1. Copyright © Houghton Mifflin Company. All rights reserved. CHAPTER EIGHTEEN Organization Culture

2. Copyright © Houghton Mifflin Company. All rights reserved.18 | 2 Learning Objectives Define organization culture, explain how it affects employee behavior, and understand its historical roots Describe how to create organization culture Describe two different approaches to culture in organizations Identify emerging issues in organization culture Discuss the important elements of managing the organizational culture

3. Copyright © Houghton Mifflin Company. All rights reserved.18 | 3 The Nature of Organization Culture Organizational Culture Defined –Culture is some set of values held by individuals in a firm that help employees understand acceptability of actions –Culture values often are taken for granted They are not made explicit in a manual or training program –Communication of values is done through symbolic means

4. Copyright © Houghton Mifflin Company. All rights reserved.18 | 4 Table 18.1 Definitions of Organization Culture

5. Copyright © Houghton Mifflin Company. All rights reserved.18 | 5 The Nature of Organization Culture Historical Foundations –Anthropology: Study of human cultures –Sociology: Study of people in social systems –Social Psychology: Study of groups and the influence of social factors on individuals –Economics: Study of creating economic advantage

6. Copyright © Houghton Mifflin Company. All rights reserved.18 | 6 The Nature of Organization Culture Culture versus Climate –Organization culture: Refers to historical context within which a situation occurs and the impact of this context on the behaviors of employees Difficult to alter in the short-run Means through which people in the organization learn/communicate organization acceptability (values/norms)

7. Copyright © Houghton Mifflin Company. All rights reserved.18 | 7 Culture versus Climate –Organization climate: Refers to current situations in an organization and the linkages among work groups, employees, and work performance Easier for management to manipulate in order to directly affect the behavior of employees The Nature of Organization Culture

8. Copyright © Houghton Mifflin Company. All rights reserved.18 | 8 Creating the Organization Culture Process of Creating an Organization: Culture- Linking Strategic-Cultural Values –Steps in Creating Organization Culture 1.Formulate strategic values 2.Develop cultural values 3.Create vision 4.Initiate implementation strategies 5.Reinforce cultural behaviors

9. Copyright © Houghton Mifflin Company. All rights reserved.18 | 9 Approaches to Describing Organization Culture The Ouchi Framework*- William G. Ouchi –Analyzed Three Types of Firms Typical U.S. firms Typical Japanese firms Type Z U.S. firms * William G. Ouchi, Theory Z: How American Business Can Meet the Japanese Challenge (Reading, MA: Addison-Wesley, 1981).

10. Copyright © Houghton Mifflin Company. All rights reserved.18 | 10 Approaches to Describing Organization Culture The Ouchi Framework: William G. Ouchi Type Z U.S. firms –Committed to retaining employees –Evaluate workers’ performance based on qualitative and quantitative information –Emphasize broad career paths –Exercise control through informal/implicit mechanisms –Require that decision making occur in groups –Are committed to full information-sharing –Expect individuals to take responsibility for decisions –Emphasize concern for people

11. Copyright © Houghton Mifflin Company. All rights reserved.18 | 11 Table 18.3 The Ouchi Framework

12. Copyright © Houghton Mifflin Company. All rights reserved.18 | 12 Approaches to Describing Organization Culture The Peters-Waterman* Approach –Attributes of an Excellent Firm Bias for action Stay close to the customer Autonomy and entrepreneurship Productivity through people Hands-on management Stick to the knitting Simple form, lean staff Simultaneously loose and tight organization *Thomas J. Peters and Robert H. Waterman Jr., In Search of Excellence: Lessons from America’s Best-Run Companies (New York: Harper & Row, 1982).

13. Copyright © Houghton Mifflin Company. All rights reserved.18 | 13 Emerging Issues in Organization Culture Innovation: The process of creating and doing new things that are introduced into the marketplace as products, processes, or services –Types Radical innovation New ventures Corporate research

14. Copyright © Houghton Mifflin Company. All rights reserved.18 | 14 Emerging Issues in Organization Culture Innovation (cont.) Radical innovation –Major breakthroughs that change or create whole industries –Systems innovation: Creates a new functionality by assembling parts in new ways –Incremental innovation: Continues the technical improvement and extends the applications of radical and systems innovations

15. Copyright © Houghton Mifflin Company. All rights reserved.18 | 15 Innovation (cont.) Radical innovation New ventures –Require entrepreneurship and good management –Intrapreneurship: Entrepreneurial activity that takes place within the context of a large organization –Entrepreneur’s profile Needs achievement Desires to assume responsibility Willing to take risks Focuses on concrete results Emerging Issues in Organization Culture

16. Copyright © Houghton Mifflin Company. All rights reserved.18 | 16 Emerging Issues in Organization Culture Innovation (cont.) Radical innovation New ventures Corporate research –Supports existing businesses to provide incremental innovations and to explore potential new technology bases –Responsible for keeping the company’s products/ processes technologically advanced –Corporate culture can be instrumental in fostering environment for creativity and innovation

17. Copyright © Houghton Mifflin Company. All rights reserved.18 | 17 Emerging Issues in Organization Culture Empowerment –The process of enabling workers to set their own work goals, make decisions, solve problems within their sphere of responsibility and authority

18. Copyright © Houghton Mifflin Company. All rights reserved.18 | 18 Emerging Issues in Organization Culture Appropriate Cultures –Goffee and Jones*: The nature of the value chain and the dynamism of the environment are two factors that may determine what type of culture is appropriate for a particular organization *Rob Goffee and Gareth Jones, “Organizational Culture,” in Organization 21C: Someday All Organizations Will Lead This Way, et. Subir Chowdhury (Upper Saddle River, NJ: Financial Times-Prentice Hall, 2003), pp. 273-290.

19. Copyright © Houghton Mifflin Company. All rights reserved.18 | 19 Managing Organization Culture Elements of Managing Organization Culture –Taking advantage of the existing culture –Teaching organization culture –Changing the organization culture Source: © Royalty Free/Triangle Images/ Getty Images

20. Copyright © Houghton Mifflin Company. All rights reserved.18 | 20 Managing Organization Culture Elements of Managing Organization Culture –Taking advantage of the existing culture Easier/faster to alter employee behaviors within the existing culture than it is to change existing history/traditions/values Managers must be aware/understand the organization’s values Managers can communicate their understanding to lower-level individuals

21. Copyright © Houghton Mifflin Company. All rights reserved.18 | 21 Managing Organization Culture Elements of Managing Organization Culture –Taking advantage of the existing culture –Teaching organization culture Organizational socialization: Process through which employees learn about the firm’s culture and pass their knowledge/understanding on to others Organizational mechanisms: –Examples employees see in experienced people’s behavior –Corporate pamphlets and formal training sessions

22. Copyright © Houghton Mifflin Company. All rights reserved.18 | 22 Managing Organization Culture Elements of Managing Organization Culture –Taking advantage of the existing culture –Teaching organization culture –Changing the organization culture Managing symbols: Substitute stories/myths that support new cultural values for those that support old ones The difficulty of change –Upper management inadvertently reverts to old behavior The stability of change –New values/beliefs are as stable/influential as old ones –Value systems tend to be self-reinforcing –Changing value systems requires enormous effort