block to making change
happen. Changing organizational structures and managerial thinking challenges and undercuts
traditional power bases . . . For the manager reared on the old functional certainties, the new world
organization is very difficult to manage. Indeed, the vast majority of managers are neither trained nor
equipped to manage in such an environment.69
The impact of change on work organisations and their management draws attention to the
importance of lifelong learning and self-development discussed in Chapter 5.
The challenge of e-business
It is impossible to know exactly what the future of e-business will bring but it will continue
to bring tremendous change. One of the biggest changes for managers, especially within large
organisations, is learning how to get to grips with an increasingly flexible workforce. As
a result of the e-business environment many people can work at any time, anywhere and at
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any place. Many employees work at home but although the virtual office may help organisations to cut costs, it also poses many management challenges including the challenge to put
structures in place to ensure regular meetings take place. Flexible working calls for flexible
managers. This means that the traditional line managers need to become leaders, coaches and
facilitators. Given the accelerating rate of change, particularly with the internet, it is essential
that organisations invest in and develop their managers to succeed with this change.
RESISTANCE TO CHANGE
Despite the potential positive outcomes, change is often resisted at both the individual and
the organisational level. Resistance to change – or the thought of the implications of the
change – appears to be a common phenomenon. As long ago as 1970, Toffler wrote about
the psychological dimension of ‘future shock’, and that people are naturally wary of change.
‘Among many there is an uneasy mood – a suspicion that change is out of control.’70
Resistance to change can take many forms and it is often difficult to pinpoint the exact
reasons. The forces against change in work organisations include: ignoring the needs and
expectations of members; when members have insufficient information about the nature of
the change; or if they do not perceive the need for change. Fears may be expressed over such
matters as employment levels and job security, de-skilling of work, loss of job satisfaction, wage
rate differentials, changes to social structures and working conditions, loss of individual
control over work, and greater management control.
Individual resistance
Some common reasons for individual resistance to change within organisations include the
following:
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Selective perception. People’s interpretation of stimuli presents a unique picture or
image of the ‘real’ world and can result in selective perception. This can lead to a biased
view of a particular situation, which fits most comfortably into a person’s own perception
of reality, and can cause resistance to change. For example, trade unionists may have a
stereotyped view of management as untrustworthy and therefore oppose any management change, however well founded might have been the intention. Managers exposed
to different theories or ideas may tend to categorise these as either those they already
practise and have no need to worry about or those that are of no practical value and which
can be discarded as of no concern to them.
Habit. People tend to respond to situations in an established and accustomed manner.
Habits may serve as a means of comfort and security, and as a guide for easy decisionmaking. Proposed changes to habits, especially if the habits are well established and require
little effort, may well be resisted. However, if there is a clearly perceived advantage, for
example a reduction in working hours without loss of pay, there is likely to be less, if any,
resistance to the change, although some people may, because of habit, still find it difficult
to adjust to the new times.
Inconvenience or loss of freedom. If the change is seen as likely to prove inconvenient,
make life more difficult, reduce freedom of action or result in increased control, there will
be resistance.
Economic implications. People are likely to resist change that is perceived as reducing
either directly or indirectly their pay or other rewards, requiring an increase in work
for the same level of pay or acting as a threat to their job security. People tend to have
established patterns of working and a vested interest in maintaining the status quo.
Security in the past. There is a tendency for some people to find a sense of security in the
past. In times of frustration or difficulty, or when faced with new or unfamiliar ideas or
methods, people may reflect on the past. There is a wish to retain old and comfortable
ways. For example, in bureaucratic organisations, officials often tend to place faith in wellestablished (‘tried and trusted’) procedures and cling to these as giving a feeling of security.
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Fear of the unknown. Changes which confront people with the unknown tend to cause
anxiety or fear. Many major changes in a work organisation present a degree of uncertainty, for example the introduction of new technology or methods of working. A person
may resist promotion because of uncertainty over changes in responsibilities or the
increased social demands of the higher position.
Organisational resistance
Although organisations have to adapt to their environment, they tend to feel comfortable
operating within the structure, policies and procedures which have been formulated to deal
with a range of present situations. To ensure operational effectiveness, organisations often
set up defences against change and prefer to concentrate on the routine things they perform
well. Some of the main reasons for organisational resistance against change are as follows.
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Organisation culture. Recall that the culture of an organisation develops over time
and may not be easy to change. The pervasive nature of culture in terms of ‘how things
are done around here’ also has a significant effect on organisational processes and the
behaviour of staff. An ineffective culture may result in a lack of flexibility for, or acceptance
of, change.
Maintaining stability. Organisations, especially large-scale ones, pay much attention to
maintaining stability and predictability. The need for formal organisation structure and
the division of work, narrow definitions of assigned duties and responsibilities, established
rules, procedures and methods of work, can result in resistance to change. The more
mechanistic or bureaucratic the structure, the less likely it is that the organisation will be
responsive to change.
Investment in resources. Change often requires large resources that may already be
committed to investments in other areas or strategies. Assets such as buildings, technology,
equipment and people cannot easily be altered. For example, a car manufacturer may
not find it easy to change to a socio-technical approach and the use of autonomous work
groups because it cannot afford the cost of a new purpose-built plant and specialised
equipment.
Past contracts or agreements. Organisations enter into contracts or agreements with
other parties, such as the government, other organisations, trade unions, suppliers and
customers. These contracts and agreements can limit changes in behaviour – for example,
organisations operating under a special licence or permit, or a fixed-price contract to
supply goods/services to a government agency. Another example might be an agreement
with unions that limits the opportunity to introduce compulsory redundancies, or the
introduction of certain new technology or working practices.
Threats to power or influence. Change may be seen as a threat to the power or influence
of certain groups within the organisation, such as their control over decisions, resources
or information. For example, managers may resist the introduction of quality circles or
worker-directors because they see this as increasing the role and influence of non-managerial
staff, and a threat to the power in their own positions. Where a group of people have, over
a period of time, established what they perceive as their ‘territorial rights’, they are likely
to resist change.
Perceptions and change
Although change is often resisted, Cunningham maintains that one of the greatest myths in
management is the generalisation that people resist change. In fact people love change. The
commonest reason for resistance is where people perceive a potential loss. For example,
because of negative rumour-mongering, people may perceive that they will be worse off from
a proposed change even if the opposite is in fact true. In a different context, changes that result,
for example, in the loss of one’s job, can create real, fact-based resistance. While people
welcome change that they want, they have to be careful about the pace of change. In a more
general context people may be enthusiastic for change, for example in large organisations
where some people want to see changes and improvements in communication.
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What seems to get in the way is the continual chanting of the untrue generalisation that ‘people resist
change’. People resist some change – if they perceive that they are going to lose out. People welcome
change that makes things better.71
Neuroscientific approach to resistance to change
Riches questions why some organisations struggle to change and applies an interesting approach
to resistance to change based on a neuroscientific understanding. Whether consolidating
a merger, re-engineering business processes, restructuring, changing value propositions,
introducing new IT systems, relocating premises, or changing the culture – all too often
the process is derailed by the resistance of employees. Resistance to change is one of the
most powerful drivers of human behaviour, and the key to dealing with it effectively is to
understand both its physical and emotional components. Most organisations make two fatal
errors when dealing with resistance. First, they underestimate the strength of current patterns
that employees are comfortable and familiar with. Second, they underestimate what will be
required to change those patterns and deal with the automatic, though sometimes subtle,
fight or flight responses that occur when employees interpret changes as threats.
The amygdala and The Almond Effect®
According to Riches, our brains are hard-wired to do three things: match patterns, resist or
fight any threats to survival, and respond first with emotion over logic. Our neural pathways
and amygdalae are the key players in these reactions. The amygdala is an almond-shaped
piece of the brain that triggers the ‘fight or flight’ reaction. Your brain has two amygdalae,
and they play a fundamental role in ensuring your survival. Sometimes, though, the
amygdalae set off a false alarm. This is what Riches calls The Almond Effect®. Put simply, you
act without thinking and get it wrong. You can probably think of many times when this has
happened, times when you said or did something in the heat of the moment, and almost
immediately afterwards regretted it.
The Almond Effect® is critical if survival really is at stake, but at work it often gets in the
way. It is the reason why all too often, human beings automatically react to change with
resistance, even before they fully understand the nature of the change. The amygdala has
activated the fear response based on previous memories of change (old neural pathways)
associated with, for example, job losses, more work, new skills required, change of roster,
cost cutting and so on. Stress hormones are released as part of the inbuilt flight/fight mechanism and show up at work as anger, anxiety, lethargy, poor performance and reluctance
to change.
The only way to overcome this resistance is to convince employees that the changes or
new initiatives enhance their ability to ‘survive’. If you don’t convince them, they may comply with changes for a while but will soon fall back into the old way of doing things. Their
older, established neural-pathway patterns are simply more hard-wired than the new ones.
Neuroscientists show us that although rational decision-making is inextricably intertwined
with emotions, human beings are primarily emotional and secondarily rational, so emotions call the shots in business and in life. Unless an organisation accepts and addresses this
reality, managing change with an emphasis on logic rather than emotion will not diminish
resistance to organisational change.72
Critical reflection
‘The biggest difficulty with change is the associated fear and uncertainty. If management
maintains effective and continuous communications at all levels of the organisation
before and during the introduction of change this would minimise any problems.’
What is your view? What has been your experience of organisational change?
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THE MANAGEMENT OF ORGANISATIONAL CHANGE
The successful management of change is clearly essential for continued economic performance
and competitiveness and is the life-blood of business success. New ideas and innovations
should not be perceived as threats by members of the organisation. The efforts made by
management to maintain the balance of the socio-technical system will influence people’s
attitudes, the behaviour of individuals and groups, and thereby the level of organisational
performance and effectiveness.
Stewart is among those writers who point out how changes in technology and in domestic
government policies have had a radical impact on managers in many companies and in
public service organisations.
One of the most difficult problems for managers is rapid change. How British managers react to
change will have an important influence on Britain’s economic future. This is true for managers
in the public service as well as for those in industry and commerce. The tempo of change has
speeded up; hence the demands made on managers to plan for, and adjust to, change are
greater. All change requires both abilities.73
Organisational responses to change
Christensen and Overdorf suggest a framework to help managers understand what types of
change the organisation is capable and incapable of handling. They identify three factors
that affect organisational responses to different types of change and what an organisation
can and cannot do:
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resources – access to abundant, high-quality resources increases an organisation’s chances
of coping with change;
processes – the patterns of interaction, co-ordination, communication and decisionmaking employees use to transform resources into products and services. Processes may
be formal and explicitly defined and documented, or informal and routines or ways of
working that evolve over time;
values – the standards by which employees set priorities that enable them to judge
whether an order is attractive, whether a customer is more or less important, whether an
idea for a new product is attractive or marginal.
The factors that define an organisation’s capabilities and disabilities evolve over time –
they start in resources, then move to visible, articulated processes and values, and finally
migrate to culture. Christensen and Overdorf maintain that when an organisation faces the
same sort of problem that its processes and values were designed to address, managing can
be straightforward. However, when the problem facing the organisation is fundamentally
different these same factors constitute disabilities, especially when the organisation’s capabilities have come to reside in processes and values. There are three possible ways in which
managers can develop new capabilities to cope with change:
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create organisational structures within corporate boundaries in which new processes can
be developed;
spin out an independent organisation from the existing organisation and develop new
processes and values;
acquire a different organisation whose processes and values match closely the new
requirements.74
Actions to secure effective change
Many books and articles refer to the steps or actions to be taken to secure successful and
sustainable change.75 For example, Kotter and Cohen list the following eight steps for successful
large-scale change:
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1 Create a sense of urgency among relevant people, whatever the nature or size of the
organisation.
2 Build a guiding team with the credibility, skills, connections, reputations and formal
authority to provide change leadership.
3 Create visions which are sensible, clear and uplifting, and sets of strategies.
4 Communicate the vision and strategy in order to induce understanding and commitment.
5 Empower action and remove obstacles that stop people acting on the vision.
6 Produce short-term wins that help to provide credibility, resources and momentum to
the overall effort.
7 Don’t let up but maintain the momentum, consolidate early changes and create wave
after wave of change.
8 Make change stick by nurturing a new culture, and developing group norms of behaviour
and shared values.76
Change and the environment
Newton points out that change takes many forms and, typically, organisations are undertaking many changes in parallel all the time. Newton provides a variety of optional guidance
to help review the nature of change being made and the environment in which one is
working.
The central point is: there is not one type of change, and there is not a single way to approach change.
Change management methodologies are only helpful if they are applicable both to the change you want
to make and the environment in which you work. The approach you take to change must be tailored
depending on the nature of the change you are making and the character of your organisation.77
Minimising the problems of change
Activities managed on the basis of technical efficiency alone are unlikely to lead to optimum
improvement in organisational performance. A major source of resistance to change arises
from the need of organisations to adapt to new technological developments. The following
discussion on how to minimise the problem of change centres on the example of the impact
of information technology. The general principles, however, apply equally to the management of change arising from other factors.
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An important priority is to create an environment of trust and shared commitment,
and to involve staff in decisions and actions that affect them. It is important that
members of staff understand fully the reasons for change. Organisations should try to
avoid change for the sake of change as this can both be disruptive and lead to mistrust.
However, considerations of the need to change arising from advances in information
technology simply cannot be ignored.
There should be full and genuine participation of all staff concerned as early as
possible, preferably well before the actual introduction of new equipment or systems.
Information about proposed change, its implications and potential benefits should
be communicated clearly to all interested parties. Staff should be actively encouraged to
contribute their own ideas, suggestions and experiences, and to voice openly their worries
or concerns.
Team management, a co-operative spirit among staff and unions and a genuine
feeling of shared involvement will help create a greater willingness to accept change.
A participative style of managerial behaviour that encourages supportive relationships
between managers and subordinates, and group methods of organisation, decisionmaking and supervision, are more likely to lead to a sustained improvement in work
performance. There is an assumption that most people will direct and control themselves
more willingly if they share in the setting of their objectives.
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As part of the pre-planning for new technology there should be a carefully designed
‘human resource management action programme’. The action programme should be
directed to a review of recruitment and selection, natural wastage of staff, potential for
training, retraining and the development of new skills, and other strategies to reduce the
possible level of redundancies or other harmful effects on staff. Where appropriate,
arrangements for greater flexibility or a shorter working week, and redeployment of staff,
should be developed in full consultation with those concerned.
The introduction of incentive payment schemes may help in motivating staff by
an equitable allocation of savings which result from new technology and more
efficient methods of work. Incentive schemes may be on an individual basis, with
bonuses payable to each member of staff according to effort and performance; or on
a group basis, where bonuses are paid to staff in relation to the performance of the group
as a whole. By accepting changes in work methods and practices, staff share in the
economic benefits gained from the improved efficiency of information technology and
automated systems.
Changes to the work organisation must maintain the balance of the socio-technical
system. Increased technology and automation may result in jobs becoming more repetitive and boring, and providing only a limited challenge and satisfaction to staff. It is
important, therefore, to attempt to improve the quality of work, to remove frustration and
stress from jobs, and to make them more responsible and interesting. Actual working
arrangements rely heavily on the informal organisation and effective teamwork and can
have a significant influence on the successful implementation of change.
Careful attention should be given to job design, methods of work organisation, the
development of cohesive groups, and relationships between the nature and content of
jobs and their task functions. The introduction of new technology has also highlighted
the need to give attention to the wider organisational context including the design of technology itself, broader approaches to improved job design, employee involvement and
empowerment, the development of skills and problem-solving capacity, and the effective
management of change. (The subject of technology and organisations is discussed more
fully in Chapter 16.)
Style of managerial behaviour
One of the most important factors in the successful implementation of organisational
change is the style of managerial behaviour. Some members may actually prefer, and
respond better, to a directed and controlled style of management. (Recall, for example, the
discussion on Theory X and Theory Y styles of managerial behaviour in Chapter 12.) In most
cases, however, the introduction of change is more likely to be effective with a participative
style of managerial behaviour. If staff are kept fully informed of proposals, are encouraged
to adopt a positive attitude and have personal involvement in the implementation of the
change, there is a greater likelihood of their acceptance of the change. However, Reis and
Pena maintain that too often, management ignores human resistance issues and the need to
address them in the implementation plan.
The success of any change depends on the willingness of employees to accept it with enthusiasm and
implement it with care. Yet, business changes at times are undertaken without understanding how the
human element influences the success or failure of a project. Frequently, companies develop impressive
technical plans and simply assume the change – technical or organizational – will occur. The difficult
and often neglected part of such initiatives is leading and managing behavioural change with those
persons who interface with the new technology or the new initiatives.78
OVERCOMING RESISTANCE TO CHANGE
The effective management of change must be based on a clear understanding of human
behaviour at work. Most people are not detached from their work but experience a range of
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emotional involvements through their membership of the organisation, and they feel threatened and disoriented by the challenge of change. Emotions such as uncertainty, frustration
or fear are common reactions. It is understandable therefore that people often adopt
a defensive and negative attitude, and demonstrate resistance to change. It is important
to remember that change is a complex and powerful psychological experience, and that
individuals react internally to change.
According to Atkinson, a major problem in driving change in organisations is dealing
with and managing the resistance that will be encountered – but that resistance should
be welcomed as a healthy response. Resistance is natural and should not be viewed only as
a negative response to change. In the absence of really positive benefits from the proposed
change, the ‘default’ response of resistance is acceptable.
It is unusual for any change not to attract some resistance. Even with foresight, pre-planning and
all the apparent logic behind the need to change, you should expect some resistance as the norm.
Recognise and welcome it as a healthy response and an opportunity to openly debate possibilities and
treat resistance as a powerful ally in facilitating the learning process.79
People are the key factor
The successful implementation of new work methods and practices is dependent upon the
willing and effective co-operation of staff, managerial colleagues and unions. People are
the key factor in the successful management of change. If change is to work, it must change
the perceptions, attitudes and behaviour of people.
However, Lucas reminds us that a high proportion of change initiatives fail, derailed by
the people factor.
Given that change has become such a fact of business life, it is worrying that so many change management programmes fail to fulfil their potential. The consensus among the experts is that it is often the
people factor that derails the effort. Put simply, organisations know where they want to go – but they
are not taking their people with them.80
Taylor points out that one of the most stressful aspects of change is often the sense of
loss of control that accompanies it. The individual can feel powerless and helpless. Many
organisations spend a great deal of attention and energy focusing on the operational
outcomes of proposed changes but often pay scant attention to enabling employees to adapt
psychologically to the new situation.81 Reeves and Knell suggest that ‘knowledge leaders
understand that change provokes an emotional response, that successful change involves
allowing people to feel angry, resentful and afraid as well as excited, hopeful and energised’.82
Behaviour change is a personal issue. Groups don’t change, teams don’t change, companies
don’t change: individuals change. Teams change the way they operate when every member of
the team changes the way he or she operates. Companies change the way they operate when
the people in them change the way they behave.83
Responsibilities of top management
The successful management of change is a key factor of organisational performance and
effectiveness and should emanate from the top of the organisation. Top management has a
responsibility for the underlying philosophy and attitudes of the organisation, for creating and
sustaining a healthy climate, and for establishing appropriate and supportive organisational
processes. The successful implementation of change demands positive action from top management and a style of transformational leadership in order to gain a commitment to change.
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Managing change in the workplace is dependant on good
people management
Effective development of people in line with business ambitions is central to managing
change and ensuring competitive edge during times of economic uncertainty. Organisations
face tough decisions in times of change. These can involve business refocusing,
rationalisation and restructuring, innovating, seizing new market opportunities, and
re-engineering the skills base to boost competitiveness. However all will include engaging
the workforce. Organisations need to be responsive to changing conditions but also to
acknowledge what this means to their people.
The Investors in People approach recognises that, in order to get the best out of your people,
it is vital that all employees are clear about the goals of the organisation as well as their
individual workplace objectives. Cascading the vision and direction of the organisation is
one of the strongest levers you can pull to generate improved business performance. During
times of change it is key that these objectives are regularly reviewed to ensure they remain
up to date and relevant. It is also critical that people are kept informed of organisation-wide
goals so they are clear about how their role contributes to these.
Changing goals can also create a need for investment in training and development to ensure
the workforce has the ability to meet new objectives. The importance of developing new skills
to respond to change and of supporting the workforce to work in new ways should not be
underestimated. However, this investment will not provide a sustained impact on performance
unless underpinned by strong leadership and communication. Managers need to be able to
support their teams effectively. What this means in practice is being able to explain to
employees both the reason for change and the effect it will have on them; creating a culture
where feedback is given on a regular basis and acted upon; one where people are
encouraged to give their ideas for working smarter and take responsibility for their objectives.
The role of inspirational leadership and effective communication is vital.
By getting the people management practices right, you open the way to a responsive and
flexible workforce which is able to respond effectively to a changing business environment.
Once this culture has been created, organisations cannot afford to stand still. Effective people
management needs to be seen as an ongoing project rather than one with an end date to
ensure that organisations stay ahead of the competition and continue to perform whatever the
market conditions.
Source: Investors in People. © Investors in People, July 2009.
Leading IT change
A report published jointly by the Chartered Management Institute, the British Computer
Society and the Change Leadership Network refers to challenges facing senior executives to
ensure they are better prepared to lead technological change. Change always involves risk
and on the basis of examination of ten detailed organisational case studies the report
identifies five key challenges in obtaining best value from IT-enabled change:
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Creating transformational value rather than just implementing IT projects.
Building capability for ongoing change. Being able to predict future business needs and
how IT can help shape new business models and deliver the desired benefits.
Creating a climate of open communication.
Managing confidence and trust – understanding the impact of external changes.
Building personal capability, learning and confidence.84
Change leaders
An interesting proposition is put forward by Drucker, who contends that ‘one cannot manage
change. One can only be ahead of it. We do not hear much anymore about “overcoming
resistance to change”.’ Everyone now accepts that change is unavoidable.
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But in a period of upheavals, such as the one we are living in, change is the norm. To be sure, it is
painful and risky, and above all it requires a great deal of very hard work. But unless it is seen as the
task of the organization to lead change, the organization – whether business, university, hospital and
so on – will not survive. In a period of rapid structural change, the only ones who survive are the
Change Leaders. It is therefore a central 21st-century challenge for management that its organization
become a change leader. A change leader sees change as opportunity. A change leader looks for change,
knows how to find the right changes and knows how to make them effective both outside the organization and inside it. This requires:
1 Policies to make the future.
2 Systematic methods to look for and to anticipate change.
3 The right way to introduce change, both within and outside the organization.
4 Policies to balance change and continuity.85
Critical reflection
‘The socialisation of new members into an organisation’s culture and climate is no more
than a management control system and manipulation of the individual. It is therefore
unethical and should be condemned.’
How would you challenge the validity of this statement? What has been your personal
experience?
SYNOPSIS
■ Organisation development (OD) is a generic term
embracing a wide range of intervention strategies into
the social processes of an organisation. In a very general
sense, OD is concerned with attempts to improve the
overall performance and effectiveness of an organisation. The broad nature of OD means, however, that
many interrelated topic areas could be included under
this heading. OD makes use of a number of intervention strategies, and is action-oriented and tailored
to suit specific organisational needs. Two central and
critical features of OD are organisational culture and
organisational change.
■ Organisational culture helps to explain how things
are performed in different organisations. Culture is,
however, a general concept, and difficult to explain
precisely. There are a number of ways to classify different types of organisation culture. It develops over
time and in response to a complex set of factors. There
are a number of different ways in which to understand
what constitutes organisational culture.
■ Applications of organisational behaviour and the
effective management of human resources are dependent upon the characteristic features of the individual
organisation – and its culture. The pervasive nature of
culture has an important effect on the behaviour and
actions of individuals, on the process of management
and on organisational performance. It describes what
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the organisation is all about. Culture helps to account
for variations among organisations and managers,
both nationally and internationally.
■ Organisational climate is based on the perception
of members towards the organisation, and can be seen
as the state of mutual trust and understanding among
members of the organisation. Climate influences the
attitudes that staff bring to bear on their work performance and personal relationships. Among the factors
which contribute to a healthy climate is the extent to
which employees have a sense of commitment to, and
psychological bond with, the organisation.
■ Organisations operate within an increasingly volatile
environment and are in a state of constant change.
Change is a pervasive influence and an inescapable part
of social and organisational life. There is a wide range
of forces acting upon organisations which make the
need for change inevitable. Change can affect all aspects
of the operation and functioning of the organisation.
Planned organisation change involves a process of
behaviour modification. Change is reciprocal and
changing organisations may affect the nature of managerial work.
■ Despite the potential positive outcomes, change is
often resisted at both the individual and the organisational level. Resistance to change can take many forms
CHAPTER 19
and it is not always easy to pinpoint the exact reasons.
It is important that management adopt a clearly defined
strategy for the successful initiation of change, including attention to the style of managerial behaviour, and
ORGANISATION CULTURE AND CHANGE
the human and social factors of change. The effective
management of change is a key factor of organisational
performance and competitiveness, and should emanate
from the top of the organisation.
REVIEW AND DISCUSSION QUESTIONS
1 Explain fully what you understand by the meaning and nature of organisation development (OD).
2 Suggest how you would attempt to explain the concept of organisational culture. What factors might
influence the development of culture?
3 Discuss critically the importance of culture for effective organisational performance. Give practical examples
from your own organisation.
4 What do you understand by organisational climate and what do you think are its main characteristic features?
From your own organisation, give examples of features that have contributed to and/or detracted from a
healthy climate.
5 Explain the concept of employee commitment and suggest how it might actually be created. Give examples
of factors that have contributed to your own strength of commitment in any work situation.
6 Give specific examples of major changes confronting management today and their probable implications for
an organisation of your choice.
7 Why do individuals and organisations tend to resist change? To what extent do you believe such resistance
can be effectively overcome?
8 Explain fully what you believe are the most important features in the successful implementation of
organisational change.
MANAGEMENT IN THE NEWS
The time is ripe for fresh ideas
FT
Lynda Gratton
Wider distribution of leadership
This recession has brought into stark perspective the
role of the leader. Up to this point, the dominant norm
has been the ‘command and control’ leadership style.
In this model, the organisation is viewed as a hierarchy
in which decisions are escalated to the top, where
a CEO makes the decisions. But many people are now
questioning the wisdom of placing so much power in
Source: iStockphoto
Forget business workshops and case studies –
recessions provide real-time opportunities for executive
learning as old myths are brought into question
and management innovations emerge. Historically
a downturn has been a time when business models,
organisational structures, labour markets and
employee contracts come under immense strain.
Accepted wisdoms are challenged and this break in
thinking can result in the adoption of new practices
and the adoption of new habits and skills. There are
two points of tension emerging in this recession that
may allow for innovation in management practices.
Recessionary times can act as the catalyst to spur changes in
organisational cultures.
the hands of so few. At the same time, insights from
research in decision sciences and technological
advances have shown that often the best decisions
are made by an ‘intelligent crowd’, rather than one
all-powerful individual.
➔
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Management in the news – continued
Senior leadership cadres have traditionally been
essentially homogeneous – middle-aged men with
similar backgrounds. Research on innovative teams
has shown that such groups are likely to be less
competent in decision-making than diverse teams.
With the dominant model under question, this is a
good time to bring diversity back on to the agenda.
Creating flexible virtual teams
Past recessions have often served to accelerate the
adoption of management practices and processes that
already had some popularity pre-recession. The same
is true of virtual working. Assembling teams to work
on projects and task forces has become more viable
in the past decade, often hastened by the pressures of
globalisation. Yet while virtual working is emerging as
a trend, there is still an assumption that face-to-face
working trumps virtual working. As a result, every
Sunday night thousands of executives board aircraft
and trains to get to Monday morning meetings. With
many companies freezing travel budgets, this is likely
to change and many executives will have to do more
work virtually.
At the same time, the entry and exit roads of the
world’s big cities are clogged from early dawn with
commuters hurrying to and from work. This movement
of people has been based on two assumptions: that
people need to meet every day to get their work done;
and that when at home, they are likely to slack and
need the discipline of an office to ensure they perform.
Both assumptions are wrong. First, people do not
need to meet every day to get their work done.
Our research has shown that virtual teams – where
members rarely meet – can be highly productive. What
is important in these teams is that they are all inspired
by a meaningful task, fascinating question or
compelling vision. The second assumption – that
people need the discipline of an office to ensure they
perform – is also a myth. Much research has shown
that when people have the opportunity to work on
engaging, well-planned tasks at home they are
significantly more productive and committed than
those who toil through the commuter traffic every day.
Source: Gratton, L. ‘The Time Is Ripe for Fresh Ideas’, Financial
Times, 5 February 2009. Copyright © 2009 The Financial Times
Limited, reproduced with permission from Lynda Gratton.
Discussion questions
1 With reference to Lewin’s model of change
management, as shown in Figure 19.4, suggest
the steps that would need to be taken by an
organisation to introduce the two innovatory
management practices advocated by Gratton.
2 Crainer suggests that managers are themselves
often the source of resistance to change. Using
the information in the chapter about resistance to
change as the basis for your analysis, explain why
managers might resist such changes.
3 What steps would you take to overcome these
types of resistance?
ASSIGNMENT 1
Understanding your organisation’s personality
An important part of any manager’s, sales person’s or frontline staff’s role is to be an ambassador for
the organisation. This means representing its values, its image and its style in a variety of situations.
In each case, you represent the personality not only of yourself, but of your organisation – and one of the most
effective ways to explore the personality of your organisation is by describing it as if it were a person.
Ask yourself the following questions about your organisation.
■
What gender would it be?
■
How old would it be?
■
Where would it live?
■
Where would it prefer to holiday?
■
What car would it drive?
■
What interests or hobbies would it have?
■
If it were to win the lottery, what would it do?
Source: Reproduced with permission from David Hill, Director, Echelon Learning Ltd.
(Some feedback may be given by your tutor.)
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ASSIGNMENT 2
Rate your readiness to change – a quiz
The left-hand column lists 17 key elements of change readiness. Rate your organisation on each item. Give
three points for high ranking (‘We’re good at this; I’m confident of our skills here’), two for medium score (‘We’re
spotty here; we could use improvement or more experience’) and one point for a low score (‘We’ve had
problems with this; this is new to our organisation’). Be honest. Don’t trust only your own perspective; ask
others in the organisation, at all levels, to rate the company too. The consultants at Symmetrix believe – no
surprise – it helps to have an outsider do the assessment with you.
Readiness scoring
How to score: High = 3, Medium = 2, Low = 1.
Category
Sponsorship
Leadership
Motivation
Direction
Measurements
Organisational
context
Score
The sponsor of change is not necessarily its day-to-day leader; he or she is the
visionary, chief cheerleader, and bill payer – the person with the power to help
the team change when it meets resistance. Give three points – change will be
easier – if sponsorship comes at a senior level; for example, CEO, COO, or the
head of an autonomous business unit. Weakest sponsors: mid-level executives or
staff officers.
This means the day-to-day leadership – the people who call the meeting, set the
goals, work till midnight. Successful change is more likely if leadership is high-level,
has ‘ownership’ (that is, direct responsibility for what’s to be changed) and has
clear business results in mind. Low-level leadership, or leadership that is not well
connected throughout the organisation (across departments) or that comes from
the staff, is less likely to succeed and should be scored low.
High points for a strong sense of urgency from senior management, which is
shared by the rest of the company, and for a corporate culture that already
emphasises continuous improvement. Negative: tradition-bound managers and
workers, many of whom have been in their jobs for more than 15 years; a
conservative culture that discourages risk-taking.
Does senior management strongly believe that the future should look different from
the present? How clear is management’s picture of the future? Can management
mobilise all relevant parties – employees, the board, customers, etc. – for action?
High points for positive answers to those questions. If senior management thinks
only minor change is needed, the likely outcome is no change at all; score
yourself low.
Or in consultant-speak, ‘metrics’. Three points if you already use performance
measures of the sort encouraged by total quality management (defect rates, time
to market, etc.) and if these express the economics of the business. Two points if
some measures exist but compensation and reward systems do not explicitly
reinforce them. If you don’t have measures in place or don’t know what we’re
talking about, one point.
How does the change effort connect to other major goings-on in context
of the organisation? (For example: Does it dovetail with a continuing total quality
management process? Does it fit with strategic actions such as acquisitions or
new product lines?) Trouble lies ahead for a change effort that is isolated or if
there are multiple change efforts whose relationships are not linked strategically.
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Assignment 2 – continued
Category
Processes/
functions
Competitor
benchmarking
Customer focus
Rewards
Organisational
structure
Communication
Organisational
hierarchy
Prior experience
with change
Morale
768
Score
Major changes almost invariably require redesigning business processes that cut
across functions such as purchasing, accounts payable, or marketing. If functional
executives are rigidly turf-conscious, change will be difficult. Give yourself more
points the more willing they – and the organisation as a whole – are to change
critical processes and sacrifice perks or power for the good of the group.
Whether you are a leader in your industry or a laggard, give yourself points for
a continuing programme that objectively compares your company’s performance
with that of competitors and systematically examines changes in your market.
Give yourself one point if knowledge of competitors’ abilities is primarily anecdotal
– what salesmen say at the bar.
The more everyone in the company is imbued with knowledge of customers,
the more likely that the organisation can agree to change to serve them better.
Three points if everyone in the workforce knows who his or her customers are,
knows their needs, and has had direct contact with them. Take away points if that
knowledge is confined to pockets of the organisation (sales and marketing, senior
executives).
Change is easier if managers and employees are rewarded for taking risks, being
innovative, and looking for new solutions. Team-based rewards are better than
rewards based solely on individual achievement. Reduce points if your company,
like most, rewards continuity over change. If managers become heroes for making
budgets, they won’t take risks even if you say you want them to. Also: If
employees believe failure will be punished, reduce points.
The best situation is a flexible organisation with little churn – that is,
reorganisations are rare and well received. Score yourself lower if you have
a rigid structure that has been unchanged for more than five years or has
undergone frequent reorganisation with little success; that may signal a cynical
company culture that fights change by waiting it out.
A company will adapt to change most readily if it has many means of two-way
communication that reach all levels of the organisation and that all employees use
and understand. If communications media are few, often trashed unread, and
almost exclusively one-way and top-down, change will be more difficult.
The fewer levels of hierarchy and the fewer employee grade hierarchy levels,
the more likely an effort to change will succeed. A thick impasto of middle
management and staff not only slows decision-making but also creates large
numbers of people with the power to block change.
Score three if the organisation has successfully implemented major changes in the
recent past. Score one if there is no prior experience with major change or if
change efforts failed or left a legacy of anger or resentment. Most companies will
score two, acknowledging equivocal success in previous attempts to change.
Change is easier if employees enjoy working in the organisation and the level of
individual responsibility is high. Signs of unreadiness to change: low team spirit,
little voluntary extra effort, and mistrust. Look for two types of mistrust: between
management and employees, and between or among departments.
CHAPTER 19
ORGANISATION CULTURE AND CHANGE
Category
Innovation
Decision-making
Score
Best situation: the company is always experimenting; new ideas are implemented
with seemingly little effort; employees work across internal boundaries without much
trouble. Bad signs: lots of red tape, multiple signoffs required before new ideas are
tried; employees must go through channels and are discouraged from working with
colleagues from other departments or divisions.
Rate yourself high if decisions are made quickly, taking into account a wide variety
of suggestions; it is clear where decisions are made. Give yourself a low grade if
decisions come slowly and are made by a mysterious ‘them’; there is a lot of conflict
during the process, and confusion and finger pointing after decisions are announced.
Total score
If your score is:
41–51: Implementing change is most likely to succeed. Focus resources on lagging factors (your ones and
twos) to accelerate the process.
28–40: Change is possible but may be difficult, especially if you have low scores in the first seven readiness
dimensions. Bring those up to speed before attempting to implement large-scale change.
17–27: Implementing change will be virtually impossible without a precipitating catastrophe. Focus instead
on (1) building change readiness in the dimensions above and (2) effecting change through skunkworks or
pilot programmes separate from the organisation at large.
After completing your total score, compare and discuss your response with those of your collegues.
Source: Stewart, T. A. ‘Rate Your Readiness to Change’, Fortune, 7 February 1994, pp. 63–4. Copyright © 1999 Time Inc. All rights
reserved. Reproduced with permission.
PERSONAL AWARENESS AND SKILLS EXERCISE
Objectives
Completing this exercise should help you to enhance the following skills:
■
Relate classifications of culture to different types of organisations.
■
Assess influences on the development of culture.
■
Evaluate the appropriateness of culture for specific organisations.
Exercise
Using the classifications of organisational culture proposed by Handy, and by Deal and Kennedy, you are
required to:
1 Compare and contrast influences on the development of culture in any two different types of organisations.
Your two organisations could be, for example:
private and public sector; for-profit and not-for-profit; service sector and manufacturing sector; production
and academic; private enterprise and one other different type.
2 Suggest, with supporting reasons, which of either the Handy or the Deal and Kennedy typologies you would
try to foster if you were appointed as a senior manager in any three of the following organisations:
– wheel-clamping contractor;
– research laboratory;
– naval submarine;
➔
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Personal awareness and skills exercise – continued
– private hospital;
– second-hand car business;
– high-fashion clothing store;
– fast-food chain;
– advertising agency.
Discussion
■
How important is organisational culture? How would you attempt to foster a change in the prevailing culture
of an organisation?
■
To what extent do textbook classifications aid our practical understanding and analysis of organisational
culture?
■
Should there be/is there a most ‘suitable’ culture for specific organisations?
CASE STUDY
The NHS Workforce Review Team (WRT) is a group of
dedicated health-care workforce planners who provide
objective modelling, analysis and evidence-based
recommendations in order to enable patient-centred
and clinically driven strategic decision-making across
the health-care workforce. WRT was established in 1999
by Dr Judy Curson, a medical doctor turned specialist in
workforce planning and staff development. Today, WRT
comprises an experienced team of analysts, data
modellers and professional health-care advisers.
In early 2007 it was clear that WRT would need to
relocate its main office within the following 12 to
24 months. Consequently, two conflicting needs
emerged: to improve the standard of the facilities
available to staff, and to maintain costs at an
appropriate and affordable level.
An important first step in planning and delivering
an office environment that allowed the team to perform
well but remain cost-effective was recognising some of
the key features of the organisation and its staff. The
culture of the organisation was characterised by a strong
belief in the values of public service combined with
a drive to be successful. It also had a reputation for
delivering projects effectively. It was crucial to maintain
flexibility both in organisational terms to allow
responsiveness to business needs, and on an individual
level within the team. It was also important to maintain
its reputation for efficiency.
770
Source: Courtesy of NHS Workforce Review Team (WRT)
Moving with the times
One team of professionals shows the way to make hot-desking really
work.
WRT in Winchester comprised 40–45 staff, with
four individuals located in a satellite office in Leeds
who were not directly affected by this relocation.
A significant proportion of the WRT team worked
part-time and/or were frequently out of the office for
business reasons. The total number of staff fluctuated
according to the demands of the business through
the use of a small pool of temporary workers. An early
list of essential needs in the new accommodation
included:
CHAPTER 19
■
■
■
■
approximately 45 desk units
three meeting rooms
accessibility via public transport
availability of staff parking.
However, it became clear that it would be costly to
lease an office that would provide all these features.
A more innovative approach was needed, so WRT gave
all staff the opportunity to put forward ideas and
suggestions. The relocation project group proposed
a solution which extended the use of open-plan office
space together with a hot-desking system for the
majority of staff. This would reduce both the number
of desks and the total floor space required, therefore
reducing the cost to an affordable level. Once it was
agreed that this would form the basis of the office
system, suitable premises were located and the final
selection was made by the senior management team
using a points system.
Implications of adopting a hot-desking system
The decision to move the whole team to hot-desking
could not be made in isolation. It was anticipated that it
would have a wide-ranging impact on most other office
systems. The WRT team as a whole recognised the
potential effect the physical work environment could
have on its effectiveness and cohesion. The diagram
below shows other working practices that had to be
developed either to support hot-desking directly or to
improve the team’s efficiency. The design of the new
working area provided 26 standard desk units for the
40–45 staff, situated in an open-plan office. To support
this area and necessary new working practices,
WRT planned the following additional facilities:
■
■
■
■
■
ORGANISATION CULTURE AND CHANGE
five small to medium-sized meeting rooms,
including one with soft seats intended for one-to-one
discussions, and two rooms with a moving divide
between them to extend the room when needed;
a central area where printers, fax, scanner and small
photocopier machines were located in an ‘S’-shaped
curve to serve all staff;
a bistro-style kitchen area with essential facilities and
seating for use during breaks;
a tea bar area of six to seven seats equipped with
power and telephone sockets as an overflow area for
busy days, intended for use by staff who are only in
the office for a short time or who were mainly in
scheduled meetings;
an enclosed bank of built-in, full-height storage
cupboards on one wall to provide a range of storage
options.
Follow me!
A key part of the success of hot-desking lay in ensuring
that the IT and telephone system could ‘follow’
an individual as they moved from one desk to another
and as they worked in the office or at home. This was
achieved relatively inexpensively as all staff were given
laptops. However it was essential that staff working
remotely could still access the main shared drive
because data and information cannot be carried out of
the office, for example on memory sticks, for reasons of
confidentiality and security.
The telephone system was adapted to allow
allocation of an extension number (rather than a
specific handset) to each individual. The software allows
staff to remain on the same extension number when
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working from home. On arrival at a desk the individual
logs into the telephone system and calls are routed to
that handset until they log out. All hot desks are
equipped identically with power and network points,
an adjustable mounted screen, keyboard and mouse.
The whole office area is covered by wireless access
allowing those temporarily working from the tea bar or
elsewhere full access to WRT systems and the internet.
reason and was not available electronically was archived
and kept in remote storage. A central resource centre of
key reference material was developed, and is maintained
in a designated part of the storage wall to provide
an up-to-date resource for the whole team. It includes
a single printed copy of many official publications,
articles and ‘grey’ literature not widely available
otherwise.
Where am I sitting today?
A total of six members of staff were allocated
permanent desks spaced throughout the open office
area. These were all administrative members of the
operations/business support team who are office-based.
Other team members, including senior management
and the WRT directors, are allocated a hot desk. After
considering other options such as a first come first
served system, it was decided that desks would be
allocated each day by a simple rota system scheduled
a week at a time by each member of the operations
team in turn. This system was felt to be fairer as it
would avoid small groups/teams colonising preferred
areas. It also ensured that staff who chose to start and
finish later under the existing flexitime system were not
disadvantaged.
Guidelines were drawn up requiring staff to move
around the office each day and not sit in the same place
throughout a working week. On the occasions when the
tea bar was needed as overflow space, staff members
with the most meetings in their diaries were allocated
the space. In practice this tends to mean that members
of the senior management team are most often
allocated this area, providing further high-level, visible
management support for the policy. The next day’s
seating allocation is displayed every afternoon.
But will I like it?
One of the challenges WRT faced in developing this
working practice was the doubt felt by some team
members prior to the changes; the loss of their ‘own’
desk and therefore their own personal space was one
such concern. These concerns had to be recognised and
addressed as far as possible as they had important
implications not only for individuals but for the
cohesiveness of the whole team.
In order to allay the concerns and provide an
overview of how the new office would function, a draft
office systems document was developed and circulated
to all staff giving them an opportunity to comment,
raise questions or make suggestions. Following this
consultation a final working draft was agreed that
formed the basis of the office systems in the period
immediately after the move. A comprehensive review
after three months in the new premises, involving all
team members, was also planned. The Leeds office
staff were involved in this process, as it was recognised
that the changes in the main office, and to IT systems,
could affect those working more remotely. It was felt
to be important that the Leeds staff should not be
alienated by the Winchester group’s preoccupation
with their approaching move and new working
practices.
Where’s my stuff?
One of the logistical challenges WRT faced in
introducing the hot-desking system was how to provide
storage for items such as working documents and
laptops (although staff members are encouraged to take
their laptops home). The solution was to provide a
plastic storage box with handles for each person – these
are stored in a section of the storage wall and have
become known as the ‘blue boxes’. They have the
capacity to store a laptop, a good number of files and
paperwork, and personal effects. To achieve this change
in working practices WRT undertook a comprehensive
review of all the material it held prior to moving and
dramatically reduced the volume of material held in
hard copy. Material that needed to be retained for any
How do I get to work?
The new office is located in central Winchester and has
only two parking spaces. It is, however, situated close to
a railway and bus station, and is within 30 minutes of
an airport. There are ‘park and ride’ sites around the city
and several car parks in close proximity. To encourage
other methods of travel, one of the two car parking
spaces was turned into a bicycle rack. The one
remaining car park space is allocated on a rota basis
to individuals travelling long distances. This rota is
done at the same time as the seating plan. The team’s
acceptance of this plan was influenced by the range of
travel options available and a perceived fairness and
flexibility in the allocation of parking spaces.
772
Source: The case study was provided by Donna and Chris of WRT.
CHAPTER 19
ORGANISATION CULTURE AND CHANGE
Your tasks
1 Review the case study organisation in the light of the ‘cultural web’ (Figure 19.1) and try to pick out examples
of each aspect.
2 Write a brief description of WRT’s culture based on your findings and show how the aspects fit together.
3 Summarise the evidence you can find in the case about the use of the managerial tools (recruitment and
selection, social tools and training, reward system) considered by Chatman and Cha.
4 Choose a model of change or change management from the chapter and use it to analyse the content of the
case. Write a short report explaining how the model can help managers to manage major workplace changes
such as this one.
Notes and references
1 French, W. L. and Bell, C. H. Organization Development:
Behavioral Science Interventions for Organization Improvement,
sixth edition, Prentice Hall (1999), pp. 25–6.
2 Ibid., p. 29.
3 Hamlin, B., Keep, J. and Ash, K. Organisational Change and
Development, Financial Times Prentice Hall (2001), p. 13.
4 Maier, D., Leban, B. and Orr-Alfeo, D. ‘A Values Statement
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6 Naylor, J. Management, second edition, Financial Times
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7 Woodall, J. ‘Managing Culture Change: Can It Ever Be
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8 See, for example, Smircich, L. ‘Concepts of Culture and
Organizational Analysis’, Administrative Science Quarterly,
vol. 28, 1983, pp. 339–58.
9 Atkinson, P. E. ‘Creating Cultural Change’, Management
Services, vol. 34, no. 7, 1990, pp. 6–10.
10 McLean, A. and Marshall, J. Intervening in Cultures, working
paper, University of Bath, 1993.
11 See, for example, Oswick, C., Lowe, S. and Jones, P.
‘Organisational Culture as Personality: Lessons from
Psychology?’, in Oswick, C. and Grant, D. (eds)
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12 Charters, J. ‘Are You a “Woodentop?”’, The British Journal of
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13 Cartwright, J. Cultural Transformation, Financial Times
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14 Schein, E. H. Organizational Culture and Leadership:
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16 Handy, C. B. Understanding Organizations, fourth edition,
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17 Deal, T. E. and Kennedy, A. A. Corporate Cultures: The Rites
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18 Deal, T. E. and Kennedy, A. A. The New Corporate Cultures,
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19 See, for example, Handy, C. B. Understanding Organizations,
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20 Kransdorff, A. ‘History – A Powerful Management Tool’,
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21 See, for example, Beckett-Hughes, M. ‘How to Integrate
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22 Roddick, A. Body and Soul, Ebury Press (1991); Roddick, A.
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23 Blackhurst, C. ‘Up Front at Pearson’, Management Today,
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24 Gerstner, L. V. Jr. Who Says Elephants Can’t Dance?: Inside
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26 Wilson, F. Organizational Behaviour and Work: A Critical
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27 ‘Effective Organisations: The People Factor’, Advisory
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28 Naylor, J. Management, second edition, Financial Times
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29 Oliver, J. ‘Losing Control’, Management Today, June 1998,
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30 Harrison, R. and Stokes, H. Diagnosing Organizational
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31 Reigle, R. F. ‘Measuring Organic and Mechanistic Cultures’,
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33 Egan, G. ‘Cultivate Your Culture’, Management Today, April
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35 Bunting, M. Willing Slaves, HarperCollins (2004), p. xxiii.
36 Meudell, K. and Gadd, K. ‘Culture and Climate in ShortLife Organizations: Sunny Spells or Thunderstorms?’,
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38 Goldsmith, W. and Clutterbuck, D. The Winning Streak
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39 Cummings, T. G. and Worley, C. G. Organization
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40 Chatman, J. A. and Cha, S. E. ‘Culture of Growth’, Mastering
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41 Stewart, R. The Reality of Management, third edition,
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42 Naylor, J. Management, second edition, Financial Times
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43 ‘Inspired Leadership: Insights Into People Who Inspire
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47 Cheng, T., Sculli, D. and Chan, F. ‘Relationship
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48 Francesco, A. M. and Gold, B. A. International Organizational
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50 Moran, E. T. and Volkwein, J. F. ‘The Cultural Approach
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51 Rentsch, J. R. ‘Climate and Culture: Interaction and
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54 Walton, R. E. ‘From Control to Commitment in the
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55 Altman, W., Cooper, C. and Garner, A. ‘New Deal Needed
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56 Galunic, C. and Weeks, J. ‘Survey – Mastering People
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57 Gratton, L. The Democratic Enterprise, Financial Times
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58 De Vita, E., ‘Get Engaged’, Management Today, April 2007,
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59 For a discussion of change in relation to the complexities
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60 Czerniawska, F. From Bottlenecks to BlackBerries: How the
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61 See, for example, Henderson, H. (Squadron Leader)
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62 Fenlon, M. ‘The Public Spirit’, Mastering Leadership,
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63 ‘Effective Organisations: The People Factor’, Advisory
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64 Lewin, K. Field Theory in Social Science, Harper and Row
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65 French, W. L., Kast, F. E. and Rosenzweig, J. E.
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66 ‘Management Futures: The World in 2018’, Chartered
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67 Gratton, L. Living Strategy: Putting People at the Heart of
Corporate Purpose, Financial Times Prentice Hall (2000),
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68 Lockhead, Sir M. ‘In My Opinion’, Management Today,
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69 Crainer, S. Key Management Ideas: Thinkers That Changed the
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70 Toffler, A. Future Shock, Pan Books (1970), p. 27.
71 Cunningham, I. ‘Influencing People’s Attitudes to Change’,
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72 Material in this section reproduced with kind permission
of Anne Riches, creator of The Almond Effect®. For further
information see www.AnneRiches.com.
73 Stewart, R. The Reality of Management, third edition,
Butterworth Heinemann (1999), p. 161.
74 Christensen, C. M. and Overdorf, M. ‘Meeting the
Challenge of Disruptive Change’, Harvard Business Review,
vol. 78, no. 2, March–April 2000, pp. 67–76.
75 See, for example, Covington, J. and Chase, M. L. ‘Eight
Steps to Sustainable Change’, Industrial Management,
vol. 14, no. 6, November/December 2002, pp. 8–11 and
‘Implementing an Effective Change Programme’,
Management Checklist 040, Chartered Management
Institute, July 2008.
76 Kotter, J. P. and Cohen, D. S. The Heart of Change, Harvard
Business School Press (2002).
77 Newton, R. Managing Change: Step by Step, Pearson Prentice
Hall (2007), p. 215.
78 Reis, D. and Pena, L. ‘Reengineering the Motivation to Work’,
Management Decision, vol. 39, no. 8, 2001, pp. 666–75.
79 Atkinson, P. ‘Managing Resistance to Change’, Management
Services, Spring 2005, p. 15.
80 Lucas, E. ‘Riding the Change Roller-Coaster’, Professional
Manager, September 2002, pp. 27–9.
81 Taylor, G. ‘Managing the Situational and Psychological
Pressures Brought About by Change’, Professional Manager,
vol. 16, no. 4, July 2007, p. 14.
82 Reeves, R. and Knell, J. ‘Your Mini MBA’, Management
Today, March 2009, pp. 60–4.
83 Stuart-Kotze, R. Performance: The Secrets of Successful
Behaviour, Financial Times Prentice Hall (2006),
pp. 17–28.
84 Tranfield, D. and Braganza, A. Business Leadership of
Technological Change: Five Key Challenges Facing CEOs,
Chartered Management Institute (2007).
85 Drucker, P. F. Management Challenges for the 21st Century,
Butterworth Heinemann (1999), p. 73.
Now that you have finished reading this chapter, visit MyManagementLab at
www.pearsoned.co.uk/mymanagementlab to find more learning resources
to help you make the most of your studies and get a better grade.
20
ORGANISATIONAL PERFORMANCE AND
EFFECTIVENESS
Upon the attainment of its aims and objectives rests the success
and ultimate survival of the organisation. Every work organisation
is concerned with being effective. There is, however, a multiplicity
of variables that impinge upon the overall performance and
success of the organisation. The people resource and quality of
management are central to the performance, development and
effectiveness of the organisation.
Learning outcomes
After completing this chapter you should be able to:
■
assess the nature of organisational effectiveness;
■
evaluate the benefits of the learning organisation;
■
debate the value of TQM and business process re-engineering;
■
explore the main features and requirements of the management
development process;
■
assess the contribution of the Excellence Model and of Investors in
People;
■
provide criteria for assessing organisational performance and
effectiveness;
■
review the future of management and the nature of successful
organisations.
Critical reflection
‘According to a senior researcher at the Work Foundation, there is no
incontrovertible evidence that links company well-being to increased
organisational performance.1 So presumably attempting to establish clear
links between the process of management and organisational effectiveness
is a waste of time.’
What is your response to this assertion? How would you describe
the relationship within your own organisation?