Week 8: Culture

Question 1

The importance of culture (vis -à-vis strategy)

Answer 1

You can have the best strategy in the world, but culture will kill strategy (Launi Skinner, CEO First West Credit Union)
* The No. 1 thing is culture. It allows us to move very quickly and react very quickly in making business decisions (Bill Emerson, CEO Quicken Loans)
* Culture eats strategy for breakfast (Peter Drucker)

Question 2

What is culture in companies?

Answer 2

There are many definitions of culture:
* “The collective programming of the mind which distinguishes the members of one human group from another” (Hofstede)

• “The set of shared, taken-for-granted, implicit assumptions that a group holds and determines how it perceives, thinks about, and reacts to its various environments” (Schein)
• “A pattern of beliefs and expectations shared by the organization’s members” (Louis)

Question 3

9 Attributes of organisational culture:
What is culture in companies?

Answer 3

The attributes of organizational culture are:
* sharedness
* stability
* taken for grantedness (to some extent), tacit
* expressivity (meanings are associated to actions and decisions)
* being grounded in history and tradition
* transmission to new members
* being a source of order and rules
* being a source of collective identity and commitment
* uniqueness

Quite different from a “Values & Culture” corporate statement!

Question 4

What does organizational culture include? 4 things

Answer 4

Culture in companies becomes manifest in, among others:
* Organizational stories and legends
* Organizational language and communication
* Rituals and ceremonies
* Physical structures and symbols

Question 5

The culture iceberg

Answer 5

Visible culture: Food, festivals, flags, fashion
Deep culture: Dispositions, values, attitudes, beliefs

Question 6

Schein three-level model

Answer 6

Easier to change
1. Observable behaviors
* Visible and feelable structures and processes
* Difficult to decipher
(Available resources, processes, etc)

2. Espoused Beliefs and Values
   * Ideals, goals, values, aspirations
   * Ideologies
   * Rationalizations
   * May or may not be congruent with behaviors
   (Expected behaviours we value in the organisation)
3. Basic underlying assumptions
   * Unconscious, taken-for-granted beliefs, values and purpose
   * Determine behavior, perception, thought, and feeling
   (Purpose is here, what we believe about the purpose of the company and basic assumptions)
   Harder to change

Question 7

2 Functions of organizational culture: Internal integration, External adaptation

Answer 7

• Internal integration means that members develop a collective identity and know how to work together effectively. Culture guides day-to-day working relationships and determines how people communicate within the organization, what behavior is acceptable or not acceptable, and how power and status are allocated
• External adaptation refers to how the organization defines, measures and reaches goals and how it deals with outsiders. Culture helps guide the daily activities of workers to meet certain goals. It can help the organization respond rapidly to customer needs or the moves of a competitor.

Question 8

Culture embedding mechanisms

Answer 8

Primary embedding mechanisms (founders):
What leaders pay attention to, measure, and control on a regular basis
How leaders react to critical incidents and organizational crises
How leaders allocate resources
Deliberate role modeling, teaching, and coaching
How leaders allocate rewards and status
How leaders recruit, select, promote, and excommunicate

Secondary articulation and reinforcement mechanism:
Organizational design and structure Organizational systems and procedures
Rites and rituals of the organization
Design of physical space, facades, and buildings
Stories about important events and people
Formal statements of organizational philosophy, creeds, and charters

Question 9

The competing values framework

Answer 9

Developed by Cameron & Quinn, and widely used as a practitioner tool to understand the type of company culture (Organizational Culture Assessment Tool – OCAI).

Clan, Adhocracy, Hierarchy, Market

Flexibility & discretion vs stability & control

Internal focus & integration vs External focus & differentiation

Question 10

The competing values framework: Clan

Answer 10

Assumptions : Human affiliation
Beliefs : People behave appropriately when they have trust in, loyalty to, and membership in the organization.
Values : Attachment, affiliation, collaboration, trust, and support
Behaviors : Teamwork, participation, employee involvement, and open communication
Effectiveness criteria : Employee satisfaction and commitment

Question 11

The competing values framework: Adhocracy

Answer 11

Assumptions: Change
Beliefs: People behave appropriately when they understand the importance and impact of the task.
Values: Growth, stimulation, variety, autonomy, and attention to detail
Behaviors: Risk-taking, creativity, and adaptability
Effectiveness criteria: Innovation

Question 12

The competing values framework: Market

Answer 12

Assumptions: Achievement
Beliefs: People behave appropriately when they have clear objectives and are rewarded based on their achievements
Values: Communication, competition, competence, and achievement
Behaviors: Gathering customer and competitor information, goal-setting, planning, task focus, competitiveness, and aggressiveness
Effectiveness criteria: Increased market share, profit, product quality, and productivity

Question 13

The competing values framework: Hierarchy

Answer 13

Assumptions: Stability
Beliefs: People behave appropriately when they have clear roles and procedures are formally defined by rules and regulations.
Values: Communication, routinization, formalization, and consistency
Behaviors: Conformity and predictability
Effectiveness criteria: Efficiency, timeliness, and smooth functioning

Question 14

Configurational approaches to culture

Answer 14

Graph: y axis: low high; x-axis: leadership, communication, policy-driven, innovation and risk-taking, performance-reward contingencies, emphasis on clear goals and planning, market-facing, respect for people, opportunities for individual development
Socialisation on entry

Question 15

Configurational approaches to culture

Answer 15

Graph: y axis: low high; x-axis: leadership, communication, policy-driven, innovation and risk-taking, performance-reward contingencies, emphasis on clear goals and planning, market-facing, respect for people, opportunities for individual development
Socialisation on entry

Question 16

Culture strength: 4 dimensions: Sociological penetration, Psychological penetration, Historical penetration, Artifactual penetration

Answer 16

Culture plays a strong role in hampering or promoting change. One of the reasons is culture strength, that is the degree of acceptance of organizational culture. It has four dimensions:
* Sociological penetration: the extent to which the culture is shared across the members of the organization as a whole, including across various groups or subcultures in the organization (horizontal penetration) and across layers of the organizational hierarchy (vertical integration).
* Psychological penetration: how deeply individuals in the organization hold the assumptions, values, and beliefs that make up their organization’s culture.
* Historical penetration: how long the culture has consistently existed within the organization (socialization).
* Artifactual penetration: the extent to which the more deeply held assumptions values are manifested in the outer layers of the organization’s culture (i.e., in its artifacts).

Question 17

The attraction-selection-attrition (ASA) model

Answer 17

The ASA model states that organizations have a natural tendency to attract, select, and retain people with values and personality characteristics that are consistent with the organization’s character, resulting in a more homogeneous organization and a stronger culture.
* Attraction. Job applicants engage in self-selection by avoiding prospective employers whose values seem incompatible with their own values. They look for subtle artifacts during interviews and through public information that communicate the company’s culture.
* Selection. How well the person “fits in” with the company’s culture is often a factor in deciding which job applicants to hire
* Attrition. People are motivated to seek environments that are sufficiently congruent with their personal values and to leave environments that are a poor fit. This occurs because person–organization values congruence supports their social identity and minimizes internal role conflict.

Question 18

Can culture be a source of competitive advantage? A VRIN analysis

Answer 18

Is organizational culture valuable? Can culture positively affect the value creation and capture mechanisms in companies?
* Yes, but this does not occur in every company: there are companies where culture enables value creation and capture (and strategic innovation), but there are other companies where culture constrains performance.

Is organizational culture rare?
* Sometimes they are. Companies are imprinted by the founders’ unique ideas and vision, and have a unique history, but, while the antecedents might be unique to one specific company, the final outcome (company culture) can be similar to other companies. Furthermore, cultures are not only top-down, but also bottom-up, increasing the difficulty of finding many similar cultures content wise.

Is organizational culture imperfectly imitable, or not imitable at all?
* Since company culture has great deal of taken-for-grantedness and unawareness, it is hard for competitors to understand it and imitate it. Incentives and formal structures and processes are important, but their observation is not exhaustive for understanding, and even less exhaustive for actually replicating, a company culture to its full extent in another company.
* The more the culture is tacit and hard to codify (plus valuable and rare), the harder it is for competitors to replicate it in their company.

Question 19

Does culture benefit performance? 1. When there is alignment between company culture and the external environment

Answer 19

1. When there is alignment between company culture and the external environment

• Companies require an employee-centric culture in environments where business success depends mainly on employee talent, whereas an efficiency-focused culture may be more critical for companies in environments with strong competition and standardized products.
• If the dominant values are congruent with the environment, then employees are more likely to engage in decisions and behaviors that improve the organization’s interaction with that environment. But when the dominant values are misaligned with the environment, a strong culture encourages decisions and behaviors that can undermine the organization’s connection with its stakeholders.

Question 20

Does culture benefit performance? 2. When culture is moderately strong

Answer 20

2. When culture is moderately strong

• Very strong company cultures lock people into mental models, which can blind them to new opportunities and unique problems. The effect of these very strong cultures is that people overlook or incorrectly define subtle misalignments between the organization’s activities and the changing environment.
• Very strong company cultures can suppress dissenting subcultures. The challenge for organizational leaders is to maintain not only a strong culture but one that allows subcultural diversity. Subcultures encourage task-oriented conflict, which improves creative thinking and offers some level of ethical vigilance over the dominant culture. In the long run, a subculture’s nascent values could become important dominant values as the environment changes. Corporate cults suppress subcultures, thereby undermining these benefits.

Question 21

Does culture benefit performance? 3. When culture is an adaptive culture

Answer 21

3. When culture is an adaptive culture

• An adaptive culture is an organizational culture in which employees are receptive to change, including the ongoing alignment of the organization to its environment and continuous improvement of internal processes.
• Adaptive company cultures have a strong learning orientation because being receptive to change necessarily means that the company also supports action-oriented discovery.

Question 22

Attributes of an adaptive culture

Answer 22

1. Willingness to make changes in culturally ingrained behaviors
2. Emphasis on identifying problems before they occur and rapidly implementing workable solutions 3. Focus on innovation
3. Shared feelings of confidence about managing problems and opportunities
4. Emphasis on trust
5. Willingness to take risks
6. Spirit of enthusiasm
7. Candor
8. Internal flexibility in response to external demands
9. Consistency in word and action
10. Long-term focus

Question 23

Dimensions of culture

Answer 23

• “Intangible” culture, made of behavioral norms, incentives, routines,
• “Material” culture, made of artifacts, such as logos, mottos, texts, objects, and so on.
• If carefully managed, the components of the “material” culture of a company can be helpful for distinguishing the company from its competitors, and to develop new products and services. Why?
• Company artifacts have symbolic meaning, beyond their functional use: they are the observable symbols and signs of the company culture.

Question 24

A model of culture change (fig: Unfreezing, learning, Refreezing)

Answer 24

• Disconfirmation
• Creation of survival anxiety
• Creation of psychological safety to overcome learning anxiety
  1. Unfreezing: Creating the motivation to change
• Imitation of and identification with role models
• Scanning for solutions and trial-and-error learning
  2. Learning new concepts, new meanings, and new standards
• Incorporation into identity
• Incorporation into ongoing relationships
  3. Refreezing: internalizing new concepts, meanings and standards

Stage 1
* Learning anxiety instead is an individual state where the individual feels that learning new attitudes or behaviors is interlinked with the loss of self-esteem or group membership. It can have different sources:
* Fear of loss of power or position
* Fear of temporary incompetence
* Fear of punishment for incompetence
* Fear of loss of personal identity
* Fear of loss of group membership
* Psychological safety refers to perceptions of the consequences of taking interpersonal risks in a particular context (Edmondson).

How to create psychological safety?
* A compelling positive vision
* Formal training
* Involvement of the learner
* Informal training of relevant “ family ”groups, and teams
* Practice fields, coaches, and feedback
* Positive role models
* Support groups in which learning problems can be aired and discussed
* Systems and structures that are consistent with the new way of thinking and working

Stage 2
* Transformative change implies that the person or group that is the target of change must unlearn something as well as learning something new.

There are two main mechanisms through which such cognitive restructuring can occur:
* by imitation and identification with a leader, or a group
* by scanning the environment and develop our own solution
* The first works best when it is clear what the new way of working is to be, and when the concepts to be taught are themselves clear. The second requires not to overcomplicate the structural incentives and rewards, as they might thwart the individual effort to make the new norms and behaviors consistent with individual’s own personality.

A model of culture change
* The change goal must be defined concretely in terms of the specific problem you are trying to fix, not as “ culture change”. Culture change is too vague to be understood. Specific behaviors or norms need to be defined as object of change.
* Changing the whole culture (see the map of Ciba-Geigy basic underlying assumptions) altogether might not be necessary. Some parts of the culture can be reinforced and used to contrast other parts of the culture which need to change. It is important to assess the core characteristics of organizational culture while the organization is changing.

Question 25

Designing culture for supporting strategic innovation

Answer 25

Fig
Levers for strategic innovation: Implementation

Cultural aspects: Effective teamwork and group functioning, Speed and flexibility

Question 26

Fitting culture within a strategic innovation project

Answer 26

• Fit between people and culture: how are individual needs met by the informal organization (culture)? How does the informal organization make use of individual resources consistent with goals?
• Fit between critical tasks and culture: does culture facilitate the tasks and activities requested by the long-term strategy and the business model of the company? Does it help to meet the demands of the task? In the case of an independent unit, which are the key behaviors that need to be supported and incentivized by organizational culture that are different from the ones of the parent company?
• Fit between organizational structure and culture: are the goals, rewards, and structures of the informal organization consistent with those of the formal organization? Do the human capital systems support the norms and patterns of behavior that must permeate the organization for it to deliver on critical tasks?