CHAPTER 9 MANAGING ORGANIZATIONAL CULTURE

LEARNING OUTCOMES After studying this chapter, you should be able to: Define organizational culture. Explain the evolution of culture. Discuss the impact of culture on strategy. List the elements of organizational culture. Discuss the importance of culture and leadership.

9.1 INTRODUCTION Culture is vital. It is a way of life, affecting not only how an organization creates values but also how the organization is perceived. An organization will develop its own unique culture — two organizations belonging to the same industry and location will display distinctively different ways of operating.

9.2 ORGANIZATIONAL CULTURE AND MANAGEMENT Organizational culture is the specific collection of values and norms that are shared by people and groups in an organization Enables an organization to adapt to environmental changes, and coordinate and integrate its internal operations Presents as a factor which influences performance, the integration process of mergers, knowledge transfer, shareholder values, competitive advantage and the adoption of the marketing concept by organizations

9.2.1 Evolution of Culture The founder of an organization is usually the main influence on its culture. The founder’s assumptions about success form the foundation of the organization’s culture. A set of beliefs about the organization’s distinctive competence will differentiate the organization from others in new organizations. These beliefs will directly affect organizational strategies and operations.

9.2.2 Impact of Culture on Strategy Organizational culture can either facilitate or hinder an organization’s strategic actions. Successful organizations developed cultures that emphasized three key groups of stakeholders — customers, stakeholders and employees.

9.2.3 Building a Strategy Supportive of Culture Organization intending to create a fit between organizational strategy and culture has to consider the following elements: Symbolic actions and substantive actions Building a culture or spirit of high performance Fostering a strategy supportive of climate and culture

9.2.3 Building a Strategy Supportive of Culture (cont,) Maintaining internal responsiveness and innovativeness Dealing with organization politics Enforcing ethical behaviour Leading the process of making corrective adjustments

9.3 COMMUNICATING ORGANIZATIONAL CULTURE Organizational culture usually tends to influence an organization’s philosophy, style and behavior. Managers must, thus, carefully consider the type of culture they want for their organization and strive to foster it via communicating with every organizational member. To use culture to an organization’s advantage, managers must accomplish several tasks which depend on effective communication:

9.3 COMMUNICATING ORGANIZATIONAL CULTURE (cont.) They must clearly understand the culture. They must transmit that culture to others in the organization. They must sustain that culture by rewarding and promoting those who understand it and work towards maintaining it.

9.3.1 Elements of Organizational Culture Organizational culture includes: Values Symbols Stories Heroes Rituals and ceremonies

9.3.2 Functions of Organizational Culture Cooperation Decision-making Control Communication Commitment Perception Justification of behaviour

9.4 ORGANIZATIONAL CULTURE AND LEADERSHIP How leaders shape culture Transactional leadership Refers to the capacity to motivate followers by exchanging rewards for performance Works within the organizational culture as it exists Transformational leadership Refers to the capacity to motivate followers by inspiring involvement in a mission Changes the organizational culture

9.4 ORGANIZATIONAL CULTURE AND LEADERSHIP (cont.) How leaders shape culture Charismatic leader Refers to one who has the ability to influence the behaviour of others through his/her personal qualities, enthusiasm, beliefs and charm

9.4.2 Organizational Culture and Environment Adaptive cultures Innovative cultures that encourage and reward initiative taken by middle and lower level managers Inert cultures Conservative cultures that caution and do not value middle and lower level managers who take such initiative or actions

9.4.2 Organizational Culture and Environment Environmentally Adaptive vs Unadaptive Organizational Cultures Adaptive Unadaptive Visible behaviour Managers pay close attention to all constituencies, especially customers. Changes are initiated when needed for legitimate interests, even if it entails taking some risks. Managers typically behave somewhat politically and bureaucratically. Thus, they do not change strategies quickly or take advantage of changes in their business environments. Expressed values Managers care deeply about customers, stakeholders and employees. They strongly value people and processes that create useful changes. Managers care about themselves, their immediate work group or products, and technology associated with the work group. They strongly value a systematic, risk-reducing management process to leadership initiatives.