Walter A. Haas School of Business
University of California, Berkeley
UGBA105:
Organizational Behavior
Professor Jim Lincoln
Week 5: Lecture on
Organization Culture
• Last time: Leadership vision and charisma
as levers for change
• This week: Analyzing and managing
organizational culture
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Class business: Tuesday agenda
 Mary Kay video
 Body Shop case
– What is the culture of the Body Shop and where did it come from?
– How (and how effectively) did TBS manage its culture?
– Was the Body Shop’s penchant for modelling itself on the opposite
of standard cosmetic industry practice a matter of core values or
smart business strategy?
– Is the story of the Body Shop chiefly one of culture or one of
leadership?
Next Thursday: Review for Exam:
Come with questions!
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Congruence Model
Informal
Organization
Input
Output
Environment
Resources
Strategy
Formal
Organization
Tasks
Systems
Unit
History
Individual
People
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The nature of culture
Fuzzy, ephemeral, intuitive
• “No one can define the HP way. If it weren’t fuzzy,
it would be a rule” (HP Vice President)
– Emotional, charismatic, spiritual
• Takes “emotional intelligence” to navigate
– Holistic and enveloping
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The Berkeley Way
“It's invisible but omnipresent. Most know it exists but
few can actually define it. Newcomers are perplexed by it.
Confronting it head on can be dangerous.”
“The name of this nebulous creature? It's known on
campus as "The Berkeley Way" -- an unwritten code of
conduct that governs how people go about their business.”
The Berkeleyan, February 16, 2000
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Where did the concept of culture come from?
The critique of 1950’s corporate
culture: overconformity and
alienation
– William H. Whyte’s The
Organization Man
(Doubleday, 1956)
– The Man in the Gray Flannel Suit
(20th Century Fox, 1956)
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The new view of culture as an
organizational asset
Discovery of Japanese management in 80’s
– William Ouchi: Theory Z
(1981)
– Tom Peters and Robert
Waterman: In Search of
Excellence (1979)
– Richard Pascale and Anthony
Athos: The Art of Japanese
Management (1983)
– Ezra Vogel: Japan as No. 1
(1985)
– James Abegglen and George
Stalk: Kaisha (1985)
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What is culture?
• Shared values, norms, beliefs/understandings
– Values define what is important
– Norms define appropriate attitudes and behaviors
– Beliefs define reality
• Manifested in:
– Ritual, ceremony, tradition, language
– Folklore, heroes, legends, stories, songs
• Transmitted through:
– Informal networks
– Logos, slogans, PR, advertising, annual reports, websites
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The behavioral norms at P&G
Juelene Beck, who worked as P&G beverage
brand assistant from 1984 to 1986, says
supervisors once questioned whether a trendy
haircut and suit were "appropriate" for P&G.
During performance reviews, she says, she was
asked why she preferred sailing to socializing
with co-workers.
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How culture is manifested &
channeled: Heroes
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Ceremonies
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Contests, sports, recreational activities
13
Office parties
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Logos and symbols
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Language and jargon
• Southwest
– People Department
– Culture Committee
• Executive ranks at Chumbo Corp.
– Grand Pooh-Bah
– Web Goddess
– Director of Something
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Core values
Is making $ a value?
The culture paradox:
– An organization whose core values transcend making
money will make the most money
“Profits are to a corporation much like breathing is to
life. Breathing is not the goal of life, but without
breath, life ends. Similarly, without turning a profit,
a corporation, too, will cease to exist.”
Dennis Bakke, CEO, AES Corporation
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Examples of core values:
Southwest Airlines
Value 1: Work should be fun…it can be play…enjoy it
Value 2: Work is important…don’t spoil it with seriousness
Value 3: People are important…each one makes a difference.
It used to be a business conundrum: “Who comes first? The employees,
customers, or shareholders?” That’s never been an issue to me. The
employees come first. If they’re happy, satisfied, dedicated, and energetic,
they’ll take real good care of the customers. When the customers are happy,
they come back. And that make the shareholders happy.”
Herb Kelleher
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Saturn: “Putting people first”
“Saturn was created with one simple idea: to
put people first. (Its) mission (is) to create a
different kind of car company — one
dedicated to finding new ways for people to
work together to design, build and sell cars”
Saturn website
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“Respect the divine
and respect people”
“Our goal is to strive toward both the material and spiritual fulfillment
of all employees… and through this … fulfillment, serve mankind in its
progress and prosperity.
We are scientists directing our efforts toward perfecting
technology. But we must not forget that complete process of living
requires devotion to humanity as well as to science, to the emotional as
with the rational, and to love equally with reason.
Just as a family unites in a common bond of support and affection,
let us all unite in a bond of love and respect.”
Do spirituality and emotionality have a place American management?
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More core values
• Customer service (IBM, Nordstrom)
• Innovation, creativity (3M, Intel, HP)
• Competitiveness, aggressiveness
(GE, Motorola, Pepsi)
• Social responsibility (Ben and Jerry’s; BP?)
Levi’s; The Body Shop; Mary Kay
Cosmetics, Working Assets)
• Quality (Toyota; Ford?)
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Strong and weak cultures
– Strong: Consistent, persistent, intense, shared,
crystallized, consensual, consequential
– Weak: Vague, fragmented, inconsistent,
transitory, politicized, conflictual
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Strong culture companies as cults,
tribes, and churches
“What do the Branch Davidians and Microsoft have in
common? Give up? Both organizations are cults. In
both, the members are cut off from the real world
and are obsessed with achieving the mission of their
leaders. For the Davidians, it was the charismatic
David Koresh; for Microsoft, it's the world's richest
man, Bill Gates.
Corporate Cults: The Insidious Lure of the
All-Consuming Organization by David Arnott
(NY: AMACOM, 2000).
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Apple as tribe
“Apple is a lot like a tribe, with folklore handed down
from generation to generation. The question is how
can we channel it? We are trying to shift away from
folk heroes and individualism in the organization, but
we have selected people for this in the past, and we
don’t punish that kind of behavior.
--Apple executive
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The church of
"IBM, more than any other big company, has
institutionalized its beliefs the way a church does.
They are expounded in numerous IBM internal
publications to ensure that employees know what's
expected of them. And they are reflected in codes of
behavior…(S)alespersons wear dark business suits
and white shirts.
....the result is a company filled with ardent
believers.. The IBM culture is so pervasive
that, as one nine-year former employee put
it, “leaving the company is like emigrating."
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Dimensions of culture strength
Sharing
Intensity
Complacent
“country club”
culture
Strong, organizationwide culture
Absence of culture
(anomie)
Subcultures
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Subcultures
• Around departments, occupations,
divisions, demographics
• Source of in-group cohesion, out-group
competition, conflict, and politics
• Is the overall organization culture strong
enough to subsume subcultures?
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What does strong culture do?
•
•
•
•
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General
Manager
Engineering
Manufacturing
Marketing
Product A Culture
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How does it help the bottom line?
• Lower cost
– Fewer formal control systems
• Better quality/productivity/customer service
• Culture as branding
“Ben and Jerry’s unconventional, anti-big-business values
..emerged as the company’s biggest brand asset”
Workforce Management, April 26, 2005
• Culture as sustainable competitive advantage
– Hard-to-imitate capabilities
• "The ExxonMobil culture is something that a lot of people would like
to understand better. I'm not really going to help them understand it,
because it's the source of our competitive advantage.“ Exxon Mobil
CEO Rex Tillerson as quoted by CNNMoney, 4/3, 2006
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What are the downsides
to strong culture?
•
•
•
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SAS Institute
“Some call James Goodnight’s SAS Institute “the
Stepford software company” after the movie The
Stepford Wives. In the movie people were almost
robotlike in their behavior, apparently under the
control of some outside force. The place can come
across as being a bit too perfect, as if working there
might mean surrendering some of your personality.”
O’Reilly and Pfeffer: Hidden Value.
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Strong culture breeds
homogeneity at P&G
Few corporate cultures are as dominant as the "Procter
Way." "It's such a strong culture, they really want
sameness," says Ms. Beck, who later worked as a brand
manager for Dunkin Donuts and as a vice president for
Burger King. "The way women think and the way we do
business has some inherently different qualities to it," Ms.
Beck says. "In retrospect, there was a gender aspect to
[P&G's culture] that was not intentional, but was very, very
real.“
WSJ, 9/9/98
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“…at one point product
features became the
religion, not the
vision. This drove
prices up and closed
out individuals (as
customers).
--Apple executive
35
Enron’s “culture of corruption” or
the absence of culture?
The management’s aims.. were to minimise
taxes, maximise apparent profits and, in some
cases, to line their own pockets. The directors'
report was described by Senator Byron Dorgan,
who is leading another investigation into the
company’s collapse, as “devastating”, adding that
“this is almost a culture of corporate
corruption.”
--The Economist, 2/12/02
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Managing & changing culture: Step I: Study it
• Be culturally savvy (vs. clueless): pay attention
• Do a culture audit:
– Find key informants
• oral histories with tribal elders
• map genealogies
• learn folklore
– Be a “fly on the wall”
• Ethnography & participant observation
– Study texts
• Annual reports, websites, advertising
– Do value surveys
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Step II: understand its causes
• Leader/founder
– Family ownership (Ford)
• Long history
– Railroads, P&G (founded 1837), Levi Strauss (founded 1873)
• Society
– Asia/Europe
• Region
– Northern California/Manhattan/South
– Small town vs. big city
• Amana, Cummins, Corning, Chase, Citibank
• Product
– Apple, Coke
• Industry
– High tech/petroleum/investment banking
• Structure
– Functional/divisional/process
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“Wal-Mart is
Ozark culture writ large”
Wal-Mart's culture is a "macrocosm" of the brutal hillcountry society now exported to the world. Early WalMart management was not that far removed from being
Ozark farmers themselves. They treated the women
and other employees the way they treated their own
wives and others under their influence.
New York Review of Books, April 28, 2005
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Where do Honda and Toyota’s cultures come from?
Honda executives say Toyota..will have difficulty emulating
Honda's unique culture. "All Toyota is doing is aping us and
letting their money talk," says Ken Hashimoto, a senior Honda
R&D executive.
(But) Toyota, in spite of its often-ridiculed "country boy" image,
has been proving that it can successfully woo young car buyers,
thanks to designers such as Takao Minai. Mr. Minai languished
for a long time in Toyota's hierarchical culture but had a
sudden leap in responsibilities two years ago. (T)he ponytailed
36-year-old amateur video jockey took charge of developing a
dream car for male twentysomethings.
Wall Street Journal 9/21, 2000
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Apple’s product-driven culture
“Here’s the most interesting thing about
our culture-- we are what we make.
I’ve never seen an organization where
the personality of the organization is so
intertwined with the personality of the
product--individualistic, pure,
uncompromised, ahead of everyone
else, so elegant it can’t fail. We are the
Macintosh here.”
Apple Marketing Manager
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Step III: Align/realign the
organization
– Find visionary, charismatic, committed leadership
– Change people
– Change the formal organization
• Structure
• Measurement and incentive systems
– Change the informal organization
• Build cohesive networks
• Stop politics
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Aligning people
• Selection and socialization (buy or make)
• First, selection:
– Select for fit or “misfit” to the culture
• Intensive screening
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Selection at Microsoft
In 1999, the average age of the more than
31,000 Microsoft employees was only 34,
and raw intelligence matters more than
judgment or experience in determining who
gets hired. Craig Mundie, senior vice
president for consumer strategy, described
Microsoft "as a company full of a lot of
high IQ people who have relatively no
experience."
44
Selection at Apple
Sculley came to a company renowned for its exciting
and countercultural work environment, where employees
often wore T-shirts that proclaimed “working 90 hours a
week and loving it.”
Sculley described Apple as “the Ellis Island of American
business because it intentionally attracted the dissidents
who wouldn’t fit into corporate America.”
Harvard Business School Press
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Selecting for “bad fit” at HP
(Wall Street Journal interview with
former CEO Lew Platt)
WSJ: Did you feel constrained running a company that had legendary
founders and a culture enshrined in a book?
Platt: A little bit. There were certain constraints. There were certain
traditions they wanted upheld.
WSJ: Give me an example.
Platt: They were very conservative -- heavy investment in R&D, little
debt. I was asked not to question those things.
WSJ: Ms. Fiorina is a woman, a nonengineer and an outsider -- all firsts
for H-P. What should we read into that?
Platt: They wanted someone who could bring change, someone with a
higher visibility. Most H-P people are pretty low-key. David
[Packard] and Bill [Hewlett] were that way. I'm that way. Carly
comes in without some of those constraints. She will question some of
the thinking that I, as a 33-year employee, couldn't.
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Aligning people
• Socialization
–
–
–
–
–
Focus on firm-specific values and tacit skills
Invest heavily in training, including OJT
Mentoring
Participation
Rites of passage
• “Humiliating-inducing experiences”
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Selection and socialization at P&G
Job candidates must pass a battery of tests
measuring aptitude and leadership skills. Once
hired, employees are schooled in all things
Procter, even attending training seminars known
as P&G College.
48
Hell Camp: Extreme resocialization
“Founded nine years ago in the foothills of Mt.
Fuji, Hell Camp claims to have subjected some
100,000 Japanese salarymen to 13 days of speed
drills, speechifying and hazing rituals. Its main
message-- “100 liters of sweat; 100 liters of tears”
was designed to counteract a growing fear among
Japan’s corporate and government elite that the
nation’s
workers
are
becoming
too
“Americanized”, too soft. The school’s solution,
for nearly $3000 a pop: to crush the individual
ego with mindless and humiliating exercises
and then rebuild it with a modern version of
the Samurai code of selfless servitude called
bushido.”
“Japanese-style camp for managers is lost in translation in
U. S.: Hazing rituals and obeisance don’t make it in
Malibu even among freeloaders. WSJ, March 1, 1988.
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(Re)Align the formal organization
– Structure
• From divisional to functional (HP)
• From functional to divisional (Ford)
– Systems
• Accounting/information
• Compensation
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Carly Fiorina’s failed effort to
change HP’s culture with a re-org
She launched a plan to consolidate H-P's 83
businesses into only 12. Executives fretted that
managers wouldn't wield "real" authority if they
couldn't control both product development and
marketing. "It took .. the glory.. out of the job," says
Mr. Perez, the departed executive.
Consternation rippled through the ranks.
Managers who had long aspired to run their own
autonomous units, known as P&Ls, short for
profit & loss, suddenly saw most of those jobs
disappear.
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CEO Jacques Nasser’s failed effort to
change Ford’s culture with a re-org
Since the hard-charging 51-year-old executive
took over in January (1999) Nasser has
declared war on Ford's stodgy, overly
analytic culture.
In its place, he envisions a company in which
executives run independent units--cut loose
from a stifling bureaucracy and held far more
accountable for success and failure.
52
Aligning rewards at Cisco
“Chambers is adamant about rewards being tied
to customer satisfaction. He ties the
compensation of all managers to measures of
customer satisfaction– really listening to the
customer. “We are the only company of
anywhere near this size that does it.”
O’Reilly and Pfeffer: Hidden Value
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Culture takeaways
• Culture is an extremely powerful force in
every organization
– It can lead to either success or to failure
• Culture may be “soft” but it can be managed
and changed
– It does take time, commitment, and consistency
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