2.5. Organisational (corporate) culture (HL only)

Organizational Culture

A relatively straightforward definition of organisational culture is one proposed by Hellreigel et al, (1992) who defines it as the philosophies, ideologies, values, beliefs, assumptions, expectations, attitudes and norms shared by the members of an organisation. It includes the following dimensions:

• Observed behaviour when people interact and the language commonly used
• The norms shared by working groups throughout the organisation
• The dominant values held by an organisation, such as product quality or price leadership
• The philosophy that guides an organisation’s policy towards employees and customers
• The rules that a newcomer must learn in order to become an accepted member
• The feeling or climate conveyed in an organisation by the physical layout and the way in which its members interact with customers or other outsiders.

Examples of the six dimensions of company culture

• Observable patterns of behaviour: calling employees by their surname, casual dress, wearing a formal suit, trousers not allowed for women
• Norms or standards: making decisions in teams, regular decision meetings, work late to finish a job
• Main values: quality, excellence, speed of delivery
• Philosophy: environmentally friendly, customers always right, wide range of products/services
• Rules: never leaving the office unattended, specified tea breaks, attendance at social events
• Feeling or climate: friendly or distant, relaxed or stressful, creative or oppressive

None of these dimensions alone represent the culture of an organisation but taken together they help to understand the meaning of the concept of organisational culture.

Task 2: Briefly describe Hofstede's dimensions of national culture. See https://geert-hofstede.com/national-culture.html

Characteristics of organisational culture

Williams et al. (1989) have identified six elements that characterise organisational culture. Culture is:

• Learnt
• Both an input and output
• Is partly unconscious
• Historically based
• Held rather than shared
• Heterogeneous

• Culture is learnt

Individual beliefs, attitudes and values are gained from the individual’s environment. Culture can therefore be seen to be gained from the environment which is common to all its members, both internal and external environments.

• Culture is both an input and an output

This simply means that the culture people learn (input) affects the way in the future (output). The strategies, structures, procedures and behaviour adapted by management affects the work environment of the future. In other words, people create a culture by their actions, the way they behave etc and this culture in turn affects how they behave in future. Culture is therefore highly resistant to change.

• Culture is partly unconscious

Commonly held beliefs of individuals in organisations may exist at an unconscious level. This may occur because conscious beliefs and underlying attitudes become so commonplace that they are taken for granted and so become the norm over time, and members unconsciously process information that influences the way they think.

• Culture is historically based

Organisations are developed from the original assumptions, strategies and structures made by their founders. Once the organisation has made a strategic decision, this limits the degree of freedom for succeeding generations.

• Culture is commonly held attitudes and values

A key feature of culture in organisations and society is that mostly it is shared. This may sound odd but generally individuals discuss and reach a consensus on how to think and behave in a given situation i.e. they agree to hold common values. This common thought and behaviour results from common learning, common history and experience and a common environment.

• Culture is heterogeneous

In practice, organisational cultures are not likely to be completely homogenous. Most organisations are characterised by sub-cultures which form around different roles, functions and levels. Most organisations generally comprise an executive culture with a common perspective and belief about strategic decision, a management culture focusing upon managing and resourcing, and a blue collar culture focusing on production.

Sub-cultures of greater or lesser significance exist in any culture. These sub-cultures can often be beneficial if they instil a sense of common purpose and identity within a given department. Equally though, they can be highly detrimental if they limit coordination or cause conflict across the organisation.

Handy's Culture Types

One way of comparing and contrasting cultures was suggested in the work of Charles Handy (1976) who developed a typology of common culture types. He identified four theoretical cultural types as follows: power, role, task and people, represented diagrammatically below.

Power Orientation

This type of organisation attempts to dominate its environment, and those who are powerful within this organisation strive to maintain absolute control over subordinates. Work is divided by function or product and the organisation structure tends towards the traditional framework, presented as a web structure.

The functions or departments are represented by lines radiating out from the centre, but the essential feature is that there are also concentric lines representing communications and power. The further away from the centre, the weaker the degree of power and influence. This structure is dominated from the centre and therefore is typical of small entrepreneurial organisations. Decisions can be taken quickly but the quality of the decision depends to a large extent upon the ability of managers in the inner circle who in turn, are dependent upon their affinity and trust, both within suppliers, customers and other key influencers. Employees are rewarded for effort, success and compliance with essential values. Change is very much determined by the central power source.

This type of culture places a lot of faith in the individual but this organisation operates with apparent disregard for human values and general welfare, and is highly competitive. It is often seen as tough or abusive, but may well suffer from low morale and high turnover in the middle layers as individuals fail or opt out of the competitive environment.

Power cultures are usually found in family run businesses, small companies with a dominant manager and entrepreneurial ventures.

Role Orientation

An organisation that is role-oriented aspires to be as rational and orderly as possible. In contrast with the wilful autocracy of the power culture, there is preoccupation with legitimacy, loyalty and responsibility as the culture is built around defined jobs, rules and procedures generally, described as a bureaucracy. People fit into jobs and are recruited for this purpose, hence rationality and logic are at the heart of the culture which is designed to be stable and predictable.

This culture is represented by the greater temple design since the strengths of the organisation are designated to be in the pillars which are coordinated.

However, although the strength of the organisation is in the pillars, power lies at the top. There is a strong emphasis upon hierarchy and status with rights and privileges defined and adhered to. This culture is most often found in semi-state organisations and the civil service.

There are several strengths. As well as being designed for stability, the structure also allows for continuity and change of personnel, thus dramatic changes are less likely than more gradual ones. Conflict is regulated by rules and procedures, predictability is high and stability and respectability are valued almost as much as competence.

High efficiency is possible in stable environments but Handy states that this structure is less suitable for dynamic environments or situations. A weakness is that communication goes up and down the structure but is less likely across the structure between departments or sections. Another possible weakness is that decisions are made at the top which may mean that leader satisfaction is high but that people lower down the hierarchy may feel frustrated and lacking in status.

Task orientation

In such organisations, functions and activities are all evaluated in terms of their contribution to organisational goals. Management in the task culture is concerned with the continuous and successful solution of problems, and performance is judged by the success of task outcomes. The culture is depicted as a net because, for particular problem situations, people and other resources can be drawn from various parts of the organisation on a temporary basis.

Once the problem is dealt with, individuals will move on to different tasks and, as a consequence, discontinuity is a key element.

The attainment of goals is the persuasive ideology in task-oriented organisations. Nothing is allowed to get in the way of task achievement. If individuals do not possess the necessary technical skills or knowledge, they are retrained or replaced. Emphasis is placed on a rapid and flexible organisation, hence project groups and collaboration between groups is commonplace. Expertise is the major source of individual power and authority, and will determine an individual’s relative power in a given situation.

This culture is extremely adaptable and individuals retain a high degree of control over their work. It is successful in highly volatile or ever-changing environments.

One overriding feature of this culture is its cost to the organisation. Due to its reliance on meetings and discussion, experimentation and learning by trial, it is highly expensive to introduce and maintain over extended periods of time.

Person Orientation

This type of culture differs completely from the other three, since the organisation in this instance exists primarily to serve the needs of its members.

The organisation provides a service for individual specialists which they could not provide for themselves. Authority in the environment sense is redundant although, where necessary, it may be assigned on the basis of task competency, but this practice is kept to a minimum.

Instead of formalised authority, individuals are expected to influence each other through example and helplessness. Consensus methods of decision-making are preferred as the figure illustrates, and roles are assigned on the basis of personal preferences and the need for learning and growth.

Individuals in this orientation are not easy to manage as there is little influence that can be brought to bear on them; being professionals, alternative employment is often all too easy to obtain. The psychological contract thus stipulates that the organisation is subordinate to the individuals and depends on the individual for its existence.

Clearly, many organisations cannot exist with this kind of culture since organisations tend to have objectives over and above the collective objectives of those who comprise them. This culture is often found in clubs, societies, professional bodies and small consultancies.

Task 4: Question on comparing and contrasting cultures

The unique culture that occurs within an organisation is determined by a wide range of factors including, for instance, the size, structure and nature of an organisation's business. The three different types of organisation listed below are each likely to exhibit a different cultural type:

1. E Company is a small entrepreneurial organisation run by an owner-manager.
2. F Company is a large bureaucratic organisation, structured by function.
3. G Company is a project-based organisation

Compare and contrast the types of culture that are most likely to be evident in each of the three companies.

Task 5: Question on role culture and changing organisational culture

S Company has for many years been a long standing household name, designing and manufacturing electrical appliances for use in the kitchen. It has developed a strong culture over the years which can be best typified as a role culture. However, this culture is now acting as a barrier to the company’s ability to adapt to become more flexible so that it is able to respond quickly to changes in the environment and initiatives taken by its competitors in product design.

In particular, the company is falling behind its new competitors when it comes to innovations in new product development and design. Effective new product development requires staff to work together across functional boundaries but this is becoming hard to achieve in S Company where people now fiercely protect their functional specialism and will only work on the tasks specified in their job descriptions.

Describe the key characteristics of a role culture, explaining why this type of culture is no longer appropriate for S Company

Recommend, with reasons, the type of culture to which S Company now needs to change

Types of organisational culture: Cameron & Quinn

According to Robert E. Quinn and Kim S. Cameron at the University of Michigan at Ann Arbor, there are four types of organizational culture: Clan, Adhocracy, Market, and Hierarchy.

There’s no correct organizational culture for an arts organization. All cultures promote some forms of behaviour, and inhibit others. Some are well suited to rapid and repeated change, others to slow incremental development of the institution.

For example, Quinn and Cameron associate the lower two cultures (Hierarchy and Market) with a principal focus on stability and the upper two (Clan and Adhocracy) with flexibility and adaptability. A Hierarchy culture based on control will lead mainly to incremental change, while a focus on Adhocracy will more typically lead to breakthrough change. The right culture will be one that closely fits the direction and strategy of a particular organization as it confronts its own issues and the challenges of a particular time.

Culture Clashes

Culture clash: Occurs when there is conflict between two or more cultures within an organisation. This may exist when there is a merger or acquisition and two firms are required to integrate, each with their own unique corporate culture.

Culture gap: The difference between the existing culture of an organisation and its desired culture. Management will use different strategies to reduce this gap.

See - https://research.wpcarey.asu.edu/culture-clash-when-corporate-culture-fights-strategy-it-can-cost-you/

Consequences of Culture Clashes:

Many businesses have turned themselves around, converting potential bankruptcy into commercial success. Very often this transformation has been achieved by changing the culture of the business. The existing culture of a business can become inappropriate and clash with new objectives needed to achieve growth, development and success.

For example:

• A product-led business needs to respond to changing market conditions by encouraging more staff involvement. A team or task culture may need to be adopted.
• A merger or takeover may result in one of the businesses having to adapt its culture to ensure consistency within the newly created larger business unit.
• Declining profits and market share may be the consequence of poorly motivated staff and a lack of interest in quality and customer service. A person culture may help to transform the prospects of this business.

Task 8: Assess the commonalities as to why these 6 mergers failed

Source: https://resources.globoforce.com/globoforce-blog/6-big-mergers-that-were-killed-by-culture-and-how-to-stop-it-from-killing-yours

Task 10: Porsche culture contributes to success

Perhaps one of the reasons for the astonishing success of the Porsche motor manufacturing business is the culture embodied by the views of its former boss, Wendelin Wiedeking. ‘The Porsche philosophy is that first comes the client, then come the workers, then the suppliers and

finally the shareholders. When the first three are happy, then so are the shareholders.’ Compare this with the typical view in US- and UK-based businesses that often promote ‘shareholder culture’ as being most important. These differences in outlook and culture help to explain why high-profile integrations between BMW and Rover Cars and then Chrysler and Mercedes-Benz were such disasters.

Questions

1 Explain the term ‘corporate culture’. [2]

2 Outline two factors that may have affected Porsche’s corporate culture. [4]

3 Analyse why Porsche’s philosophy of focusing on the needs of clients, workers and suppliers will ultimately satisfy shareholders. [6]

4. Discuss the problems of adapting the corporate culture of a car manufacturer when it is taken over by or merges with a foreign car manufacturer. [8] '

Source: Business and Management for the IB Diploma

How individuals influence organisational culture and how organisational culture influences individuals

There’s an old joke about a CEO who attended a presentation on corporate culture and then asked his head of HR to “get me one of those things.” Of course it sounds ludicrous — but like most jokes, this story is based in truth. Many organizations treat the creation, maintenance, and periodic updating of their cultures in a cavalier manner. Either they pay lip service to the kind of culture they want, but don’t do much about it — or worse, ignore culture completely.

Most senior managers struggle with culture because it’s so difficult to define. Even less tangible than a “soft” concept, culture is more like a cloud: You know it’s there, but it’s nearly impossible to grasp. Wikipedia defines culture as “the set of shared attitudes, values, goals, and practices that characterizes an institution, organization or group.” But how do you come to an agreement on those “shared” attitudes, values, goals, and practices? And even if you do, how do you get hundreds (or thousands) of people to think and act in the way you agreed upon?

The answer is that you don’t. Even after thousands of years of civilization, leaders still have trouble getting everyone to follow any basic precepts of behaviour (think the Ten Commandments). In other words, culture is not a “goal” to be mandated, but the outcome of a collective set of behaviours.

Leaders however can influence those behaviours in several ways — and by so doing shape the culture of their firms. Whether you are a CEO or a department manager, here are three steps that you can take:

Convey your vision of a winning culture. If you want to be more than just the caretaker of an existing culture, then you need to define your aspirations. What will be different, and how will it make a difference for the success of your organization? More specifically what are the most critical behaviours that will characterize the culture you want to create? For example, Jack Welch used the mantra of “speed, simplicity, and self-confidence” as the beacon for his transformation of GE’s culture in the 1990′s — in stark contrast to the company’s analytical, bureaucratic, and hierarchical culture at the time. This aspirational vision sparked dialogue at every level of the company about what people needed to do to make GE successful — and to be personally successful at GE.

Demonstrate how new cultural behaviours can advance the business. Nothing reinforces new behaviours more than success. So once you define these behaviours, work with your team to apply them to a specific project that might need to be accelerated or improved. To do this, challenge your team to achieve a specific stretch goal in a short period of time, while explicitly trying to bring the new culture to life. For example, several years ago a financial institution set out to create a more collaborative, proactive, and externally focused culture. To demonstrate what this meant, one of the trading groups worked with a relationship team to find ways of improving cash flow for a specific client — while keeping the new cultural imperatives in mind. Their success encouraged other groups to try similar experiments, such that the new culture gradually became more of a reality across the company.

Put teeth into the new culture by integrating it into HR processes. People tend to do what’s measured and rewarded. So a third step for building a new culture is to use the desired behaviours as criteria for hiring, promoting, rewarding, and developing people. The real turning point for GE’s transformation came when Jack Welch publicly announced to his senior managers that he had fired two business leaders for not demonstrating the new behaviours of the company — despite having achieved exceptional financial results. This made it very clear that the culture was not just a soft concept — instead; it had tangible outcomes and consequences.

Shaping a corporate culture is one of the most difficult challenges for a leader. But if you want to get started, following these guidelines will probably be more effective than telling the HR director to go out and “get us one of those.”

Innovation and Organizational Culture - http://timkastelle.org/blog/2015/02/innovation-and-organizational-culture/

Pixar Inc. and Culture

Some background on Pixar

In the early-1990s, Disney was a highly diversified firm with theme parks, TV channels, a publishing house, film studios, film production and distribution companies, and a circuit of outlets for sales of tie-in merchandising. Its economic model essentially consisted of creating characters and capitalizing on them in all possible forms. In the case of the Lion King, for example, over 150 tie-in products were sold — not to mention home videos, theme park attractions and a stage musical.

Pixar came into being in 1986, when Steve Jobs bought the computer-assisted animation division of Lucasfilm. Between 1986 and 1991, Pixar was involved in the production of TV commercials, music videos and video games. It also developed and licensed digital tools (RenderMan, Marionette and Ringmaster) to companies such as Disney, DreamWorks and Lucasfilm.

Pixar began to attract public attention when it released Luxo Junior (the very first short film in 3D animation) and handled special effects for films such as Beauty and the Beast and Terminator 2. However, it essentially owed its survival to the financial support of Steve Jobs. Just as Steve Jobs was about to sell the company, he eventually succeeded in pushing through an agreement with Disney. In May 1991, Disney and Pixar signed an exclusivity contract for three full-length 3D animated films. Under the terms of the agreement, the films were to be made by Pixar and distributed by Disney. Disney, headed by Michael Eisner, would pay for all production and distribution costs, in return for a 12.5 percent fee on box office takings as distributor and 85 percent of takings as producer. Disney also held merchandising rights and the right to make sequels to the films created in collaboration with Pixar.

On its release, Toy Story (1995) was considered revolutionary, both from a technological and artistic perspective. While animated films were traditionally aimed at children, Pixar’s films could be enjoyed by children, but also by teenagers and adults. Emboldened by this success, Steve Jobs threatened to end the relationship with Disney unless the contract terms were adjusted in Pixar’s favor. Eisner eventually agreed to renegotiate the contract in exchange for an extended duration. A new exclusivity contract for five films was signed in 1997 with the same allocation of roles, but considerable differences in the cost—benefit split. Under the new contract, Pixar would bear 50 percent of production costs in return for 50 percent of box office takings, and the profits on sales of tie-in merchandising would be shared equally between Disney and Pixar. The other clauses were unchanged. Disney also acquired 5 percent of the Pixar.

Films made under the 1997 contract include A Bug’s Life (1998), Toy Story 2 (1999), Monsters, Inc. (2001) and, most important, Finding Nemo (2003). Finding Nemo is Pixar’s greatest success to date. It knocked Disney’s The Lion King off the top of the rankings for the most profitable animated film in history. It also became the best-selling DVD ever for any film category. Meanwhile, Treasure Planet (2002), a 2D animation film entirely made by Disney, was a flop that resulted in a $100 million loss.

Steve Jobs took advantage of this situation to make a new proposal to Disney in 2003. His objective was to strike a deal similar to the one that George Lucas had with Twentieth Century Fox for his Star Wars series. First, Pixar offered to pay all production costs in return for 100 percent of box office takings and full ownership rights to the films. Second, Pixar proposed to reduce the distribution fee from 12.5 percent to 7 percent. Third, Pixar asked for these new conditions to be applied retroactively to The Incredibles and Cars, two films covered by the 1997 contract. Steve Jobs justified this last demand as follows: ‘‘To fold the two remaining films into a new deal is consistent with common practice in Hollywood, where studios often grant such concessions to keep a valued partner. . . (It) would have mirrored the renegotiation of the contract between Disney and Pixar after Pixar’s first hit, ‘Toy Story’, under which the two remaining films from the old deal became the first two under a new contract.’’

After discussions lasting several months, Disney put forward the following counterproposal: box office takings should be split 70 percent for Pixar and 30 percent for Disney, after deduction of a distribution fee of 10 percent. While Pixar was prepared to raise the distribution fee, it would not budge on the respective shares of takings. Negotiations eventually broke down in February 2004 (which led some Disney board members to ask for the departure of Michael Eisner).

Four studios were approached to handle the distribution of the films Pixar would make after the end of its contract with Disney: Twentieth Century Fox, Sony Pictures, Warner Bros and Universal. Contrary to expectations, no agreement was announced with any of these studios. Negotiations resumed with Disney following the arrival of a new CEO, Bob Iger. During the negotiations, Chicken Little (2005), the first 3D animated film made entirely by Disney, was only moderately successful. Its box office takings were lower than those of A Bug’s Life, the Pixar film that had registered the lowest audience figures.

In January 2006, Disney announced the takeover of Pixar for 7.4 billion dollars (fifty times Pixar’s revenues, or the price of seventy Pixar films). The merger agreement stipulated that Disney was entitled to terminate the operation and demand $210 million in compensation if Ed Catmull (president of Pixar) or John Lasseter (executive vice-president of Pixar) resigned before the merger took place. With 6.5 percent of Disney’s capital, Steve Jobs became a board director at Disney and the company’s largest individual shareholder.

After the takeover, Ed Catmull became president of both animation studios. Although they were renamed ‘‘Disney and Pixar Animation,’’ they did not truly merge. For instance, the Pixar teams did not move to join Disney’s teams in Burbank. The merger agreement also explicitly stipulated that the ‘‘Pixar Animation’’ logo on Pixar’s facilities in Emeryville would not be replaced by the ‘‘Disney and Pixar Animation’’ logo. Nevertheless, considerable pressure was put on Pixar. First, the pace of production was increased (seven films were announced for the period 2008—2013). Second, production costs had become so high (requiring $600 million in worldwide box office takings to break even) that each film had to be a ‘‘blockbuster’’ to be profitable.

How Pixar fosters Collective Creativity - https://hbr.org/2008/09/how-pixar-fosters-collective-creativity

Task 11: Introduction to culture at Pixar Inc. - 'The Story Behind the Studio' - when you watch the video take notes on how three diverse individuals, Steve Jobs (businessman), Ed Catmull (scientist) and John Lasseter (artist) influenced the current organisational culture at Pixar Inc.

Files to download