1. Chapter 15 Organizational Culture and Innovation
Living and working together

2. Chapter 15 Study Questions
What is organizational culture? How do you understand an organizational culture? What is innovation and why is it so important? How to manage organizational culture and innovation?
Copyright © 2012 John Wiley & Sons, Inc.

3. What is organizational culture?
The system of shared actions, values, and beliefs that develops within an organization and guides the behavior of its members.
In the business setting, this system is often referred to as the corporate culture. Each organization has its own unique culture. Just as no two individual personalities are the same, no two organizational cultures are identical. Yet, there are some common cultural elements that yield stability and meaning for organizations.
Copyright © 2012 John Wiley & Sons, Inc.

4. What is organizational culture?
External adaptation
Knowing ways of reaching goals.
Knowing the tasks and methods to achieve goals.
Methods of coping with success and failure.
Organizational members need to know the real mission of the organization, not just the pronouncements to key constituencies, such as stockholders. By talking to one another, members will naturally develop an understanding of how they contribute to the mission.
Copyright © 2012 John Wiley & Sons, Inc.

5. What is organizational culture?
Important aspects of external adaptation
Separating, or prioritizing, external forces based on their importance.
Developing ways to measure accomplishments.
Creating explanations for not meeting goals.
The final issues in external adaptation deal with two important, but often neglected, aspects of coping with external reality. First, individuals need to develop acceptable ways of telling outsiders just how good they really are. Second, individuals must
collectively know when and how to admit defeat.
Copyright © 2012 John Wiley & Sons, Inc.

6. What is organizational culture?
External adaptation questions:
What is the real mission?
How can we contribute?
What are our goals and how do we reach them?
What external forces are important?
How doe we measure results?
What do we do if specific targets are not met?
How do we tell others how good we are?
How will we know when to quit?
Copyright © 2012 John Wiley & Sons, Inc.

7. What is organizational culture?
Internal integration
The creation of a collective identity.
Finding ways of working and living together.
Through dialogue and interaction, members begin to characterize their world. They may see it as malleable or fixed, filled with opportunities or threats. Real progress toward innovation can only begin when group members believe that they can change important parts of the world around them and that what appears to be a threat is actually an opportunity for change.
Copyright © 2012 John Wiley & Sons, Inc.

8. Copyright © 2012 John Wiley & Sons, Inc.
In your experience…
Recall the orientation you received during your first day or week with a new organization
Was it formal or informal?
Were the rules described or written in a manual?
What were you told about your department?
How did you meet your team mates? (individually, collectively, during lunch)
Each one of these areas would provide you with different aspects of ‘how we do things around here’ – the essence of organizational culture.
Copyright © 2012 John Wiley & Sons, Inc.

9. What is organizational culture?
Important aspects of working together:
Deciding how to allocate power, status, and authority.
Establishing a shared understanding of who will get rewards and sanctions for specific types of actions.
Working out ways to communicate and develop guidelines for friendships.
Copyright © 2012 John Wiley & Sons, Inc.

10. What is organizational culture?
Internal integration questions:
What is our unique identity?
How do we view the world?
Who is a member?
How do we allocate power, status, and authority?
How do we communicate?
What is the basis for friendship?
Resolving the issues of internal integration helps individuals develop a shared identity and a collective commitment. It may well lead to longer-term stability and provide a lens for members to use to make sense of their part of the world.
Copyright © 2012 John Wiley & Sons, Inc.

11. What is organizational culture?
Subculture
A group of individuals who exhibit a unique pattern of values and a philosophy that is consistent with the organization’s dominant values and philosophy.
While subcultures are unique, their members’ values do not clash with those of the larger organization. Interestingly, strong subcultures are often found in task forces, teams, and special project groups in organizations. The subculture emerges to bind individuals working intensely together to accomplish a specific task.
Copyright © 2012 John Wiley & Sons, Inc.

12. What is organizational culture?
Counterculture
Groups whose patterns of values and philosophies outwardly reject those of the larger organization or social system.
Every large organization imports potentially important subcultural groupings when it hires employees from the larger society. In North America, for instance, subcultures and countercultures may naturally form based on ethnic, racial, gender, generational, or locational similarities. In Japanese organizations, subcultures often form based on the date of graduation from a university, gender, or geographic. location. In European firms, ethnicity and language play an important part in developing subcultures, as does gender. In many less developed nations, language, education, religion, or family social status are often grounds for forming popular subcultures and countercultures.
Within an organization mergers and acquisitions may produce adjustment problems. Employers and managers of an acquired firm may hold values and assumptions that are inconsistent with those of the acquiring firm.
Copyright © 2012 John Wiley & Sons, Inc.

13. What is organizational culture?
Problems associated with importing societal subgroups from the larger society
Subgroups may naturally form into a counterculture.
The firm may encounter extreme difficulty in coping with broader cultural changes.
Embracing natural divisions from the larger culture may lead to difficulty in developing sound international operations.
Beyond becoming culturally sensitive, difficulties often arise with importing groupings from the larger society. Some of these
groupings are relevant to the organization whereas others may be quite destructive.
Copyright © 2012 John Wiley & Sons, Inc.

14. What is organizational culture?
Multicultural organization
A firm that values diversity but systematically works to block the transfer of societally based subcultures into the fabric of the organization.
Copyright © 2012 John Wiley & Sons, Inc.

15. What is organizational culture?
Five-steps for developing a multicultural organization
The organization should develop pluralism with the objective of multi-based socialization.
The firm should fully integrate its structure to prevent direct relationship between a group and any particular job.
The firm must integrate the informal networks by eliminating barriers and increasing participation.
The organization should break the linkage between group identity and identity of the firm.
The organization must actively work to eliminate interpersonal conflict based on either group identity or large group backlash.
Copyright © 2012 John Wiley & Sons, Inc.

16. Figure 15.1: Organizational Culture – Three Level Analysis
The figure illustrates the observable aspects of culture, shared values, and underlying assumptions as three layers. The deeper one digs, the more difficult it is to discover the culture but the more important an aspect becomes.
Copyright © 2012 John Wiley & Sons, Inc.

17. How do you understand an organizational culture?
Layers of cultural analysis
Observable culture.
Shared values.
Common cultural assumptions.
Important parts of an organization’s culture emerge from the collective experience of its members. These emergent aspects of the culture help make it unique and may well provide a competitive advantage for the organization. Some of these aspects may be directly observed in day-to-day practices.
Many consultants suggest that organizations should develop a “dominant and coherent set of shared values.” The term shared in cultural analysis implies that the group is a whole. Not every member may agree with the shared values, but they have all been exposed to them and have often been told they are important.
At the deepest layer of cultural analysis are common cultural assumptions; these are the taken-for-granted truths that collections of corporate members share as a result of their joint experience. It is often extremely difficult to isolate these patterns, but doing so helps explain why culture invades every aspect of organizational life.
Copyright © 2012 John Wiley & Sons, Inc.

18. How do you understand an organizational culture?
Sagas
Heroic accounts of organizational accomplishments.
Rites
Standardized and recurring activities that are used at special times to influence the behaviors and understanding of organizational members .
Sagas are important because they are used to tell new members the real mission of the organization, how the organization operates, and how individuals can fit into the company.
Rituals are systems of rites. Rituals and rites may be unique to particular groups within the organization. Subcultures often arise from the type of technology deployed by the unit, the specific function being performed, and the specific collection of specialists
in the unit. A unique language may well maintain the boundaries of the subculture. Often, the language of a subculture, and its rituals and rites, emerge from the group as a form of jargon. In some cases, the special language starts to move outside the firm and begins to enter the larger society.
Copyright © 2012 John Wiley & Sons, Inc.

19. How do you understand an organizational culture?
Cultural symbols
Any object, act, or event that serves to transmit cultural meaning (i.e. the color brown and the nickname “Big Brown” is associated with UPS).
Copyright © 2012 John Wiley & Sons, Inc.

20. How do you understand an organizational culture?
Shared values
Help turn routine activities into valuable and important actions.
Tie the organization to the important values of society.
May provide a very distinctive source of competitive advantage.
In organizations, what works for one person is often taught to new members as the correct way to think and feel.
Important values are then attributed to these solutions to everyday problems. By linking values and actions, the organization taps into some of the strongest and deepest realms of the individual.
Copyright © 2012 John Wiley & Sons, Inc.

21. How do you understand an organizational culture?
Shared Values
Reinforce Corporate Identity
Enhance Collective Commitment
Provide a Stable Social System
Reduce Bureaucratic Control
Some successful organizations share some common cultural characteristics. Organizations with “strong cultures” possess a broadly and deeply shared value system.
Copyright © 2012 John Wiley & Sons, Inc.

22. How do you understand an organizational culture?
Characteristics of strong cultures
A belief that ritual and ceremony are important to members and to building a common identity.
A well-understood sense of the informal rules and expectations so that employees and managers know what is expected of them.
A belief that what employees and managers do is important and that it is essential to share information and ideas.
When it is established over a long period of time, a strong culture can be a double-edged sword. A strong culture and value system can reinforce a singular and sometimes outdated view of the organization and its environment. If dramatic changes are needed, it may be very difficult to change the organization.
Copyright © 2012 John Wiley & Sons, Inc.

23. How do you understand an organizational culture?
Organizational myths
Unproven and often unstated beliefs that are accepted uncritically.
Enable managers to redefine impossible problems.
Facilitate experimentation and creativity.
Allow managers to govern.
Common organizational myths include:
Senior management has no risk bias.
The presumption of administrative competence based organizational self-assessment.
The denial of trade-off places emphasis on singular department goals while neglecting other goals.
Copyright © 2012 John Wiley & Sons, Inc.

24. What is innovation and why is it so important?
The process of creating new ideas and putting them into practice.
Innovation is the means by which creative ideas find their way into everyday practices—ideally practices that contribute to improved customer service or organizational productivity.
Copyright © 2012 John Wiley & Sons, Inc.

25. Figure 15.3: The innovation process: a case of new product development
1. Idea creation—to create an idea through spontaneous creativity, ingenuity, and information processing;
2. Initial experimentation—to establish the idea’s potential value and application;
3. Feasibility determination—to identify anticipated costs and benefits;
4. Final application—to produce and market a new product or service, or to implement a new approach to operations.
In practice, the innovation process is not always a straightforward process and can include many stops and starts, blind alleys, and deviations for the main ideas, and development of a completely new set of ideas.
The innovation process is never really over: astute innovators continually listen to customers and clients to make further improvements and adaptations.
Copyright © 2012 John Wiley & Sons, Inc.

26. What is innovation and why is it so important?
Product innovations
Introduce new or improved goods or services to better meet customer needs.
Process innovations
Introduce new and better methods and operations.
A number of studies suggest that the key difficulty associated with product development is the integration across all of the units needed to move from the idea stage to final implementation. Culturally, new product development often challenges existing practice, existing value structures, and common understandings.
One of the most interesting and difficult types of process improvement is that of management innovation. Obviously,
much management innovation comes from the vast industry known as management consulting, Unfortunately, many of the new management practices emanating from these outside units are more fashions and fads than workable solutions to the problems faced by individual firms.
Copyright © 2012 John Wiley & Sons, Inc.

27. What is innovation and why is it so important?
Innovation is a continual process of:
Exploitation
Focuses on refinement of and reuse of existing products and processes.
Exploration
Calls for the organization and it managers to stress freedom and radical thinking, opening the firm to big changes – what some call radical innovations.
Refining an existing product to make it more saleable in a new market is an example of exploitation.
Although some radical departures are built on existing competencies, often the adoption of a radically
new product or process means that the existing knowledge within a firm is invalidated. Conversely, an emphasis on exploitation stresses control and evolutionary development. Such exploitation can be planned with tight budgets, careful forecasts, and steady implementation. It is often much easier to stress exploitation because most organizations have a structure and culture that emphasize stability and control.
Managers may attempt to solve this tension between exploration and exploitation in a variety of ways. One partial solution is to have separate units for the two types of activities. Others rely on middle managers to reconcile the tensions stemming from attempts to link explorative and exploitative groups. However, the desired mix of explorative and exploitative may well depend on
the industry setting.
Copyright © 2012 John Wiley & Sons, Inc.

28. How to manage organizational culture and innovation
Management philosophy
Links goals with key collaboration issues and comes up with a series of general ways by which the firm will manage its affairs.
The process of managing organizational culture calls for a clear understanding of the organizational subculture at the top and a firm recognition of what can and cannot be changed. The first step in managing an organizational culture is for management to recognize its own subculture.
Copyright © 2012 John Wiley & Sons, Inc.

29. How to manage organizational culture and innovation
A well-developed management philosophy :
Establishes generally understood boundaries for all members of the firm.
Provides a consistent way for approaching new and novel situations.
Helps hold individuals together by assuring them a known path to success.
When the management philosophy stresses security and stability, management reinforces such values as benevolence. Such firms tend to be less innovative than when the management philosophy is more self-directive and reinforces risk taking. When the management philosophy stresses reaching out to others, embracing novel situations, and collectively developing a new path toward new visions of success, there is greater innovation.
Copyright © 2012 John Wiley & Sons, Inc.

30. How to manage organizational culture and innovation
Strategies for managing organizational culture
Managers help modify visible aspects of culture, such as language, stories, rites, rituals, and sagas.
Through reward systems – two common patterns:
Steady state (hierarchical, ‘clan’ cultures)
Evolution and change (market culture)
By setting the tone of the organization.
One of the key ways management influences the organizational culture is through the reward systems it establishes. In many larger U.S.-based firms the reward system matches the overall strategy of the firm and reinforces the culture emerging from day-today activities.
Early research on culture and cultural change often emphasized direct attempts by senior management to alter the values and assumptions of individuals by resocializing them—that is, trying to change their hearts so that their minds and
actions would follow. The goal was to establish a clear, consistent organization-wide consensus. More recent work suggests that this unified approach of working through values may not be either possible or desirable.
Copyright © 2012 John Wiley & Sons, Inc.

31. How to manage organizational culture and innovation
Common mistake in changing culture
Trying to change people’s values from the top down without also changing how the organization operates and recognizes the importance of individuals does not work very well.
Copyright © 2012 John Wiley & Sons, Inc.

32. How to manage organizational culture and innovation
Organizational lag
The dominant cultural patterns are inconsistent with emerging innovations.
Cultural change is hampered by a legacy of established behaviors, with an overreliance on rule following and reinforcement of old patterns of action.
Observable aspects of organizational culture such as rites, rituals, and cultural symbols often have powerful underlying meaning for organizational members. In a way they are symbols of prior successful ways to cope with external adaptation and internal integration. Individuals are often wary of abandoning the successful for an unproven new approach.
Copyright © 2012 John Wiley & Sons, Inc.

33. How to manage organizational culture and innovation
Techniques for overcoming ‘cultural lag’ and promoting innovation:
Demonstrate how shared values and common assumptions can be applied to new innovations.
Balance rule changing with rule following.
If left uncontrolled, rule changing can yield runaway industry change that can quickly lead to chaos. While rule following can lead to a more stable industry structure and/or controlled industry change, there is also a danger of reinforcing cultural lag.
Copyright © 2012 John Wiley & Sons, Inc.