BA105:
Organizational Behavior
Professor Jim Lincoln
Week 6: Lecture
• Last time: Leadership vision and charisma
as OB levers for change
• This week: Analyzing and managing
organizational culture
2
Class business: exams next week
• Essay (Tuesday, March 1)
– You will analyze a case (announced Thursday)
that deals with structure, culture, and leadership
• One or more exam questions will guide your
analysis
– See p. 2 in the syllabus on how the exam will
be evaluated.
– A model exam will be put on the website
• I will hold extended office hours this
Thursday (3:30-5:30)
3
Class business: Thursday 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?
• Review for exam: come with questions
4
Congruence Model
Informal
Organization
Input
(Culture, leadership,
networks, politics)
Environment
(Competition,
change)
Resources
(munificence)
History (age,
conditions at
founding)
Strategy
(diversification;
innovation)
Formal
Organization
Output
(job titles,
departments,
reporting hierarchy,
IT & HR systems
Systems
Tasks
(technologies,
work flows)
Unit
Individual
People
(ability, skills,
motivation,
biases)
5
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
6
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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What is culture?
• Shared values, norms, beliefs/understandings
– Manifested in:
• Ritual, ceremony, tradition, language (jargon)
• Folklore, heroes, legends, stories, songs
– Channeled through:
• Informal networks
• Logos, slogans, PR, advertising, annual reports, websites
8
Where did the concept of
organization culture come from?
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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How culture is manifested &
channeled: Heroes
10
Ceremonies
11
Contests, sports, recreational
activities
12
Office parties
13
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
15
Peoplesoft’s people-obsessed lingo
Even by the standards of Silicon Valley, PeopleSoft is
famous for an aggressively informal and sensitive
corporate culture. Its staff routinely worked 70-hour weeks,
but for more than the stock options. There was a payoff in
PeopleSoft's in-house jokes and clubby code words -- in
company lingo, employees are "PeoplePeople," they feast on
company-funded "PeopleSnacks," (bought at the
“Peoplestore”), which causes them to gain "PeoplePounds."
Employees gave birth to "PeopleBabies."
WSJ May 5, 1999
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Chorus from the IBM Rally Song:
“EVER ONWARD”
EVER ONWARD – EVER ONWARD
That’s the spirit that has brought us fame
We’re big but bigger we will be,
We can’t fail for all can see
That to serve humanity has been our aim!
Our products now are known in every zone,
Our reputation sparkles like a gem!
We’ve fought our way through- and new
Fields we’re sure to conquer, too
For the EVER ONWARD IBM
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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. With the mission to create a different kind of
car company — one dedicated to finding new ways for
people to work together to design, build and sell cars —
Saturn has earned a reputation for superior customer
satisfaction.”
Saturn website
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Other core organizational values
• Customer service (IBM, Nordstrom)
• Innovation, creativity (3M, Intel, HP)
• Competitiveness, aggressiveness (GE,
Motorola, Pepsi)
• Social responsibility (Ben and Jerry’s;
Levi’s; The Body Shop; Working Assets)
• Quality (Japanese companies; Ford?)
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“Respect the divine and respect
people”
“Our goal is to strive toward both the material and
spiritual fulfillment of all employees in the Company, and
through this successful fulfillment, serve mankind in its
progress and prosperity.
We are scientists constantly directing our efforts toward
perfecting our technology. But we must not forget that
complete process of living requires devotion to humanity as
well as to science, to the emotional as with the rational, and
to love equally with reason.
Just as a family unites in a common bond of support
and affection, let us all unite in a bond of love and respect.”
21
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
22
Strong vs. weak cultures
– Strong: Consistent, persistent, intense, shared,
crystallized, consensual, consequential
– Weak: Vague, fragmented, inconsistent,
transitory, politicized, conflictual
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Dimensions of culture strength
Sharing
Intensity
Complacent
“country club”
culture
Strong, organizationwide culture
Absence of culture
(anomie)
Subcultures
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Subcultures
• Around departments, occupations,
divisions, demographics
• Source of in-group cohesion, out-group
competition, conflict, and politics
• Is the overall organization culture strong
enough to subsume subcultures?
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Strong culture companies as cults,
tribes, cloisters, churches, the military
What do the Branch Davidians and Microsoft have
in common? Give up? Both organizations are
cults. No joke. The only difference is one is
religious (Davidians), while the other (Microsoft)
is corporate. So says David Arnott, author of
Corporate Cults: The Insidious Lure of the AllConsuming Organization (AMACOM).
Both are classified as cults because the members
of these organizations are cut off from the real
world and are obsessed with achieving the
mission of their leaders. For the Davidians, it
was the charismatic David Koresh; for Microsoft,
it's the world's richest man, Bill Gates.
27
Bob Weinstein, March 5, 2000
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
28
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; that's no longer a strict regulation
but most IBM salesmen continue to dress that way
....the result is a company filled with ardent
believers..
The IBM culture is so pervasive that, as one nineyear former employee put it, “leaving the
company is like emigrating."
29
What does culture do for an
organization? It provides:
•
•
•
•
Motivation and commitment
Vision and direction
Coordination and alignment
Ease of communication
30
Culture aligns and coordinates
General
Manager
Engineering
Manufacturing
Marketing
Product A Culture
31
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
32
Does culture help the bottom line?
• Lower cost
– Fewer formal control systems
• Better quality/productivity/customer service
• Culture as branding
– Apple, Southwest, Saturn, Japanese firms
• Culture as sustainable competitive
advantage
– Hard-to-imitate capabilities
33
Culture as Honda’s competitive advantage and
Toyota’s competitive disadvantage
Honda executives say Toyota's aggressive moves don't
concern them, arguing that their giant rival will have
difficulty emulating Honda's unique culture. "All Toyota is
doing is aping us and letting their money talk," says Ken
Hashimoto, a senior Honda R&D executive.
Some of Honda's fears are already playing out. Toyota, in spite
of its often-ridiculed "country boy" image, has been proving
that it can successfully woo young car buyers, thanks to
designers such as Takao Minai. Mr. Minai languished for a
long time in Toyota's hierarchical culture but had a sudden
leap in responsibilities two years ago. Under Mr. Okuda's
guidance, the ponytailed 36-year-old amateur video jockey took
charge of developing a dream car for male twentysomethings.
34
Are there downsides to strong culture?
•
•
•
•
•
•
•
Rigidity/inertia
Homogeneity
Overconformity
Narrowness/intolerance/xenophobia
Extremism/obsessiveness
Provincialism/insularity
Goal displacement; ends-means inversion
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SAS Institute
“Some people say that SAS Institute reeks of paternalism or a
plantation mentality in a world otherwise dominated by
marketlike labor market transactions. For instance, an article in
Forbes stated, “More than one observer calls James Goodnight’s
SAS Institute, Inc., “the Stepford software company” after the
movie The Stepford Wives. In the movie people were almost
robotlike in their behavior, apparently under the control of some
outside force. Another article noted “The place can come across
as being a bit too perfect, as if working there might mean
surrendering some of your personality.”
O’Reilly and Pfeffer: Hidden Value.
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Strong culture leads to
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
37
“…at one point product
features became the
religion, not the
vision. This drove
prices up and closed
out individuals (as
customers).
--Apple executive
38
Enron’s “culture of corruption” or
the absence of culture?
The report (by three Enron non-executive
directors) into the collapse of Enron, once one of
America's top ten public companies, confirmed
outsiders' suspicions about how badly the firm was
run. The management’s aims, the directors
concluded, were to minimise taxes, maximise
apparent profits and, in some cases, to line their
own pockets. The directors' report was described
by Senator Byron Dorgan, who is leading another
investigation into the company’s collapse, as
“devastating”, adding that “this is almost a
culture of corporate corruption.”
--The Economist, 2/12/02
39
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)
40
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
41
Step II: understand its causes
• Leader/founder
– Family ownership
• Long history
– P&G
• Society
– Asia/Europe
• Region
– Northern California/Manhattan/South
– Small town vs. big city
• Amana, Cummins, Corning, Chase, Citibank
• Product
– Apple, Coke
• Industry
– High tech/railroads/investment banking
• Structure
– Functional/divisional/process
42
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
43
Aligning people
• Selection and socialization (buy or make)
• First, selection:
– Select for fit or “misfit” to the culture
• Intensive screening
44
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."
45
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
46
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”
48
Selection and socialization at P&G
Job candidates must pass a battery of tests measuring
aptitude and leadership skills. Once hired, employees are
schooled in all things Procter, even attending training
seminars known as P&G College. Memos, written in a
distinct P&G style, are valued over meetings. Employees
are expected to have facts and data at their fingertips -opinions and intuition are frowned upon.
Juelene Beck, who worked as P&G beverage brand
assistant from 1984 to 1986, says supervisors once
questioned whether a trendy haircut and suit were
"appropriate" for P&G. During performance reviews, she
says, she was asked why she preferred sailing to
socializing with co-workers.
49
Hell Camp: Extreme resocialization
“Founded nine years ago in the foothills of Mt.
Fuji, Hell Camp claims to have subjected some
100,000 Japanese salarymen to 13 days of speed
drills, speechifying and hazing rituals. Its main
message-- “100 liters of sweat; 100 liters of tears”
was designed to counteract a growing fear among
Japan’s corporate and government elite that the
nation’s
workers
are
becoming
too
“Americanized”, too soft. The school’s solution,
for nearly $3000 a pop: to crush the individual
ego with mindless and humiliating exercises
and then rebuild it with a modern version of
the Samurai code of selfless servitude called
bushido.”
“Japanese-style camp for managers is lost in translation in
U. S.: Hazing rituals and obeisance don’t make it in
Malibu even among freeloaders. WSJ, March 1, 1988.
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(Re)Align the organization
– Structure
• From divisional to functional (HP)
• From functional to divisional (Ford)
51
Carly Fiorina’s failed effort to
change HP’s culture with a reorg
Most dramatically, she launched a plan to consolidate H-P's 83
businesses into only 12. She also aligned the reduced number of
divisions into two "front-end" groups that would focus on customer
activities, such as marketing and sales, and two "back-end" organizations
devoted strictly to designing and making computer and printer products.
Old-time H-P executives were shocked. "I was a deer caught in the
headlights when she described the front and back end," says Carolyn
Ticknor, who now presides over the merged printer unit.
Some 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.
52
WSJ, 8/22/2000
CEO Jacques Nasser’s failed effort to
change Ford’s culture with a reorg
Since the hard-charging 51-year-old executive took over in January
(1999), he has picked up the whole organization by the lapels and
shaken it. His goal? To reinvent the 96-year-old industrial giant as a
nimble, growth-oriented consumer powerhouse for the 21st century,
when a handful of auto giants will battle across the globe.
That's why Nasser has declared war on Ford's stodgy, overly
analytic culture. In its place, he envisions a company in which
executives run independent units--cut loose from a stifling bureaucracy
and held far more accountable for success and failure. And with a
consumer focus at the heart of his retooled Ford, he's banking on a
future in which designers, engineers, and marketers someday will do a
far better job of anticipating the wants and needs of car buyers.
53
(Re)align the organization
– HR systems
• Long-term employment
• Job rotation
• Compensation design
– Reward group & long-term performance
– Reward conformity with core values
» Innovators head new product divisions at 3M and HP
– Maintain fairness and equity
54
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
55
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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