1. COGNITIVE INERTIA TOWARD CHANGE: A FUNDAMENTAL BUILDING BLOCK FOR ORGANIZATIONAL CULTURE Assoc.Prof.Dr. Ahmet Emre Demirci Anadolu University, FEAS aedemirci@anadolu.edu.tr

2. INTRODUCTION Among many variables that hinder effective adaptation to change, thinking mode or the cognitive status of the members of the organization toward change is crucial for the change process. In addition to the cognitive inertia within the organization, cultural profile of the organization is of paramount importance for change efforts. Because we claim that cultural profile of the organization has important impact on the cognitive status of its employees that in return enhances or hinders change efforts. Besides, it could also be argued that every change process in each organization has its own unique situation since the nature, culture, values, managerial attitudes and employees’ modes of thinking vary from one organization to another.

3. Cognitive responses to change efforts are the opinions individuals have about the advantages, disadvantages, usefulness and necessity of change, and about the knowledge and information required to handle it (Kwahk & Ahn, 2010). Cognitive dimension of the employees’ attitudes toward change reflect their beliefs and thoughts about change. These beliefs and thoughts can be positive, negative or neutral depending on the specific case. How these beliefs are shaped is a complex question and the answer lies within the individual assessment of certain situations (Piderit, 2000). Oreg (2006) suggests that job security, intrinsic rewards, trust in management, power and prestige are among the major factors that have direct impact on employees’ attitudes toward change. COGNITIVE INERTIA

4. According to Cyert et al. (1992) and Simon (1947) cognitive inertia refers to employees’ cognitive conflict and bias. Thus, it could be noted that cognitive inertia is a negative inclination in thoughts and beliefs about change efforts. We claim that, among many other variables, such a negative inclination is shaped by the cultural profile of the organization. COGNITIVE INERTIA

5. Organizations with an entrepreneurial culture emphasize entrepreneurship, creativity, adaptability, risk tolerance, flexibility and growth through acquiring new resources. McGuire (2003) defines entrepreneurial organizational culture as: “A system of shared values, beliefs and norms of members of an organization, including valuing creativity and tolerance of creative people, believing that innovating and seizing market opportunities are appropriate behaviors to deal with problems of survival and prosperity, environmental uncertainty, and competitors’ threats, and expecting organizational members to behave accordingly.” CULTURAL PROFILES – ENTREPRENEURIAL

6. Team culture is an organizational culture archetype that primarily emphasizes concern for people within the organization. Innovative ideas mainly stem from the complex interaction of diverse ideas and perspectives (Sethi, Smith & Park, 2001). Sethi et al. (2001) also note that likelihood of having innovative ideas improves as the diversity of input increases. According to Morariu, Serghiuta and Chasovschi (2009), team culture refers to the collective effort of all employees for the common goals while promoting creativity and communication. They suggest that innovation and creativity are encouraged within the organizations having a strong team culture. Similarly, Katzenbach and Smith (1992) argue that organizations most likely fail to meet the challenges ahead – including Change and innovation – without a team culture. CULTURAL PROFILES - TEAM

7. However, there is a fine line between a team culture and a clan culture. Although clan culture is also based on socialization and internalization of organizational values and norms, these processes are considered within a hierarchy-based control system (Ouchi & Wilkins, 1985). Kerr and Slocum (1987) note that individuals within the organization are like the members of a fraternity and they share a sense of pride of being a part of this group. Pressure to conform is heavily felt in the organization. CULTURAL PROFILES - TEAM

8. In their competitive values framework model, Cameron and Queen (2011) defines hierarchical culture with a focus on internal and control-based values such as formalization, management by procedures and stability. Cameron and Freeman (1991) suggest that order, rules, regulations, uniformity and efficiency are the dominant attributes in an organization with a hierarchical culture. They also indicate that the strategic priority and emphases for such organizations focus on stability, predictability and smooth operations. Formalization and centralization are among the primary factors associated with hierarchical culture. The degree of hierarchy of authority is a conventional measure of centralization within the organization (Van de Ven, 1976) and centralization tends to be more evident in the organizations where highly formal practices exist (Demirci, 2013). CULTURAL PROFILES - HIERARCHICAL

9. Fiol and Lyles (1985) suggest that organizations with a hierarchical culture would most likely to resist change initiatives and less likely to have motives to adapt themselves to the changing environment as they have strong emphasis on stability and control. Their research also revealed that organizational cultures that limit bureaucracy and hierarchical values are most likely to lead to higher absorptive capacity. Similarly, Wildawsky and Dake (1990) suggest that excessive normative constraints and control on behavior that are typical characteristics of hierarchical cultures are perceived as barriers to autonomy of the individuals. CULTURAL PROFILES - HIERARCHICAL

10. According to Cameron and Queen (2011), rational culture represents a focus on external and control-based values. Competitiveness, goal achievement and environment exchange are the dominant attributes of this type of organizational culture. Goal orientation, production and competition are the major bonding factors whereby strategic emphases lean towards competitive advantage and market superiority (Cameron and Freeman, 1985). McDermott and Stock (1999) have found that organizations with rational culture tend to have better competitive performance due to its emphasis on achievement and competitiveness. Gray and Hooley (2002) note that rational culture implements a corporate culture that fosters attitudes and behaviors aimed at collecting, disseminating and responding to information on actors in the external environment such as customers, competitors, market structure in ways that create value for primary and secondary stakeholders. CULTURAL PROFILES - RATIONAL

11. As rational cultures promote an external focus, organizations with rational culture tend to be consistent with the norms and values associated with change, creativity and innovation (Fiol & Lyles (1985; Harrington & Guimaraes, 2005). Similarly, Prajogo and McDermott (2011) found that rational culture is highly correlated with entrepreneurial culture. Therefore, they claim that rational culture values support both process and product innovations. In their study, O’Cass and Ngo (2007) also found similar results. They suggest that market (rational) culture and entrepreneurial culture are different yet interrelated concepts. Organizations with a dominant entrepreneurial culture tend to pursue behaviors associated with rational culture. CULTURAL PROFILES - RATIONAL

12. In this this first step of a more detailed study, we will try to explore if there are any significant relationship between the cognitive status of the employees and organizational culture. Our study will be focusing on four different profiles of organizational culture including entrepreneurial, team, hierarchical and rational and we will try to explore how these four different cultural profiles effect change-related cognitive inertia. AIM OF THE RESEARCH

13. H1. Entrepreneurial organizational culture negatively effects cognitive inertia. H2. Team organizational culture negatively effects cognitive inertia. H3. Hierarchical organizational culture positively effects cognitive inertia. H4. Rational organizational culture negativelt effects cognitive inertia. RESEARCH HYPOTHESES

14. In order to support our arguments, we have surveyed the shop-floor employees of seven SMEs operating in Eskisehir. All seven companies are involved with supplying high quality materials to machinery industry. In the end of the data collection process, we ended up with 505 surveys 470 of which are usable for statistical analysis. Our research findings have revealed that there is a strong correlation and varying nature of relationship between change-related cognitive inertia and different cultural profiles. RESEARCH SAMPLE

15. In this initial study, organizational culture was measured with an instrument developed by Cameron and Freeman (1985) based on Quinn and Rohrbaugh’s (1981) competing values framework. The scale measures the relative impact of different organizational culture types – team, entrepreneurial, hierarchical and rational – that composes an organization’s culture. Cognitive inertia was measured with an instrument developed by Oreg (2006). Oreg’s original instrument consists of 15 questions to measure cognitive, affective and behavioral dimensions of the perceptions toward organizational change. We have adopted Oreg’s five questions about cognitive dimension to measure cognitive inertia. RESEARCH INSTRUMENT

16. As mentioned earlier, previous studies adopted sub-scales revealed that the instruments are valid, reliable and internally consistent. We have also found that the scales were reliable, valid and internally consistent. Our Cronbach’s alpha value for the organizational culture scale was 0.833, while the Cronbach’s alpha values for cognitive inertia was 0.637. RESEARCH INSTRUMENT

17. Table 1.1: Correlations among the research variables Variables*Mean Std. Deviation COGENTHIERTEAMRAT COGNITIVE INERTIA 3.67980.732251 ENTREPRENEUR IAL 2.60340.74557-.385** 1 HIEARCHICAL 2.63320.70495-.120*.507**1 TEAM 2.55850.87221-.319**.723**.470**1 RATIONAL 2.39780.85274-.354**.645**.539**.607**1 **. Correlation is significant at the 0.05 level (2-tailed) **. Correlation is significant at the 0.01 level (2-tailed) RESEARCH FINDINGS

18. Table 1.2: Results of the multiple linear regression ConstructsS. Betatp Adjusted R 2 ENTREPRENEURIAL - 0.385- 7.619.000.146 HIEARCHICAL - 0.124- 2.206.028.011 TEAM - 0.319- 6.156.000.102 RATIONAL - 0.354- 6.912.000.125 RESEARCH FINDINGS

19. HYPOTHESES TEST RESULTS Hypotheses Status H1. Entrepreneurial organizational culture negatively effects cognitive inertia. Accepted H2. Team organizational culture negatively effects cognitive inertia. Accepted H3. Hierarchical organizational culture positively effects cognitive inertia. Rejected H4. Rational organizational culture negativelt effects cognitive inertia. Accepted

20. DISCUSSIONS Literature review regarding the impact of different cultural profiles on the cognitive status of the employees supports our research findings except the relationship between hierarchical cultural and cognitive inertia.

21. DISCUSSIONS In the literature review, we have found that the relations between hierarchical values and change-related employee thoughts and beliefs are paradoxical. While a stream of research claim that hierarchical values hinder change-readiness (Rickards, 1985; Caruana, 1998; Barringer & Bluedorn, 1999), others claim that hierarchical cultural values can also support change processes under certain conditions (Ayers et al., 1997; Ghoshal & Bartlett, 1998). Bonner et al. (2002) suggests that effective implementation of hierarchy-related organizational practices is important for managing radical change processes. Based on the results we have obtained in our research, we suggest that entrepreneurial, team and rational cultural values are better and stronger predictors for cognitive inertia. However, this interpretation is based on the data we have collected from our research subjects and needs to be further investigated by implementing other research methods, using different scales, expanding sample size or even collecting data from different sectors.