Organizational behavior

548 PART 3 The Group The Organic Model Exhibit 15-7 Mechanistic versus Organic Models The Mechanistic Model • High specialization • Cross-functional teams • Rigid departmentalization • Cross-hierarchical teams • Clear chain of command • Free flow of information • Narrow spans of control • Wide spans of control • Centralization • Decentralization • High formalization • Low formalization innovation strategy A strategy that research indicates that aspects of organizational culture may influence the emphasizes the introduction of major new success of corporate social responsibility (CSR) initiatives.41 If the culture is products and services. supported by the structure, the initiatives are more likely to have clear paths toward application. Most current strategy frameworks focus on three strategy cost-minimization strategy A strategy dimensions—innovation, cost minimization, and imitation—and the structural that emphasizes tight cost controls, design that works best with each.42 avoidance of unnecessary innovation or marketing expenses, and price cutting. To what degree does an organization introduce major new products or services? An innovation strategy strives to achieve meaningful and unique imitation strategy A strategy that seeks innovations. Obviously, not all firms pursue innovation. Apple and 3M do, but to move into new products or new markets conservative retailer Marks & Spencer doesn’t. Innovative firms use competi- only after their viability has already been tive pay and benefits to attract top candidates and motivate employees to take proven. risks. Some degree of the mechanistic structure can actually benefit innovation. Well-developed communication channels, policies for enhancing long-term commitment, and clear channels of authority all may make it easier for rapid changes to occur smoothly. An organization pursuing a cost-minimization strategy tightly controls costs, refrains from incurring unnecessary expenses, and cuts prices in selling a basic product. This describes the strategy pursued by Walmart and the makers of generic or store-label grocery products. Cost-minimizing organizations usually pursue fewer policies meant to develop commitment among their workforce. Organizations following an imitation strategy try to both minimize risk and maximize opportunity for profit, moving new products or entering new markets only after innovators have proven their viability. Mass-market fashion manufacturers that copy designer styles follow this strategy, as do firms such as Hewlett-Packard and Caterpillar. They follow smaller and more innovative competitors with superior products, but only after competitors have demon- strated the market is there. Italy’s Moleskine SpA, a small maker of fashion- able notebooks, is another example of imitation strategy but in a different way: looking to open more retail shops around the world, it imitates the expansion strategies of larger, successful fashion companies Salvatore Ferragamo SpA and Brunello Cucinelli.43

Foundations of Organization Structure CHAPTER 15 549 Imitating the successful growth strat- egy of several large fashion firms, Italian retailer Moleskine plans to increase sales of its popular line of notebooks and travel accessories by opening about 20 new stores each year throughout the world. The expan- sion plan focuses on store openings in metropolitan and business hubs such as New York City, London, and Beijing. Source: Alessandro Garofalo/Reuters /Landov Exhibit 15-8 describes the structural option that best matches each strategy. Innovators need the flexibility of the organic structure (although, as we noted, they may use some elements of the mechanistic structure as well), whereas cost minimizers seek the efficiency and stability of the mechanistic structure. Imita- tors combine the two structures. They use a mechanistic structure to maintain tight controls and low costs in their current activities but create organic subunits in which to pursue new undertakings. Organization Size An organization’s size significantly affects its structure. Organizations that employ 2,000 or more people tend to have more specialization, more depart- mentalization, more vertical levels, and more rules and regulations than do small organizations. However, size becomes less important as an organization expands. Why? At around 2,000 employees, an organization is already fairly mechanistic; 500 more employees won’t have much impact. But adding 500 employees to an organization of only 300 is likely to significantly shift it toward a more mechanistic structure. Exhibit 15-8 the Strategy–Structure Relationship Strategy Structural Option Innovation Organic: A loose structure; low specialization, low formalization, decentralized Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings

550 PART 3 The Group technology The way in which an organiza- technology tion transfers its inputs into outputs. Technology describes the way an organization transfers inputs into outputs. Every environment Forces outside an organization has at least one technology for converting financial, human, and organization that potentially affect the physical resources into products or services. For example, the Chinese consum- organization’s structure. er electronics company Haier uses an assembly-line process for mass-produced products, which is complemented by more flexible and innovative structures to respond to customers and design new products.44 Also, colleges may use a num- ber of instructional technologies—the ever-popular lecture, case analysis, experi- ential exercise, programmed learning, online instruction, and distance learning. Regardless, organizational structures adapt to their technology. environment An organization’s environment includes outside institutions or forces that can affect its structure, such as suppliers, customers, competitors, and public pres- sure groups. Dynamic environments create significantly more uncertainty for managers than do static ones. To minimize uncertainty in key market arenas, managers may broaden their structure to sense and respond to threats. Most companies, for example Pepsi and Southwest Airlines, have added social net- working departments to counter negative information posted on blogs. Or com- panies may form strategic alliances. Any organization’s environment has three dimensions: capacity, volatility, and complexity.45 Capacity refers to the degree to which the environment can support growth. Rich and growing environments generate excess resources, which can buffer the organization in times of relative scarcity. Volatility describes the degree of instability in the environment. A dynamic environment with a high degree of unpredictable change makes it difficult for management to make accurate predictions. Because information tech- nology changes at such a rapid place, more organizations’ environments are becoming volatile. Finally, complexity is the degree of heterogeneity and concentration among environmental elements. Simple environments—like the tobacco industry where the methods of production, competitive and regulatory pressures, and the like haven’t changed in quite some time—are homogeneous and concen- trated. Environments characterized by heterogeneity and dispersion—like the broadband industry—are complex and diverse, with numerous competitors. Exhibit 15-9 summarizes our definition of the environment along its three dimensions. The arrows indicate movement toward higher uncertainty. Thus, Exhibit 15-9 three-dimensional Model of the environment Stable Abundant Simple Complex Scarce Dynamic

Foundations of Organization Structure CHAPTER 15 551 institutions Cultural factors that lead organizations that operate in environments characterized as scarce, dynamic, many organizations to have similar structures, and complex face the greatest degree of uncertainty because they have high unpredictability, little room for error, and a diverse set of elements in the envi- especially those factors that might not lead to ronment to monitor constantly. adaptive consequences. Given this three-dimensional definition of environment, we can offer some general conclusions about environmental uncertainty and structural arrange- ments. The more scarce, dynamic, and complex the environment, the more organic a structure should be. The more abundant, stable, and simple the envi- ronment, the more the mechanistic structure will be preferred. Institutions Another factor that shapes organizational structure is institutions. These are cultural factors that act as guidelines for appropriate behavior.46 Institutional theory describes some of the forces that lead many organizations to have similar structures and, unlike the theories we’ve described so far, focuses on pressures that aren’t necessarily adaptive. In fact, many institutional theorists try to high- light the ways corporate behaviors sometimes seem to be performance oriented but are actually guided by unquestioned social norms and conformity. The most obvious institutional factors come from regulatory pressures; certain industries under government contracts, for instance, must have clear reporting relationships and strict information controls. Sometimes simple inertia determines an organizational form—companies can be structured in a particular way just because that’s the way things have always been done. Organi- zations in countries with high power distance might have a structural form with strict authority relationships because it’s seen as more legitimate in that culture. Some have attributed problems in adaptability in Japanese organizations to the institutional pressure to maintain authority relationships. Sometimes organizations start to have a particular structure because of fads or trends. Organizations can try to copy other successful companies just to look good to investors, and not because they need that structure to perform better. Many companies have recently tried to copy the organic form of a company like Google only to find that such structures are a very poor fit with their operat- ing environment. Institutional pressures are often difficult to see specifically because we take them for granted, but that doesn’t mean they aren’t powerful. Try IT! If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete the Simulation: Organizational Structure. 15-6 Analyze the behavioral Organizational Designs and Employee implications of different Behavior organizational designs. We opened this chapter by implying an organization’s structure can have signifi- cant effects on its members. What might those effects be? A review of the evidence leads to a pretty clear conclusion: You can’t gen- eralize! Not everyone prefers the freedom and flexibility of organic structures. Different factors stand out in different structures as well. In highly formalized, heavily structured, mechanistic organizations, the level of fairness in formal policies and procedures (organizational justice) is a very important predictor of satisfaction. In more personal, individually adaptive organic organizations,

552 PART 3 The Group employees can Work just as Well from Home Myth or Science? T his statement is true, but not Although we can all think of jobs physical distance without sharing time unequivocally. Employees who that may never be conducive to work- or space with others, but it is perhaps work from home even part of the ing from home (such as many in the the reason that Yahoo!, Best Buy, and time report they are happier, and as service industry), not all positions that other corporations have brought their we saw in Chapter 3, happier employ- could be based from home should be. employees back into the office. ees are likely to be more productive Research indicates the success of a than dissatisfied counterparts. From work-from-home position depends on The success of a work-from-home an organization’s perspective, compa- the job’s structure even more than program depends on the individual, nies are realizing gains of 5 to 7 extra on its tasks. The amount of interde- job, and culture of the organization. work hours a week for each employee pendence needed between employ- Work from home can be satisfying for working from home. There are also cost ees within a team or in a reporting employees and efficient for organiza- savings, from reduced overhead for of- relationship sometimes requires epis- tions, but we are learning that there fice space and utilities to elimination of temic interdependence, which is each are limits. unproductive social time. Employers of employee’s ability to predict what a home-based workforce can establish other employees will do. Organization Sources: M. Mercer, “Shirk Work? Working at work teams and organizational reporting consultants pay attention to how em- Home Can Mean Longer Hours,” TriCities.com, relationships with little attention to of- ployee roles relate in the architecture March 4, 2013, www.tricities.com/news/ fice politics, making it possible to more of the organization chart, realizing that opinion_columns/article_d04355b8-83cb- objectively assign roles and respon- intentional relationship building is key. 11e2-bc31-0019bb30f31a.html; P. Puranam, sibilities. These may be some of the Thus, while an employee may com- M. Raveendran, and T. Knudsen, “Organiza- reasons organizations have increasingly plete the tasks of a job well by working tion Design: The Epistemic Interdependence endorsed the concept of telecommut- alone from home, the benefits of team- Perspective,” Academy of Management Re- ing, to the point where 3.1 million U.S. work can be lost. We don’t yet fully view 37, no. 3 (2012): 419–40; N. Shah, payrolled employees work from home. understand the impact of working at a “More Americans Working Remotely,” The Wall Street Journal, March 6, 2013, A3; and R. E. Silverman and Q. Fottrell, “The Home Of- fice in the Spotlight,” The Wall Street Journal, February 27, 2013, B6. employees value interpersonal justice more.47 Some people are most productive and satisfied when work tasks are standardized and ambiguity is minimized— that is, in mechanistic structures. So, any discussion of the effect of organiza- tional design on employee behavior has to address individual differences. To do so, let’s consider employee preferences for work specialization, span of control, and centralization.48 The evidence generally indicates that work specialization contributes to higher employee productivity—but at the price of job satisfaction. However, work specialization is not an unending source of higher productivity. Problems start to surface, and productivity begins to suffer, when the human disecono- mies of doing repetitive and narrow tasks overtake the economies of specializa- tion. As the workforce has become more highly educated and desirous of jobs that are intrinsically rewarding, we seem to reach the point at which productiv- ity begins to decline as a function of specialization more quickly than in the past. While decreased productivity often prompts companies to add oversight and inspection roles, the better answer may be to reorganize work functions and accountability.49 There is still a segment of the workforce that prefers the routine and repeti- tiveness of highly specialized jobs. Some individuals want work that makes minimal intellectual demands and provides the security of routine; for them, high work specialization is a source of job satisfaction. The question is whether

Foundations of Organization Structure CHAPTER 15 553 they represent 2 percent of the workforce or 52 percent. Given that some self- selection operates in the choice of careers, we might conclude that negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity. It is probably safe to say no evidence supports a relationship between span of control and employee satisfaction or performance. Although it is intuitively attractive that large spans might lead to higher employee performance because they provide more distant supervision and more opportunity for personal initia- tive, research fails to support this notion. Some people like to be left alone; oth- ers prefer the security of a boss who is quickly available at all times. Consistent with several of the contingency theories of leadership discussed in Chapter 12, we would expect factors such as employees’ experiences and abilities, and the degree of structure in their tasks, to explain when wide or narrow spans of con- trol are likely to contribute to performance and job satisfaction. However, some evidence indicates that a manager’s job satisfaction increases as the number of employees supervised increases. We find fairly strong evidence linking centralization and job satisfaction. In general, less centralized organizations have a greater amount of autonomy. And autonomy appears positively related to job satisfaction. But, again, while one employee may value freedom, another may find autonomous environments frustratingly ambiguous. We can draw one obvious insight: people don’t select employers randomly. They are attracted to, are selected by, and stay with organizations that suit their personal characteristics.50 Job candidates who prefer predictability are likely to seek out and take employment in mechanistic structures, and those who want autonomy are more likely to end up in organic structures. Thus, the effect of structure on employee behavior is undoubtedly reduced when the selection pro- cess facilitates proper matching of individual characteristics with organizational characteristics. Furthermore, companies should strive to establish, promote, and maintain the unique identity of their structures since skilled employees may quit as a result of dramatic changes.51 Research suggests national culture influences the preference for structure.52 Organizations that operate with people from high power-distance cultures, such as Greece, France, and most of Latin America, often find their employees are much more accepting of mechanistic structures than are employees from low power-distance countries. So consider cultural differences along with individual differences when predicting how structure will affect employee performance and satisfaction. Finally, the changing landscape of organizational structure designs has implications for the individual progressing on a career path. Research with managers in Japan, the United Kingdom, and the United States indicated that employees who weathered downsizing and resulting hybrid organizational structures considered their future career prospects diminished. While this may or may not have been correct, their thinking shows that organizational struc- ture does affect the employee and thus must be carefully designed.53 WATch IT! If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete the video exercise titled ZipCar: Organizational Structure.

554 PART 3 The Group Exhibit 15-10 Organizational Structure: Its determinants and Outcomes Causes determines Structural designs associated Performance • Strategy • Mechanistic with and • Size • Organic • Technology satisfaction • Environment • Institutions Moderated by individual differences and cultural norms Summary The theme of this chapter is that an organization’s internal structure contrib- utes to explaining and predicting behavior. That is, in addition to individual and group factors, the structural relationships in which people work have a bearing on employee attitudes and behavior. What’s the basis for this argument? To the degree that an organization’s structure reduces ambiguity for employees and clarifies concerns such as “What am I supposed to do?”, “How am I supposed to do it?”, “To whom do I report?”, and “To whom do I go if I have a problem?” it shapes their attitudes and facilitates and motivates them to higher levels of performance. Exhibit 15-10 summarizes what we’ve discussed. Implications for Managers ●● Specialization can make operations more efficient, but remember that excessive specialization can create dissatisfaction and reduced motivation. ●● Avoid designing rigid hierarchies that overly limit employees’ empower- ment and autonomy. ●● Balance the advantages of remote work against the potential pitfalls before adding flexible workplace options into the organization’s structure. ●● Downsize your organization to realize major cost savings, and focus the company around core competencies—but only if necessary, because downsizing can have a significant negative impact on employee affect. ●● Consider the scarcity, dynamism, and complexity of the environment, and balance organic and mechanistic elements when designing an organiza- tional structure.

Foundations of Organization Structure CHAPTER 15 555 the end of Management POInt COunterPOInt Management—at least as we know it—is dying. Formal organi- T here is no “right size fits all” approach to organizational struc- zational structures are giving way to flatter, less bureaucratic, ture. How flat, informal, and collaborative an organization should less formal structures. And that’s a good thing. Innovative be depends on many factors, but no matter what, management companies like Apple, Google, Facebook, Twitter, and Groupon were structure is needed. let’s consider two cases. born and now thrive thanks not to a multilayered bureaucracy, but to an innovative idea that was creatively executed by a flexible group of People lauded how loosely and informally Warren Buffett struc- people freely collaborating. management in those companies exists to tured his investment firm, Berkshire Hathaway, until it was discovered facilitate, rather than control. his CFo and heir apparent David sokol was on the take. Wouldn’t Buf- fett have known sokol was compromised if he supervised more closely The scope of what managers do has broadened to include typing, or had structures in place to check such “freedom”? It’s hard to argue taking notes, and managing their own files/schedules, while the scope with Berkshire Hathaway’s past successes, but they don’t prove the of what administrative assistants do has broadened to include making company is ideally structured. social media posts and assuming technical duties. The most innova- tive firms have questioned whether they need job titles at all, instead At Honeywell International, Ceo David Cote seems relaxed and emphasizing collaboration throughout the organization. fun-loving (he rides a Harley and wears a leather bomber jacket to work), but his hard-hitting work ethic and firm hand on the reins are The best companies have eliminated offices altogether and en- legendary. Cote’s control focus doesn’t end at the executive suite. At courage employees to mingle and form teams according to their proj- the factories, job titles are painted literally on the floor to indicate ect interests. This suits younger workers who aspire to work with the who needs to be present—and standing—at organizational meetings top players rather than report to them, and who value flexible hours limited to 15 minutes by the clock. Is Cote a control freak? maybe, and work-from-home options. Job titles are gone, roles are ambiguous, but he successfully merged three disparate company cultures and and reporting relationships morph by project. more than 250 factories—the new Honeywell has climbed the Fortune 500 ranks and pulls in over $40 billion in annual sales. Profits have “There’s a struggle right now between the old and the new,” noted increased even faster than sales, in part due to Cote’s insistence on Adam leitman Bailey, a new york real estate lawyer. “We don’t know freezing raises and hiring only two to three employees for every four what works. In the end, it’s what’s going to be best for the talent we to five who exit. hire.” The talent is ready for the elimination of management as we know it. The successful corporation of the future will have a flatter Berkshire Hathaway and Honeywell illustrate the strong need organizational structure and accountability based on performance. for management structure in an ever-changing, diverse, worldwide marketplace. Sources: A. Bryant, “structure? The Flatter the Better,” The New York Times, January 17, 2010, BU2; “Honeywell Interna- tional: From Bitter to sweet,” The Economist, April 14, 2012, www.economist.com/node/21552631; A. efrati and s. morrison, “Chief seeks more Agile Google,” The Wall Street Journal, January 22, 2011, B1, B4; H. el nasser, “What office? laptops Are Workspace,” USA Today, June 6, 2012; Fortune 500 rankings, http://money.cnn.com/magazines/ fortune/fortune500/2012/full_list/; “Honeywell | Company structure Information from ICIs,” ICIS.com, www.icis.com/ v2/companies/9145292/honeywell/structure.html; K. linebaugh, “Honeywell’s Hiring Is Bleak,” The Wall Street Journal, march 6, 2013, B3; A. murray, “The end of management,” The Wall Street Journal, August 21, 2010, W3; A. r. sorkin, “Delegator in Chief,” The New York Times, April 24, 2011, B4; and s. Tully, “How Dave Cote Got Honeywell’s Groove Back,” CNN Money, may 14, 2012, http://management.fortune.cnn.com/2012/05/14/500-honeywell-cote/.

556 PART 3 The Group cHaPter revieW MyManagementLab Go to mymanagementlab.com to complete the problems marked with this icon. QuestiOns FOr revieW 15-4 How might downsizing affect organizational 15-1 What are seven key elements to define structures and employees? an organization’s structure? 15-5 How are mechanistic and organic structural 15-2 What are the characteristics of the functional, models similar and different? divisional, and matrix structures? 15-6 What are the behavioral implications of 15-3 What are the characteristics of the virtual different organizational designs? structure, the team structure, and the circular structure? exPerientiaL exercise The Sandwich Shop Divide the class into groups of at least four individuals. A Bureaucracy As background: The managers of a new chain of Determine what a bureaucratic structure would look like  for this organization. Bureaucracies are marked sandwich shops will need to determine what types of sand- by  more hierarchy, small spans of control, and spe- wiches consumers want and find recipes and ingredients. cialized decision making. Again, you will want to Ingredient sources, prices, and other logistical require- establish task  assignments, delegation, coordination, ments (like refrigeration) will need to be determined, and the number of individuals required. Also consid- purchasing decisions will be ongoing, and supplier rela- er possibilities for future growth with a bureaucratic tionships will need to be managed. Financing must also system. be arranged at this early phase. With this groundwork, the company will move to the next stage of marketing, includ- A Virtual Structure ing pricing and the development of advertising materials. Determine what a virtual structure would look like Finally, selecting and training workers will occur. for this organization if many of the aspects of the busi- ness are outsourced. Consider which tasks can be Each group creates the following: adequately performed by individuals who do not work within the  restaurant chain, and which should be kept A Simple Structure in house. Determine what a simple structure would look like for this organization. Recall that a simple structure is one in Debriefing which there is little hierarchy, wide spans of control, and After all groups have developed different structural centralized decision making. To whom would the various options, convene for class discussion for groups to tasks described above be assigned? What sort of delega- describe how they created responsibilities for differ- tion might take place? Who would coordinate the multiple ent individuals. Then the class should talk about which operations? About how many people would be acting in system of organization seems most beneficial for this an administrative role, and what sort of spans of control business. would they have? What challenges will the organization face as it grows?

Foundations of Organization Structure CHAPTER 15 557 etHicaL DiLeMMa Post-Millennium Tensions in the Flexible Organization The message from the business press has been consistent: of job security can result in exhaustion and an apprehen- don’t count on long-term employment. For years, job seek- sive approach to work problems. ers have been told they should expect to be responsible for their own careers and prepare for the possibility that they Corporate leaders ask themselves what their role in cre- will be changing jobs frequently. A simple look at employ- ating job security should be. Some note that companies ment trends also confirms that highly routine and well- built around stability and security are less likely to compete defined jobs have been decreasing in number. successfully and may go out of business. Many organiza- tions try to maintain flexibility and a certain level of secu- The shift has often been described in fairly positive rity. For example, Scripps Health has maintained a pool of terms. Managers work to create organizations that have internal transfer opportunities and training assignments laudable characteristics like adaptability, flexibility, and for individuals whose job functions are no longer needed. creativity. Author Micha Kaufman notes that doing well As a result, even within the highly volatile health care in- in contemporary business environments means “hav- dustry, it has been able to avoid layoffs. However, systems ing the flexibility to let go of the ideas of the past, the that provide job security do not come cheaply, nor are they courage to constantly reevaluate plans for the future, feasible for all companies. and the presence of mind to adapt to life, as it is, in the moment.” There is a lot of appeal in creating your own Questions future at work. 15-7. Do you think that stability is good or bad for employees? At the same time, many workers land in precarious posi- 15-8. Do employers have an ethical responsibility to pro- tions. Researchers find that individuals who feel insecure vide security for employees or just a warning about or uncertain about future employment experience higher a lack of security? levels of psychological strain and worry. Insecure work- 15-9. If long-term employment security isn’t feasible, ers also get sick more frequently. Contrary to the positive what alternatives might employers provide to help image of the freelance worker with boundless energy and employees make smoother transitions? creativity, evidence shows that for many individuals, a lack Sources: M. Kaufman, “The Wisdom of Job Insecurity,” Forbes, October 3, 2014, http://www.forbes .com/sites/michakaufman/2014/10/03/the-wisdom-of-job-insecurity-dont-be-lulled-by-falling- unemployment/; C. Van Gorder, “A No-Layoffs Policy Can Work, Even in an Unpredictable Economy,” Harvard Business Review, January 26, 2015, https://hbr.org/2015/01/a-no-layoffs-policy- can-work-even-in-an-unpredictable-economy; J. Zumbrun, “Is Your Job ‘Routine’? If So, It’s Proba- bly Disappearing,” Wall Street Journal, April 8, 2015, http://blogs.wsj.com/economics/2015/04/08/ is-your-job-routine-if-so-its-probably-disappearing/; U. Kinnunen, A. Mäkikangas, S. Mauno, N. De Cuyper, and H. De Witte, “Development of Perceived Job Insecurity across Two Years: Associations with Antecedents and Employee Outcomes,” Journal of Occupational Health Psychology 19 (2014): 243–58. case inciDent 1 Kuuki: Reading the Atmosphere Most Japanese businesses have very complex vertically role of negotiators on behalf of the manufacturing depart- structured organizations. Each of the key departments of ment or research and development. Inter-departmental the organization has its own vertical structure and oper- communications are not common. ates rather like individual businesses. There is very little inter-relationship between departments. Each department One of the problems is that salespeople rarely have techni- has very clearly defined roles. cal expertise. The majority of salespeople would not have stud- ied science and technology and are more likely to be qualified When the business interacts with customers, it is the in the arts. They are chosen for the sales role due to their social sales and marketing departments that handle negotia- skills. The perception is that engineers and technical specialists tions. Even when the customer needs technical informa- are not as sociable and are therefore not good sellers. tion and support, sales and marketing are often involved as an intermediary between the company engineers and the In their offices, larger Japanese companies tend to have customer. It is common for sales specialists to take on the open plan spaces. This allows the departmental head to learn what other people do and to ensure that they share

558 PART 3 The Group information. In smaller Japanese businesses it is common Questions for the business owner to also be based in an open plan environment. 15-10. Complex vertical organizational structures are very hierarchical in nature. They are very rigid, with The key to success is “reading the air” or reading the each department having clearly defined roles. Is kuuki. Keeping alert to what is being said and what is such an organization capable of being agile and being done means that Japanese managers have instant responsive or is it a disadvantage? access to up-to-date information. It means that they know what individual employees know. Individuals in a 15-11. What are the problems in having such strictly department are comfortable with this situation; infor- defined roles? mal information sharing is seen as an effective and vital process. 15-12. Is reading the air just eavesdropping and spying on others? Would most employees be comfortable with this situation? Source: John Spacey, “Why You Need to Read the Air in Japan,” Japan Talk, http://www.japan-talk .com/jt/new/kuuki-yomenai (accessed January 24, 2014) case inciDent 2 Boeing Dreamliner: Engineering Nightmare or Organizational Disaster? As a flight of imagination, Boeing’s 787 Dreamliner was If Boeing and industry watchers thought its troubles an excellent idea: made of composite materials, the plane were over when the first order was delivered to All Nippon would be lightweight enough to significantly reduce fuel Airways (ANA) in 2011, 3 years behind schedule and af- costs while maintaining a passenger load up to 290 seats. ter at least seven manufacturing delays, they were wrong. Airline carriers chose options from a long list of unprec- Besides the continuing woes of remaining behind sched- edented luxuries to entice the flying public and placed ule, Boeing’s Dreamliner suffered numerous mechanical their orders well ahead of the expected completion dates. problems. After the plane’s technologically advanced lith- And then the problems started. ium-ion batteries started a fire on one aircraft and forced another into an emergency landing in January 2013, ANA An airplane like the 787 has a design about as complex as and Japan Airlines grounded their fleets. The FAA fol- that of a nuclear power plant, and Boeing’s equally complex lowed suit, grounding all 787s in the United States. The offshore organizational structure didn’t help the execution. remaining 50 flying Dreamliners worldwide were then Boeing outsources 67 percent of its manufacturing and confined to the tarmac until a solution could be found. many of its engineering functions. While the official assem- bly site is in Everett, Washington, parts were manufactured This looked like an organizational structure problem, at 100 supplier sites in countries across the globe, and some both at corporate headquarters and abroad. However, of those suppliers subcontracted piecework to other firms. there have been so many management changes during Because the outsourcing plan allowed vendors to develop the 787’s history that it would be difficult for anyone to their own blueprints, language barriers became a problem identify responsibility for errors in order to make changes back in Washington as workers struggled to understand in the team or the organizational structure. For the work multilingual assembly instructions. When components done abroad, restructuring reporting relationships in didn’t fit together properly, the fixes needed along the sup- favor of smaller spans of control to heighten management ply chain and with engineering were almost impossible to accountability and tie suppliers to the organizational struc- implement. The first aircraft left the runway on a test flight ture of corporate Boeing could be considered. Or “reshor- in 2009, but Boeing had to buy one of the suppliers a year ing” to bring manufacturing physically close to the final later (cost: $1  billion) to help make the planes. The first assembly site and under Boeing’s control while centraliz- customer delivery was still years away. ing the organizational structure could be an option.

Foundations of Organization Structure CHAPTER 15 559 Questions suggest for fixing the ongoing manufacturing problems? Sketch out the potential design. 15-13. Do you think this is a case of the difficulty of 15-15. What organizational structure would you suggest launching new technology (there are “bugs” in to effectively tie in Boeing’s managers and suppli- any system), or one of an unsuccessful launch? ers abroad? Sketch your ideas. (Goals for manag- ers might include facilitating teams, coordinating 15-14. What type of executive management structure do efforts, maintaining organizational transparency, you think would be most conducive to getting the and creating conversations.) Dreamliner past a component failure and back in flight? Is this a different structure than you would Sources: S. Denning, “The Boeing Debacle: Seven Lessons Every CEO Must Learn,” Forbes, Janu- ary 17, 2013, www.forbes.com/sites/stevedenning/2013/01/17/the-boeing-debacle-seven-lessons- every-ceo-must-learn/; E. Frauenheim, “Homeward Bound,” Workforce Management, February 2013, 26–31; C. Hymowitz, “Boeing CEO’s Task: Get the Dreamliner Airborne Again,” Bloomberg Busi- nessweek, January 24, 2013, www.businessweek.com/articles/2013-01-24/boeing-ceos-task-get-the- dreamliner-airborne-again/; D. Nosowitz, “Why Is Boeing’s 787 Dreamliner Such a Piece of Crap?” Popsci, January 17, 2013, www.popsci.com/technology/article/2013-01/why-boeings-787-dreamliner- such-piece-crap; J. Ostrower and A. Pasztor, “Boeing Plays Down 787 Woes; Net Falls 30%,” The Wall Street Journal, January 31, 2013, B3; and D. Terdiman, “Boeing’s Dreamliner Struggles Despite Tech Superiority,” C/Net, February 24, 2012, http://news.cnet.com/8301-13772_3-57385001-52/boeings- dreamliner-struggles-despite-tech-superiority/. MyManagementLab Go to mymanagementlab.com for the following Assisted-graded writing questions: 15-16. Considering Case Incident 2, how would you have envisioned the best organizational structure for Boeing during its development of the Dreamliner? How might you change the structure during the production phase of the airplane? 15-17. Based on what you’ve discovered about your personality traits on the Big Five Model through your organizational behavior studies in Chapter 5, in which organizational structures might you work best? 15-18. MyManagementLab Only – comprehensive writing assignment for this chapter.

560 PART 3 The Group enDnOtes Ties Outside of the Team,” Organization Science Resource Planning 28, no. 1 (2005): 39–48; and 25 (2014): 1434–52; J. Han, J. H., and D. J. T. Sy and S. Cote, “Emotional Intelligence: A 1L. Garicano and Y. Wu, “Knowledge, Com- Brass, “Human Capital Diversity in the Cre- Key Ability to Succeed in the Matrix Organiza- munication, and Organizational Capabilities,” ation of Social Capital for Team Creativity,” tion,” Journal of Management Development 23, Organization Science, September–October 2012, Journal of Organizational Behavior 35 (2014): no. 5 (2004): 437–55. 1382–97. 54–71; N. Sivasubramaniam, S. J. Liebowitz, 27N. Anand and R. L. Daft, “What Is the Right 2See, for instance, R. L. Daft, Organization and C. L. Lackman, “Determinants of New Organization Design?” Organizational Dynamics Theory and Design, 10th ed. (Cincinnati, OH: Product Development Team Performance: A 36, no. 4 (2007): 329–44. South-Western Publishing, 2010). 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Walter, G. S. Van der Vegt, terly 51, no. 3 (2006): 451–95; H. M. Latapie one-microsoft-company-realigns-to-enable- and P. J. M. D. Essens, “Antecedents of and V. N. Tran, “Subculture Formation, Evolu- innovation-at-greater-speed-efficiency/. Individuals’ Interteam Coordination: Broad tion, and Conflict between Regional Teams 8Ibid. Functional Experiences as a Mixed Blessing,” in Virtual Organizations,” The Business Review, 9A. Wilhelm, “Microsoft Shakes Up Its Leader- Academy of Management Journal 57 (2014): Summer 2007, 189–93; and S. Davenport and ship and Internal Structure as Its Fiscal Year 1334–59. U. Daellenbach, “‘Belonging’ to a Virtual Comes to a Close,” TechCrunch, June 17, 20A. Murray, “Built Not to Last,” The Wall Street Research Center: Exploring the Influence of 2015, http://techcrunch.com/2015/06/17/ Journal, March 18, 2013, A11. Social Capital Formation Processes on Mem- microsoft-shakes-up-its-leadership-and-internal- 21For a quick overview, see J. 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Foundations of Organization Structure CHAPTER 15 561 starbucks-first-quarter-profit-surges-82-as-food- 44J. Backaler, “Haier: A Chinese Company that 48See, for instance, Spell and Arnold, “A sales-increase. Innovates,” Forbes, June 17, 2010, http://www Multi-Level Analysis of Organizational Jus- 38L. I Alpert, “Can Imported CEO Fix Russian .forbes.com/sites/china/2010/06/17/haier-a- tice Climate, Structure, and Employee Men- Cars?” The Wall Street Journal, March 20, 2013, chinese-company-that-innovates/. tal Health”; J. D. Shaw and N. Gupta, “Job http://www.wsj.com/articles/SB10001424127 45See, for instance, J. A. Cogin and I. O. Complexity, Performance, and Well-Being: 887323639604578370121394214736. Williamson, “Standardize or Customize: The When Does Supplies-Values Fit Matter? 39K. Walker, N. Ni, and B. Dyck, “Recipes for Interactive Effects of HRM and Environment Personnel Psychology 57, no. 4 (2004): 847–79; Successful Sustainability: Empirical Organi- Uncertainty on MNC Subsidiary Perfor- and C. Anderson and C. E. Brown, “The zational Configurations for Strong Corporate mance,” Human Resource Management 53, no. Functions and Dysfunctions of Hierarchy,” Environmental Performance,” Business Strategy 5 (2014): 701–21; G. Kim and M.-G. Huh, Research in Organizational Behavior 30 (2010): and the Environment 24, no. 1 (2015): 40–57. “Exploration and Organizational Longevity: 55–89. 40See, for instance, J. R. Hollenbeck, The Moderating Role of Strategy and Environ- 49T. Martin, “Pharmacies Feel More Heat,” H. Moon, A. P. J. Ellis, B. J. West, D. R. Ilgen, ment,” Asia Pacific Journal of Management 32, The Wall Street Journal, March 16–17, L. Sheppard, C. O. L. H. Porter, and J. A. no. 2 (2015): 389–414. 2013, A3. Wagner III, “Structural Contingency Theory 46R. Greenwood, C. R. Hinings, and 50See, for instance, R. E. Ployhart, J. A. and Individual Differences: Examination of D. Whetten, “Rethinking Institutions and Weekley, and K. Baughman, “The Structure External and Internal Person-Team Fit,” Jour- Organizations,” Journal of Management Stud- and Function of Human Capital Emergence: nal of Applied Psychology, June 2002, 599–606; ies, 51 (2014): 1206–20; D. Chandler and A Multilevel Examination of the Attraction- and A. Drach-Zahavy and A. Freund, “Team H. Hwang, “Learning from Learning Selection-Attrition Model,” Academy of Manage- Effectiveness Under Stress: A Structural Con- Theory: A Model of Organizational Adop- ment Journal 49, no. 4 (2006): 661–77. tingency Approach,” Journal of Organizational tion Strategies at the Microfoundations of 51J. B. Stewart, “A Place to Play for Google Behavior 28, no. 4 (2007): 423–50. Institutional Theory,” Journal of Management Staff,” The New York Times, March 16, 41K. Walker, N. Ni, and B. Dyck, “Recipes for 41 (2015): 1446–76. 2013, B1. Successful Sustainability: Empirical Organi- 47C. S. Spell and T. J. Arnold, “A Multi- 52See, for instance, B. K. Park, J. A. Choi, zational Configurations for Strong Corporate Level Analysis of Organizational Justice and M. Koo, et al., “Culture, Self, and Preference Environmental Performance.” Climate, Structure, and Employee Mental Structure: Transitivity and Context Indepen- 42See, for instance, S. M. Toh, F. P. Morge- Health,” Journal of Management 33, no. 5 dence Are Violated More by Interdependent son, and M. A. Campion, “Human Resource (2007): 724–51; and M. L. Ambrose and People,” Social Cognition, February 2013, Configurations: Investigating Fit with the M. Schminke, “Organization Structure as 106–18. Organizational Context,” Journal of Applied a Moderator of the Relationship between 53J. Hassard, J. Morris, and L. McCann, “‘My Psychology 93, no. 4 (2008): 864–82. Procedural Justice, Interactional Justice, Brilliant Career?’ New Organizational Forms 43M. Mesco, “Moleskine Tests Appetite for Perceived Organizational Support, and and Changing Managerial Careers in Japan, IPOs,” The Wall Street Journal, March 19, Supervisory Trust,” Journal of Applied the UK, and USA,” Journal of Management 2013, B8. Psychology 88, no. 2 (2003): 295–305. Studies, May 2012, 571–99.

Organizational 16 Culture 562 Source: Ruben Sprich/Reuters /Landov

Learning Objectives After studying this chapter, you should be able to: 16-1 Describe the common characteristics of organiza- 16-4 Show how culture is transmitted to employees. 16-2 tional culture. 16-5 Describe the similarities and differences in creat- 16-3 Compare the functional and dysfunctional effects 16-6 ing an ethical culture, a positive culture, and a of organizational culture on people and the spiritual culture. organization. Show how national culture can affect the way Identify the factors that create and sustain an organizational culture is transported to another organization’s culture. country. MyManagement If your professor has chosen to assign this, go to the Assignments section of mymanagementlab.com to complete the chapter warm up. Welcome to the machine During the Second World War, a quiet revolution was launched in an unassuming barn in Bletchley Park that would permanently transform the culture of British military intelligence. The Allies, Great Britain in particular, regularly intercepted German commu- nications but couldn’t decode them. The traditional British code-breaking operation was notoriously inefficient, guided by individual cryptographers looking for patterns in secret commu- nications. Finally, the innovative ideas of Alan Turing and Gordon Welchman resulted in an early computer that combed thou- sands of encrypted German messages to crack the code. Once its effectiveness had been demonstrated, the old bureaucratic British intelligence management system was rapidly reconfig- ured. A new culture now needed to embrace the role of big data while recognizing that human perceivers could still best decide how to use the decoded findings to outwit the enemy. It might seem that adding an automated process for deci- sion making is a matter of practicality and has little to do with culture. In practice, though, we encounter many cultural issues on the road to adopting electronic decision aids. The founder of massive hedge fund Bridgewater Associates, Ray Dalio (pictured here), notes that the transi- tion to his organization’s data-oriented culture isn’t always easy for new hires. He said, “There’s a period—usually about 18 months—of sort of

564 PART 4 The Organization System adaptation to this. And some make it and some don’t make it.” People sometimes resist a culture in which decisions are guided by well-defined, mechanized rules for evaluating information. But over time, managers in organizations where everyone buys into these systems see clear benefits. As former Aetna CEO Ron Williams noted, “When you have a pre-agreed set of numbers presented in a uniform way, you can train the company how to think about problems.” Automated decision making requires a sophisticated organizational culture for successful implementation. Computer decision-making expert S. Barry Cooper notes that computerized decision systems do very well if they have enough data and a strict set of rules to guide them. But for funda- mental decisions like figuring out how to motivate a team to work together, determining what new product is going to appeal to consumers, or respond- ing to a competitor’s attempt to enter a market, human decision makers are still far ahead of machines. In dysfunctional cultures, managers often use data selectively to support their point of view, and conveniently ignore it when it doesn’t. Rather than generating a sense of fairness and objectivity, picking and choosing only supportive data leads followers to feel distrust and cynicism. It also misses out on all the advantages of supporting decisions led by data. On the other hand, a culture that over-relies on data and does not constantly question and evaluate the system’s underlying assumptions leads to equally bad decision making. The message from experienced managers is clear—big data is an effective decision aid only when it’s paired with a consistent and thoughtful culture, one that acknowledges the need for human decision making and individual judgments. Sources: C. Mims, “Why We Needn’t Fear the Machines,” Wall Street Journal, November 30, 2014, http://www.wsj.com/articles/why-we-neednt-fear-the-machines-1417394021; J. Freeman, “The Soul of a Hedge Fund ‘Machine,’” Wall Street Journal, June 6, 2014, http:// www.wsj.com/articles/james-freeman-the-soul-of-a-hedge-fund-machine-1402094722; and J. W. Ross, C. M. Beath, and A. Quaadgras, “You May Not Need Big Data after All,” Harvard Busi- ness Review, December 2013, https://hbr.org/2013/12/you-may-not-need-big-data-after-all. J ust as tribal cultures have totems and taboos that dictate how each member should act toward fellow members and outsiders, organizations have rules and norms that govern how members behave. We call these expectations the organi- zational culture. Every organization has a culture that, depending on its strength, can have a significant influence on the attitudes and behaviors of organization members, even if that effect is hard to measure precisely. As the opening discus- sion of incorporating big data illustrates, even strong improvements to decision making in organizations challenge the organizational culture. In this chapter, we’ll discuss what organizational culture is, how it affects employee attitudes and behavior, where it comes from, and whether it can be changed.

Organizational Culture CHAPTER 16 565 Watch It! If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete the video exercise titled Organizational Culture (TWZ Role Play). 16-1 Describe the common What Is Organizational Culture? characteristics of organizational culture. An executive once was asked what he thought organizational culture meant. He gave essentially the same answer U.S. Supreme Court Justice Potter Stewart organizational culture A system of gave in defining pornography: “I can’t define it, but I know it when I see it.” shared meaning held by members that In this section, we propose one definition and review several related ideas. distinguishes the organization from other organizations. a Definition of organizational culture Organizational culture refers to a system of shared meaning held by members that distinguishes the organization from other organizations.1 Seven primary characteristics seem to capture the essence of an organization’s culture:2 1. Innovation and risk taking. The degree to which employees are encour- aged to be innovative and take risks. 2. Attention to detail. The degree to which employees are expected to ex- hibit precision, analysis, and attention to detail. 3. Outcome orientation. The degree to which management focuses on re- sults or outcomes rather than on the techniques and processes used to achieve them. 4. People orientation. The degree to which management decisions take into consideration the effect of outcomes on people within the organization. 5. Team orientation. The degree to which work activities are organized around teams rather than individuals. 6. Aggressiveness. The degree to which people are aggressive and competi- tive rather than easygoing. 7. Stability. The degree to which organizational activities emphasize main- taining the status quo in contrast to growth. Each of these characteristics exists on a continuum from low to high. Apprais- ing an organization on the strength of each provides a basis for the shared understanding members have about the organization, how things are done in it, and the way they are supposed to behave. Let’s identify where the data-oriented Bridgewater Associates culture described in the introduction may fall on each of these characteristics. The push to use data to continuously revise methods is a clear example of highly valuing innovation, coupled with strong attention to detail and precise analyses. Bridgewater’s focus on intellectual rigor and independent thinking may place it somewhat lower than other organizations in terms of the people and teamwork dimensions. However, this is balanced by the company’s less competitive approach, in which potentially negative outcomes are seen as opportunities for learning and development. Finally, the organization places little value on overall stability, under Ray Dalio’s preference for constant innovation and change. Exhibit 16-1 contrasts two com- panies that are very different along these dimensions. culture is a Descriptive term If you’ve ever been in an organization (certainly you’ve been in many!), you probably noticed a pervasive culture among the members. Organizational cul- ture shows how employees perceive the characteristics of an organization, not

566 PART 4 The Organization System Exhibit 16-1 contrasting organizational cultures Organization A This organization is a manufacturing firm. Managers are expected to fully document all deci- sions, and “good managers” are those who can provide detailed data to support their rec- ommendations. Creative decisions that incur significant change or risk are not encouraged. Because managers of failed projects are openly criticized and penalized, managers try not to implement ideas that deviate much from the status quo. One lower-level manager quoted an often-used phrase in the company: “If it ain’t broke, don’t fix it.” There are extensive rules and regulations in this firm that employees are required to fol- low. Managers supervise employees closely to ensure there are no deviations. Management is concerned with high productivity, regardless of the impact on employee morale or turnover. Work activities are designed around individuals. There are distinct departments and lines of authority, and employees are expected to minimize formal contact with other employees outside their functional area or line of command. Performance evaluations and rewards emphasize individual effort, although seniority tends to be the primary factor in the deter- mination of pay raises and promotions. Organization B This organization is also a manufacturing firm. Here, however, management encourages and rewards risk taking and change. Decisions based on intuition are valued as much as those that are well rationalized. Management prides itself on its history of experimenting with new technologies and its success in regularly introducing innovative products. Managers or employees who have a good idea are encouraged to “run with it.” And failures are treated as “learning experiences.” The company prides itself on being market driven and rapidly responsive to the changing needs of its customers. There are few rules and regulations for employees to follow, and supervision is loose because management believes that its employees are hardworking and trustworthy. Management is concerned with high productivity but believes that this comes through treating its people right. The company is proud of its reputation as being a good place to work. Job activities are designed around work teams, and team members are encouraged to interact with people across functions and authority levels. Employees talk positively about the competition between teams. Individuals and teams have goals, and bonuses are based on achievement of these outcomes. Employees are given considerable autonomy in choosing the means by which the goals are attained. dominant culture A culture that whether they like them—that is, it’s a descriptive term. Research on organiza- expresses the core values that are shared by tional culture has sought to measure how employees see their organization: a majority of the organization’s members. Does it encourage teamwork? Does it reward innovation? Does it stifle initia- tive? In contrast, job satisfaction seeks to measure how employees feel about the core values The primary or dominant organization’s expectations, reward practices, and the like. Although the two values that are accepted throughout the terms have overlapping characteristics, keep in mind that organizational culture organization. is descriptive, whereas job satisfaction, for example, is evaluative. subcultures Minicultures within an Do organizations have Uniform cultures? organization, typically defined by department designations and geographical separation. Organizational culture represents a perception the organization’s members hold in common. Statements about organizational culture are valid only if individuals with different backgrounds or at different levels in the organization describe the culture in similar terms.3 The purchasing department can have a subculture that includes the core values of the dominant culture, such as aggressiveness, plus additional values unique to members of that department, such as risk-taking. The dominant culture expresses the core values a majority of members share and that give the organization its distinct personality.4 Subcultures tend to develop in large organizations in response to common problems or experi- ences a group of members face in the same department or location. Most large organizations have a dominant culture and numerous subcultures.5

Organizational Culture CHAPTER 16 567 an Organization’s culture is Forever myth or Science? T his is actually not true. Although The Wellspring program illustrates down to the lowest levels of the wide- organizational culture is difficult to the significant effect positive organi- spread organization. change and a significant change zational culture change can achieve. can take a long time, it can be done. CEO Bob Flexon of Dynegy Inc., a Positive results at Dynegy have in- Sometimes it is essential to survival. Houston-based electric utility giant cluded a reduction in turnover from 8 For years, Wisconsin’s Wellspring system emerging from bankruptcy, is trying to percent in 2011 to 5.8 percent in the provided nursing homes in which inpa- save his company by changing the or- turnaround of 2012. Flexon said, “Peo- tients had little input about their care ganizational culture. First, he ditched ple are cautiously beginning to believe and the organizational culture allowed lax the cushy CEO office suite, $15,000 that we can win again.” The company standards to prevail. Then the network marble desk, and Oriental rugs for a continues to report massive earnings of 11 nursing homes launched a culture small cubicle on a warehouse-style losses, but Flexon is optimistic about change initiative. Management focused floor shared with all 235 headquarters Dynegy’s rebound. He says, “Our ongo- on caregiver collaboration, education, employees. Next, he visited company ing focus on culture is what will make accountability, and empowerment. The facilities, trained “culture champi- the difference.” results were excellent. Wellspring real- ons,” reinstated annual performance ized fewer state standards infractions reviews, and increased employee col- Sources: J. Bellot, “Nursing Home Culture and higher employee retention rates laboration. He created a plaque as a Change: What Does It Mean to Nurses?” at the facilities, and the results for the reminder to “Be Here Now” instead Research in Gerontological Nursing, October patients were even greater: fewer bed- of multitasking and banned smart- 2012, 264–73; J. S. Lublin, “This CEO Used fast residents, less use of restraints phones from meetings. Flexon said, to Have an Office,” The Wall Street Journal, and psychoactive medication, less “The idea was to instill a winning spir- March 13, 2013, B1, B8; and J. Molineux, incontinence, and fewer tube feedings it,” and he counts on his visibility as “Enabling Organizational Cultural Change than in other nursing homes. CEO to broadcast the culture change Using Systemic Strategic Human Resource Management—A Longitudinal Case Study,” International Journal of Human Resource Management, April 1, 2013, 1588–612. strong culture A culture in which the core If organizations were composed only of subcultures, the dominant organi- values are intensely held and widely shared. zational culture would be significantly less powerful. It is the “shared meaning” aspect of culture that makes it a potent device for guiding and shaping behav- ior. That’s what allows us to say, for example, that the Zappos culture values customer care and dedication over speed and efficiency, which explains the behavior of Zappos executives and employees.6 Strong versus Weak cultures It’s possible to differentiate between strong and weak cultures.7 If most em- ployees (responding to surveys) have the same opinions about the organiza- tion’s mission and values, the culture is strong; if opinions vary widely, the culture is weak. In a strong culture, the organization’s core values are both intensely held and widely shared.8 The more members who accept the core values and the greater their commitment, the stronger the culture and the greater its influ- ence on member behavior. The reason is that a high degree of shared values and intensity create a climate of high behavioral control. Nordstrom employees know in no uncertain terms what is expected of them, for example, and these expectations go a long way toward shaping their behavior. A strong culture should reduce employee turnover because it demonstrates high agreement about what the organization represents. Such unanimity of pur- pose builds cohesiveness, loyalty, and organizational commitment. These quali- ties, in turn, lessen employees’ propensity to leave.9

568 PART 4 The Organization System culture versus Formalization We’ve seen in this text that high formalization creates predictability, orderli- ness, and consistency. A strong culture modifies behavior similarly. Therefore, we should view formalization and culture as two different roads to a common destination. The stronger an organization’s culture, the less management needs to be concerned with developing formal rules and regulations to guide employ- ee behavior. Those guides will be internalized in employees when they adopt the organization’s culture. 16-2 Compare the functional What Do Cultures Do? and dysfunctional effects of organizational Let’s discuss the role culture performs and whether it can ever be a liability for culture on people and an organization. the organization. the Functions of culture organizational climate The shared perceptions organizational members have Culture defines the rules of the game. First, it has a boundary-defining role: It creates distinctions between organizations. Second, it conveys a sense of identity about their organization and work for organization members. Third, culture facilitates commitment to something larger than individual self-interest. Fourth, it enhances the stability of the social environment. system. Culture is the social glue that helps hold the organization together by providing standards for what employees should say and do. Finally, it is a sense- making and control mechanism that guides and shapes employees’ attitudes and behavior. This last function is of particular interest to us.10 A strong culture supported by formal rules and regulations ensures employees will act in a relatively uniform and predictable way. Today’s trend toward decen- tralized organizations makes culture more important than ever, but ironically it also makes establishing a strong culture more difficult. When formal author- ity and control systems are reduced through decentralization, culture’s shared meaning can point everyone in the same direction. However, employees orga- nized in teams may show greater allegiance to their team and its values than to the organization as a whole. Furthermore, in virtual organizations, the lack of frequent face-to-face contact makes establishing a common set of norms very difficult. Strong leadership that fosters a strong culture by communicating frequently about common goals and priorities is especially important for inno- vative organizations.11 Individual–organization “fit”—that is, whether the applicant’s or employee’s attitudes and behavior are compatible with the culture—strongly influences who gets a job offer, a favorable performance review, or a promotion. It’s no coincidence that Disney theme park employees appear almost universally attrac- tive, clean, and wholesome with bright smiles. The company selects employees who will maintain that image. culture creates climate If you’ve worked with someone whose positive attitude inspired you to do your best, or with a lackluster team that drained your motivation, you’ve experienced the effects of climate. Organizational climate refers to the shared perceptions or- ganizational members have about their organization and work environment.12 This aspect of culture is like team spirit at the organizational level. When everyone has the same general feelings about what’s important or how well things are working, the effect of these attitudes will be more than the sum of the individual parts. One meta-analysis found that across dozens of different samples, psychological climate was strongly related to individuals’ level of job

Organizational Culture CHAPTER 16 569 Employees of French videogame publisher Ubisoft Entertainment are shown working on “Just Dance 3” at the firm’s creative studio near Paris. Ubisoft’s 26 creative studios around the world share a climate of creative collaboration that reflects the diversity of team members. Source: Charles Platiau/Reuters ethical work climate (EWc) The shared satisfaction, involvement, commitment, and motivation.13 A positive workplace concept of right and wrong behavior in the climate has been linked to higher customer satisfaction and organizational fi- nancial performance as well.14 workplace that reflects the true values of the Dozens of dimensions of climate have been studied, including innovation, organization and shapes the ethical decision creativity, communication, warmth and support, involvement, safety, justice, diversity, and customer service.15 For example, someone who encounters a diver- making of its members. sity climate will feel more comfortable collaborating with coworkers regardless of their demographic backgrounds. Climates can interact with one another to produce behavior. For example, a climate of worker empowerment can lead to higher levels of performance in organizations that also have a climate of per- sonal accountability.16 Climate also influences the habits people adopt. If there is a climate of safety, everyone wears safety gear and follows safety procedures even if individually they wouldn’t normally think very often about being safe— indeed, many studies have shown that a safety climate decreases the number of documented injuries on the job.17 the ethical Dimension of culture Organizational cultures are not neutral in their ethical orientation, even when they are not openly pursuing ethical goals. Over time, the ethical work climate (EWC), or the shared concept of right and wrong behavior, develops as part of the organizational climate. The ethical climate reflects the true values of the organization and shapes the ethical decision making of its members. Researchers have developed ethical climate theory (ECT) and the ethical climate index (ECI) to categorize and measure the ethical dimensions of organizational cultures.18 Of the nine identified ECT climate categories, five are most prevalent in organizations: instrumental, caring, independence, law and code, and rules. Each explains the general mindset, expectations, and values of the managers and employees in relationship to their organizations. For instance, in an instrumental ethical climate, managers may frame their decision making around the assump- tion that employees (and companies) are motivated by self-interest (egoistic). In a caring climate, conversely, managers may operate under the expectation

570 PART 4 The Organization System sustainability Organization practices that that their decisions will positively affect the greatest number of stakeholders can be sustained over a long period of time (employees, customers, suppliers) possible. because the tools or structures that support Ethical climates of independence rely on each individual’s personal moral ideas to dictate his or her workplace behavior. Law and code climates require them are not damaged by the processes. managers and employees to use an external standardized moral compass such as a professional code of conduct for norms, while rules climates tend to operate by internal standardized expectations from, perhaps, an organizational policy manual. Organizations often progress through different categories as they move through their business life cycle. An organization’s ethical climate powerfully influences the way its individual members feel they should behave, so much so that researchers have been able to predict organizational outcomes from the climate categories.19 Instrumental climates are negatively associated with employee job satisfaction and organiza- tional commitment, even though those climates appeal to self-interest (of the employee and the company). They are positively associated with turnover inten- tions, workplace bullying, and deviant behavior. Caring and rules climates may bring greater job satisfaction. Caring, independence, rules, and law and code climates also reduce employee turnover intentions, workplace bullying, and dys- functional behavior. Research indicates that ethical cultures take a long-term perspective and balance the rights of multiple stakeholders including employ- ees, stockholders, and the community. Managers are supported for taking risks and innovating, discouraged from engaging in unbridled competition, and guided to heed not just what goals are achieved but how. Studies of ethical climates and workplace outcomes suggest that some ECT climate categories are likely to be found in certain organizations. Industries with exacting standards, such as engineering, accounting, and law, tend to have a rules or law and code climate. Industries that thrive on competitiveness, such as financial trading, often have an instrumental climate. Industries with mis- sions of benevolence are likely to have a caring climate, even if they are for- profit as in an environmental protection firm. Research is exploring why organizations tend to fall into certain climate ECT categories by industry, especially successful organizations. We cannot conclude that instrumental climates are bad or that caring climates are good. Instrumen- tal climates may foster the individual-level successes their companies need to thrive, for example, and they may help underperformers to recognize their self- interest is better served elsewhere. Managers in caring climates may be thwarted in making the best decisions when only choices that serve the greatest number of employees are acceptable.20 The ECI, first introduced in 2010, is one new way researchers are seeking to understand the context of ethical drivers in organi- zations. By measuring the collective levels of moral sensitivity, judgment, moti- vation, and character of our organizations, we may be able to determine the strength of the influence our ethical climates have on us.21 Although ECT was first introduced more than 25 years ago, researchers have been recently studying ethics in organizations more closely to determine not only how ethical climates behave but also how they might be fostered, even changed.22 Eventually, we may be able to provide leaders with clear blueprints for designing effective ethical climates. culture and Sustainability As the name implies, sustainability refers to practices that can be maintained over very long periods of time23 because the tools or structures that support the practices are not damaged by the processes. One survey found that a great majority of executives saw sustainability as an important part of future success.24 Concepts of sustainable management have their origins in the environmental

Organizational Culture CHAPTER 16 571 Committed to environmental sus- tainability, founder and CEO of Sole Technology Pierre-André Senizergues has set a goal for his action-sports footwear and apparel company to go carbon neutral by 2020. He believes that the most successful brands of the future must lead by example in working harmoniously with the environment. Source: Amber Miller/ZUMA Press/Newscom movement, so processes that are in harmony with the natural environment are encouraged. Social sustainability practices address the ways social systems are af- fected by an organization’s actions over time, and in turn, how changing social systems may affect the organization. For example, farmers in Australia have been working collectively to increase water use efficiency, minimize soil erosion, and implement tilling and harvest- ing methods that ensure long-term viability for their farm businesses.25 In a very different context, 3M has an innovative pollution-prevention program rooted in cultural principles of conserving resources, creating products that have mini- mal effects on the environment, and collaborating with regulatory agencies to improve environmental effects.26 Sustainable management doesn’t need to be purely altruistic. Systematic reviews of the research literature show a generally positive relationship between sustainability and financial performance.27 However, there is often a strong moral and ethical component that shapes organizational culture and must be a genuine value in order for the relationship to exist. To create a truly sustainable business, an organization must develop a long- term culture and put its values into practice.28 In other words, there needs to be a sustainable system for creating sustainability! In one workplace study, a company seeking to reduce energy consumption found that soliciting group feedback reduced energy use significantly more than simply issuing reading materials about the importance of conservation.29 In other words, talking about energy conservation and building the value into the organizational culture resulted in positive employee behavioral changes. Like other cultural practices we’ve discussed, sustainability needs time and nurturing to grow. culture and innovation The most innovative companies are often characterized by their open, uncon- ventional, collaborative, vision-driven, accelerating cultures.30 Startup firms often have innovative cultures by definition because they are usually small, agile, and focused on solving problems in order to survive and grow. Consid- er digital music leader Echo Nest, recently bought by Spotify. As a startup,

572 PART 4 The Organization System Founded in 1969, Samsung Electronics of South Korea is past the usual innovation life cycle stage, yet continues to foster a climate of cre- ativity and idea-generation. Samsung emulates a startup culture through its Creative Labs, where employees like engineer Ki Yuhoon, shown here, take up to a year off from their regular jobs to work on innovative projects. Source: Lee-Jin/AP Images the organization was unconventional, flexible, and open, hosting music app “hack” days for users and fostering a music culture.31 All these are hallmarks of Spotify’s culture, too, making the fit rather seamless.32 Because of the similar organizational cultures, Echo Nest and Spotify may be able to continue their startup level of innovation. At the other end of the startup spectrum, consider 30-year-old Intuit, one of the World’s 100 Most Innovative Companies according to Forbes. Intuit employees attend workshops to teach them how to think creatively . . . and unconventionally. Sessions have led to managers talking through puppets and holding bake sales to sell prototype apps with their cupcakes. The culture stresses open accountability. “I saw one senior guy whose idea they’d been working on for nine months get disproved in a day because someone had a better way. He got up in front of everyone and said, ‘This is my bad. I should have checked my hypothesis earlier,’” said Eric Ries, author of The Lean Startup. As a consultant for entrepreneurs, Ries considers the older software company equally innova- tive to startups because of its culture.33 Alexion Pharmaceuticals is also one of Forbes’ Most Innovative and, like Intuit, it has been in operation long past the usual innovation life-cycle stage. Unlike Intuit, though, this maker of life-saving medicines is not known for management shenanigans. The key to its continuing innovation is a culture of caring, which drives it to develop medicines that save victims of rare diseases, even when the patients affected are few, the cost of development is prohibitively high, and the probability of success is low.34 culture as an asset As we have discussed, organizational culture can provide a positive ethical envi- ronment and foster innovation. Culture can also significantly contribute to an organization’s bottom line in many ways.

Organizational Culture CHAPTER 16 573 institutionalization A condition that One strong example is found in the case of ChildNet. ChildNet is a nonprofit occurs when an organization takes on a life child welfare agency in Florida whose organizational culture was described as “grim” from 2000, when one of its foster children disappeared, through 2007, of its own, apart from any of its members, when the CEO was fired amid FBI allegations of fraud and forgery. “We didn’t know if we would have jobs or who would take over,” employee Maggie Tilelli and acquires immortality. said. However, after intense turnaround efforts aimed at changing the organiza- tional culture, ChildNet became Florida’s top-ranked agency within four years and Workforce Management’s Optima award winner for General Excellence in 2012. President and CEO Emilio Benitez, who took charge in 2008, effected the transformation by changing the executive staff, employing new technology to support caseworkers in the field and new managers at headquarters, acknowl- edging the stress employees and managers felt by establishing an employee rec- ognition program, and creating cross-departmental roundtables (workgroups) for creative problem solving. The roundtables have been able to find solutions to difficult client cases, resulting in better placement of foster children into permanent homes. “From a business perspective, [the new problem-solving approach] was a tremendous cost savings,” Benitez said. “But at the end of the day, it’s about the families we serve.”35 While ChildNet demonstrates how an organizational culture can positively affect outcomes, Dish Network illustrates the elusiveness of matching a particu- lar culture to an industry or organization. By every measure, Dish Network is a business success story—it is the second-largest U.S. satellite TV provider, and it has made founder Charlie Ergen one of the richest men in the world. Yet Dish was recently ranked as the worst U.S. company to work for, and employ- ees say the fault is the micromanaging culture Ergen created and enforces. Employees describe arduous mandatory overtime, fingerprint scanners to record work hours to the minute, public berating (most notably from Ergen), management condescension and distrust, quarterly “bloodbath” layoffs, and no working from home. One employee advised another online, “You’re part of a poisonous environment . . . go find a job where you can use your talents for good rather than evil.” At ChildNet, positive changes to the organization’s performance have been clearly attributed to the transformation of its organizational culture. Dish, on the other hand, may have succeeded despite its culture. We can only wonder how much more successful it could be if it reformed its toxic culture. There are many more cases of business success stories due to excellent organizational cultures than there are of success stories despite bad cultures, and almost no success stories because of bad ones. culture as a liability Culture can enhance organizational commitment and increase the consistency of employee behavior, which clearly benefits an organization. Culture is valu- able to employees too, because it spells out how things are done and what’s important. But we shouldn’t ignore the potentially dysfunctional aspects of culture, especially a strong one, on an organization’s effectiveness. Hewlett- Packard, once known as a premier computer manufacturer, rapidly lost market share and profits as dysfunction in its top management team trickled down, leaving employees disengaged, uncreative, unappreciated, and polarized.36 Let’s unpack some of the major factors that signal a negative organizational culture, beginning with institutionalization. institutionalization When an organization undergoes institutionalization— that is, it becomes valued for itself and not for the goods or services it produces—it takes on a life of its own, apart from its founders or members.37 Institutionalized

574 PART 4 The Organization System organizations often don’t go out of business even if the original goals are no longer relevant. Acceptable modes of behavior become largely self-evident to members, and although this isn’t entirely negative, it does mean behaviors and habits go unquestioned, which can stifle innovation and make maintaining the organization’s culture an end in itself. Barriers to change Culture is a liability when shared values don’t agree with those that further the organization’s effectiveness. This is most likely when an organization’s environment is undergoing rapid change, and its entrenched culture may no longer be appropriate.38 Consistency of behavior, an asset in a stable environment, may then burden the organization and make it difficult to respond to changes. Barriers to Diversity Hiring new employees who differ from the majority in race, age, gender, disability, or other characteristics creates a paradox:39 Management wants to demonstrate support for the differences these employees bring to the workplace, but newcomers who wish to fit in must accept the organization’s core culture. Second, because diverse behaviors and unique strengths are likely to diminish as people assimilate, strong cul- tures can become liabilities when they effectively eliminate the advantages of diversity. Third, a strong culture that condones prejudice, supports bias, or becomes insensitive to differences can undermine formal corporate diversity policies. Strengthening Dysfunctions In general, we’ve discussed cultures that cohere around a positive set of values and attitudes. This consensus can create powerful forward momentum. However, coherence around negativity and dysfunctional management systems in a corporation can produce downward forces that are equally powerful. One study of thousands of hospitality-industry employees in hundreds of locations found that local organizational cultures marked by low or decreasing job satisfaction had higher levels of turnover.40 As we know from this text, low job satisfaction and high turnover indicate dysfunction on the organi- zation’s part. Negative attitudes in groups add to negative outcomes, suggesting a powerful influence of culture on individuals. Barriers to acquisitions and mergers Historically, when management looked at acquisition or merger decisions, the key decision factors were potential financial advantage and product synergy. In recent years, cultural compat- ibility has become the primary concern.41 All things being equal, whether the acquisition works seems to have much to do with how well the two orga- nizations’ cultures match up. When they don’t mesh well, the organizational cultures of both become a liability to the whole new organization. A study conducted by Bain and Company found that 70 percent of mergers failed to increase shareholder values, and Hay Group found that more than 90 per- cent of mergers in Europe failed to reach financial goals.42 Considering this dismal rate of success, Lawrence Chia from Deloitte Consulting observed, “One of the biggest failings is people. The people at Company A have a dif- ferent way of doing things from Company B . . . you can’t find commonality in goals.” Culture clash was commonly argued to be one of the causes of AOL Time Warner’s problems. The $183 billion merger between America Online (AOL) and Time Warner in 2001 was the largest in U.S. corporate history. It was also a disaster. Only 2 years later, the new company saw its stock fall an astounding 90 percent, and it reported what was then the largest financial loss in U.S. history.

Organizational Culture CHAPTER 16 575 16-3 Identify the factors that Creating and Sustaining Culture create and sustain an organization’s culture. An organization’s culture doesn’t pop out of thin air, and once established it rarely fades away. What influences the creation of a culture? What reinforces and sustains it once in place? how a culture Begins An organization’s customs, traditions, and general way of doing things are large- ly due to what it has done before and how successful it was in doing it. This leads us to the ultimate source of an organization’s culture: the founders.43 Founders have a vision of what the organization should be, and the firm’s initial small size makes it easy to impose that vision on all members. Culture creation occurs in three ways.44 First, founders hire and keep only employees who think and feel the same way they do. Second, they indoctri- nate and socialize employees to their way of thinking and feeling. And finally, the founders’ own behavior encourages employees to identify with them and internalize their beliefs, values, and assumptions. When the organization succeeds, the founders’ personalities become embedded in the culture. For example, the fierce, competitive style and disciplined, authoritarian nature of Hyundai, the giant Korean conglomerate, exhibits the same characteristics often used to describe founder Chung Ju-Yung. Other founders with sustaining impact on their organization’s culture include Bill Gates at Microsoft, Ingvar Kamprad at IKEA, Herb Kelleher at Southwest Airlines, Fred Smith at FedEx, and Richard Branson at the Virgin Group. Keeping a culture alive Once a culture is in place, practices within the organization maintain it by giving employees a set of similar experiences.45 The selection process, performance evaluation criteria, training and development activities, and promotion proce- dures (all discussed in Chapter 17) ensure those hired fit in with the culture, reward those employees who support it, and penalize (or even expel) those who challenge it. Three forces play a particularly important part in sustaining a culture: selection practices, actions of top management, and socialization meth- ods. Let’s look at each. Selection The explicit goal of the selection process is to identify and hire individ- uals with the knowledge, skills, and abilities to perform successfully. The final de- cision, because it is significantly influenced by the decision maker’s judgment of how well candidates will fit into the organization, identifies people whose values are consistent with at least a good portion of the organization’s.46 The selection process also provides information to applicants. Those who perceive a conflict between their values and those of the organization can remove themselves from the applicant pool. Selection thus becomes a two-way street, allowing employer and applicant to avoid a mismatch and sustaining an organization’s culture by re- moving those who might attack or undermine its core values, for better or worse. W. L. Gore & Associates, the maker of Gore-Tex fabric used in outerwear, prides itself on its democratic culture and teamwork. There are no job titles at Gore, nor bosses or chains of command. All work is done in teams. In Gore’s selection process, teams put job applicants through extensive interviews to ensure they can deal with the level of uncertainty, flexibility, and teamwork that’s normal in Gore plants. Not surprisingly, W. L. Gore appears regularly on Fortune’s list of 100 Best Companies to Work For (number 17 in 2015) partially because of its selection process emphasis on culture fit.

576 PART 4 The Organization System socialization A process that adapts top management The actions of top management have a major impact on the employees to the organization’s culture. organization’s culture.47 Through words and behavior, senior executives establish norms that filter through the organization about, for instance, whether risk-taking is desirable, how much freedom managers give employees, what is appropriate dress, and what actions earn pay raises, promotions, and other rewards. The culture of supermarket chain Wegmans—which believes driven, happy, and loyal employees are more eager to help one another and provide exem- plary customer service—is a direct result of the beliefs of the Wegman fam- ily. Their focus on fine foods separates Wegmans from other grocers—a focus maintained by the company’s employees, many of whom are hired based on their interest in food. Top management at the company believes in taking care of employees to enhance satisfaction and loyalty. For example, Wegmans has paid more than $90 million in educational scholarships for more than 28,400 employees. Top management also supports above average pay for employees, which results in annual turnover for full-time employees at a mere 4 percent (the industry average is 24 percent). Wegmans regularly appears on Fortune’s 100 Best Companies to Work For list (number 7 in 2015),48 in large measure because top management sustains the positive organizational culture begun by its founding members. Socialization No matter how good a job the organization does in recruiting and selection, new employees need help adapting to the prevailing culture. That help is socialization.49 Socialization can help alleviate the problem many employees report that their new jobs are different than expected (see OB Poll). For example, the consulting firm Booz Allen Hamilton begins its process of bringing new employees onboard even before their first day of work. New recruits go to an internal Web portal to learn about the company and under- stand the culture. After they start work, a social networking application links them with more established members of the firm and helps ensure that the Ob POLL job is not as good as advertised Of the 61% of 2,054 new hires who say the job is di erent than expected, why? 45% 40% 40% 37% 35% 36% 30% 27% 25% 20% 22% 15% Employee Work Supervisor’s Career Salary morale hours personality advancement opportunities Source: S. Bates, “Majority of New Hires Say Job Is Not What They Expected,” Society for Human Resource Management, May 28, 2012, http://www.shrm .org/hrdisciplines/employeerelations/articles/pages/newhiresfeelmisled.aspx.

Organizational Culture CHAPTER 16 577 Exhibit 16-2 a Socialization model Outcomes Productivity Socialization process Commitment Prearrival Encounter Metamorphosis Turnover prearrival stage The period of learning in culture is reinforced over time.50 Clear Channel Communications, Facebook, the socialization process that occurs before a Google, and other companies are adopting fresh onboarding (new hire accli- new employee joins the organization. mation) procedures, including assigning “peer coaches,” holding socializing events, personalizing orientation programs, and giving out immediate work as- encounter stage The stage in the signments. “When we can stress the personal identity of people, and let them socialization process in which a new employee bring more of themselves at work, they are more satisfied with their job and sees what the organization is really like and have better results,” researcher Francesca Gino of Harvard said.51 confronts the possibility that expectations and reality may diverge. We can think of socialization as a process with three stages: prearrival, encounter, and metamorphosis.52 This process, shown in Exhibit 16-2, has an metamorphosis stage The stage in the impact on the new employee’s work productivity, commitment to the organiza- socialization process in which a new employee tion’s objectives, and decision to stay with the organization. changes and adjusts to the job, work group, and organization. The prearrival stage recognizes that each individual arrives with a set of values, attitudes, and expectations about both the work and the organization. One major purpose of a business school, for example, is to socialize students to the attitudes and behaviors companies want. Newcomers to high-profile orga- nizations with strong market positions have their own assumptions about what it’s like to work there.53 Most new recruits will expect Nike to be dynamic and exciting and a stock brokerage firm to be high in pressure and rewards. How accurately people judge an organization’s culture before they join the organiza- tion, and how proactive their personalities are, become critical predictors of how well they adjust.54 The selection process can help inform prospective employees about the orga- nization as a whole. Upon entry into the organization, the new member enters the encounter stage and confronts the possibility that expectations—about the job, coworkers, boss, and organization in general—may differ from reality. If expectations were fairly accurate, this stage merely cements earlier perceptions. However, often this is not the case. At the extreme, a new member may become disillusioned enough to resign. Proper recruiting and selection should signifi- cantly reduce this outcome, along with encouraging friendship ties in the orga- nization—newcomers are more committed when friendly coworkers help them “learn the ropes.”55 Finally, to work out any problems discovered during the encounter stage, the new member changes or goes through the metamorphosis stage. The options presented in Exhibit 16-3 are alternatives designed to bring about metamorpho- sis. Most research suggests two major “bundles” of socialization practices. The more management relies on formal, collective, fixed, and serial socialization programs while emphasizing divestiture, the more likely newcomers’ differences will be stripped away and replaced by standardized predictable behaviors. These institutional practices are common in police departments, fire departments, and other organizations that value rule following and order. Programs that are informal, individual, variable, and random while emphasizing investiture are

578 PART 4 The Organization System Exhibit 16-3 entry Socialization options Formal vs. Informal The more a new employee is segregated from the ongoing work setting and differentiated in some way to make explicit his or her newcomer’s role, the more socialization is formal. Specific orientation and training programs are examples. Informal socialization puts the new employee directly into the job, with little or no special attention. Individual vs. Collective New members can be socialized individually. This describes how it’s done in many professional offices. They can also be grouped together and processed through an identical set of experiences, as in military boot camp. Fixed vs. Variable This refers to the time schedule in which newcomers make the transition from outsider to insider. A fixed schedule establishes standardized stages of transition. This characterizes rotational training programs. It also includes probationary periods, such as the 8- to 10-year “associate” status used by accounting and law firms before deciding on whether or not a candidate is made a partner. Variable schedules give no advance notice of their transition timetable. Variable schedules describe the typical promotion system, in which one is not advanced to the next stage until one is “ready.” Serial vs. Random Serial socialization is characterized by the use of role models who train and encourage the newcomer. Apprenticeship and mentoring programs are examples. In random socialization, role models are deliberately withheld. New employees are left on their own to figure things out. Investiture vs. Divestiture Investiture socialization assumes that the newcomer’s qualities and qualifications are the necessary ingredients for job success, so these qualities and qualifications are confirmed and supported. Divestiture socialization tries to strip away certain characteristics of the recruit. Fraternity and sorority “pledges” go through divestiture socialization to shape them into the proper role. more likely to give newcomers an innovative sense of their roles and methods of working. Creative fields such as research and development, advertising, and filmmaking rely on these individual practices. Most research suggests high levels of institutional practices encourage person–organization fit and high levels of commitment, whereas individual practices produce more role innovation.56 The three-part entry socialization process is complete when new members have internalized and accepted the norms of the organization and their work groups, are confident in their competence, and feel trusted and valued by their peers. They understand the system—not only their own tasks but the rules, procedures, and informally accepted practices as well. Finally, they know what is expected of them and what criteria will be used to measure and evaluate their work. As Exhibit 16-2 showed earlier, successful metamorphosis should have a positive impact on new employees’ productivity and their com- mitment to the organization, and reduce their propensity to leave the organi- zation (turnover). Researchers examine how employee attitudes change during socialization by measuring at several points over the first few months. Several studies have now documented patterns of “honeymoons” and “hangovers” for new workers, show- ing that the period of initial adjustment is often marked by decreases in job sat- isfaction as idealized hopes come into contact with the reality of organizational life.57 Newcomers may find that the level of social support they receive from supervisors and coworkers is gradually withdrawn over the first few weeks on the job, as everyone returns to “business as usual.”58 Role conflict and role overload may rise for newcomers over time, and workers with the largest increases in these role problems experience the largest decreases in commitment and satis- faction.59 It may be that the initial adjustment period for newcomers presents increasing demands and difficulties, at least in the short term.

Organizational Culture CHAPTER 16 579 Exhibit 16-4 how organizational cultures Form Philosophy of Selection Top Organizational organization’s criteria management culture founders Socialization 16-4 Show how culture Summary: how organizational cultures Form is transmitted to employees. Exhibit 16-4 summarizes how an organization’s culture is established and sustained. The original culture derives from the founder’s philosophy and rituals Repetitive sequences of activities strongly influences hiring criteria as the firm grows. The success of socializa- that express and reinforce the key values of tion depends on the deliberateness of matching new employees’ values to the organization, which goals are most those of the organization in the selection process and on top management’s important, which people are important, and commitment to socialization programs. Top managers’ actions set the general which are expendable. climate, including what is acceptable behavior and what is not, and employees sustain and perpetuate the culture. How Employees Learn Culture Culture is transmitted to employees in a number of forms, the most potent be- ing stories, rituals, material symbols, and language. Stories When Henry Ford II was chairman of Ford Motor Company, you would have been hard pressed to find a manager who hadn’t heard how he reminded his executives, when they got too arrogant, “It’s my name that’s on the building.” The message was clear: Henry Ford II ran the company. Today, a number of senior Nike executives spend much of their time serving as corporate storytellers.60 When they tell how co-founder (and Oregon track coach) Bill Bowerman went to his workshop and poured rubber into a waffle iron to create a better running shoe, they’re talking about Nike’s spirit of inno- vation. When new hires hear tales of Oregon running star Steve Prefontaine’s battles to make running a professional sport and attain better performance equipment, they learn of Nike’s commitment to helping athletes. Stories such as these circulate through many organizations, anchoring the present in the past and legitimating current practices. They typically include narratives about the organization’s founders, rule breaking, rags-to-riches suc- cesses, workforce reductions, relocations of employees, reactions to past mis- takes, and organizational coping.61 Employees also create their own narratives about how they came to either fit or not fit with the organization during the process of socialization, including first days on the job, early interactions with others, and first impressions of organizational life.62 Rituals Rituals are repetitive sequences of activities that express and reinforce the key values of the organization—what goals are most important, and/or which people

580 PART 4 The Organization System material symbols What conveys to are important versus which are expendable.63 Some companies have nontradi- employees who is important, the degree of tional rituals to help support the values of their cultures. Kimpton Hotels & Restaurants, one of Fortune’s 100 Best Companies to Work For, maintains its egalitarianism top management desires, and customer-oriented culture with traditions like a Housekeeping Olympics that includes blindfolded bedmaking and vacuum races.64 At marketing firm United the kinds of behavior that are appropriate. Entertainment Group, employees work unusual hours a few times a year, arriv- ing in the late afternoon and working until early morning. CEO Jarrod Moses does this to support a culture of creativity. He says, “You mess with somebody’s internal clock, and some interesting ideas come out.”65 Symbols The layout of corporate headquarters, the types of automobiles top executives are given, and the presence or absence of corporate aircraft are a few examples of material symbols. Others include the size of offices, the elegance of furnish- ings, perks, and attire.66 These convey to employees who is important, the de- gree of egalitarianism top management desires, and the kinds of behavior that are appropriate, such as risk-taking, conservative, authoritarian, participative, individualistic, or social. One example of the intentional use of material symbols is Texas electric com- pany Dynegy. Dynegy’s headquarters doesn’t look like your typical head-office operation, as you could tell from the “Myth or Science?” box. There are few individual offices, even for senior executives. The space is essentially made up of cubicles, common areas, and meeting rooms. This informality conveys to employ- ees that Dynegy values openness, equality, creativity, and flexibility. While some organizations provide their top executives with chauffeur-driven limousines and a corporate jet, other CEOs drive the company car themselves and travel in the economy section. At some firms, like Chicago shirtmaker Threadless, an “any- thing goes” atmosphere helps emphasize a creative culture. At Threadless, meet- ings are held in an Airstream camper parked inside the company’s converted FedEx warehouse, while employees in shorts and flip-flops work in bullpens fea- turing disco balls and garish decorations chosen by each team.67 Baidu, a Chinese Web services firm, describes its culture as “simple”—meaning direct, open, and uncomplicated—and “reliable”— meaning trusting the competence of colleagues. Baidu’s casual workplaces reflect this trust with lounges, gyms, yoga studios, and dome-shaped nap rooms employees may use at any time. Source: Lou Linwei/Alamy

Organizational Culture CHAPTER 16 581 a culture of compassion an ethical choice In the world of banking, success • Mefit “Mike” Mecevic was a loyal jani- retention” team members in confi- and ethical culture don’t neces- tor for Goldman Sachs when Super- dential booths set up in large halls sarily go hand in hand. Leaders storm Sandy hit New York in 2012. across the United States. Clients who desire ethical cultures in their Mecevic and his coworkers rode out bring paperwork specific to their organizations must choose to build the storm in the company’s Manhat- cases, and team members negotiate ethics into the company’s definition tan skyscraper and worked nonstop binding agreements. One client said, of success in ways that translate for days to keep floodwaters back. “It is a great feeling to not worry” into ethical actions for managers Then a Goldman Sachs manager about losing her home. and employees. Contrast two finan- threw him out without explanation. Organizational culture is where lead- cial success stories, Goldman Sachs Mecevic said to him, “‘I live in Staten ers’ ethical choices demonstrate their and Wells Fargo. Both megabanks are Island, there’s a state of emergency, expectations for others’ decisions among the Fortune 100 (the largest there are no cars, no trains, no lights. throughout the company. Both Goldman U.S. companies ranked by revenue). The water is up to our necks.’ I was and Wells Fargo enjoy stellar reputa- They are also two of Fortune’s World’s begging for my life. But he said ‘Leave tions. But these examples suggest that Most Admired Companies, a list that the building.’” Mecevic left but was the two cultures may make very differ- ranks the largest companies in rev- later fired anyway. “I worked day and ent ethical choices. enue by nine criteria including social night,” Mecevic said. “They destroyed responsibility. Yet their organizational my life for nothing. Nothing.” Sources: B. Ross, A. Ng, and C. Siemaszko, cultures appear to be vastly different. “Ex-Goldman Sachs Janitor Sues for Being Goldman Sachs seems to struggle to • Wells Fargo is committed to respect- Forced into Post-Hurricane Sandy Destruc- achieve an ethical culture for its em- ing its clients, even when those tion,” New York Daily News, June 7, 2013, ployees and clients, while Wells Fargo clients are in trouble. For the past w w w. ny d a i l y n e w s . c o m / n e w - y o r k / j a n i t o r - seems to emanate a culture of com- few years, it has held “Home Pres- sues-tossed-aftermath-hurricane-sandy- passion. Consider some headlines: ervation Workshops” where indebted article-1.1366334; M. Schifrin and H. homeowners can meet with “home Touryalai, “The Bank That Works,” Forbes, February 13, 2012, 66–74. Some cultures are known for the perks in their environments, such as Google’s bocce courts, Factset Research’s onsite pie/cheese/cupcake trucks, software designer Autodesk’s bring-your-dog office, SAS’s free health care clinic, Microsoft’s organic spa, and adventure-gear specialist REI’s free equipment rentals. Other companies communicate the values of their cultures through the gift of time to think creatively, either with leaders or offsite. For instance, Biotech leader Genentech and many other top companies provide paid sabbati- cals. Genentech offers every employee 6 weeks’ paid leave for every 6 years of service to support a culture of equitability and innovative thinking.68 language Many organizations and subunits within them use language to help members identify with the culture, attest to their acceptance of it, and help preserve it. Unique terms describe equipment, officers, key individuals, suppliers, cus- tomers, or products that relate to the business. New employees may at first be overwhelmed by acronyms and jargon that, once assimilated, act as a common denominator to unite members of a given culture or subculture. try It! If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete the Simulation: Organizational Culture.

582 PART 4 The Organization System 16-5 Describe the similarities Influencing an Organizational Culture and differences in creating an ethical As we discussed, the culture of an organization is set by its founders and often culture, a positive difficult to change afterward. It’s true that the ideal scenario is a strong founder culture, and a spiritual (or founders) who carefully plans the organization’s culture beforehand. That’s culture. seldom the case, though; organizational culture usually grows organically over time. When we think of the development of culture as ongoing and conducted through each employee, we can see ways to increase the ethical, positive, and/ or spiritual aspects of the environment, discussed next. an ethical culture Despite differences across industries and cultures, ethical organizational cultures share some common values and processes.69 Therefore, managers can create a more ethical culture by adhering to the following principles:70 • Be a visible role model. Employees will look to the actions of top manage- ment as a benchmark for appropriate behavior, but everyone can be a role model to positively influence the ethical atmosphere. Send a positive message. • Communicate ethical expectations. Whenever you serve in a leadership capacity, minimize ethical ambiguities by sharing a code of ethics that states the organization’s primary values and the judgment rules employees must follow. • Provide ethical training. Set up seminars, workshops, and training pro- grams to reinforce the organization’s standards of conduct, clarify what practices are permissible, and address potential ethical dilemmas. • Visibly reward ethical acts and punish unethical ones. Evaluate subordinates on how their decisions measure up against the organization’s code of ethics. Review the means as well as the ends. Visibly reward those who act ethically and conspicuously punish those who don’t. • Provide protective mechanisms. Seek formal mechanisms so everyone can discuss ethical dilemmas and report unethical behavior without fear of reprimand. These might include identifying ethical counselors, ombudspeople, or ethical officers for liaison roles. A widespread positive ethical climate has to start at the top of the organiza- tion.71 One study demonstrated that when top management emphasizes strong ethical values, supervisors are more likely to practice ethical leadership. Posi- tive attitudes transfer down to line employees, who show lower levels of deviant behavior and higher levels of cooperation and assistance. Several other studies have come to the same general conclusion: The values of top management are a good predictor of ethical behavior among employees. One study involving audi- tors found perceived pressure from organizational leaders to behave unethi- cally was associated with increased intentions to engage in unethical practices.72 Clearly the wrong type of organizational culture can negatively influence employee ethical behavior. Finally, employees whose ethical values are similar to those of their department are more likely to be promoted, so we can think of ethical culture as flowing from the bottom up as well.73 a Positive culture At first blush, creating a positive culture may sound hopelessly naïve or like a Dilbert-style conspiracy. The one thing that makes us believe this trend is here to stay, however, are signs that management practice and OB research are

Organizational Culture CHAPTER 16 583 Market Technologies, a family-owned trading software developer, fosters a positive climate. The firm rewards employees in many ways, including fun events like tacky tourist days, shown here, birthday and achievement cel- ebrations, frequent family outings, and catered breakfasts and lunches. Source: St. Petersburg Times/ZumaPress/Newscom positive organizational culture converging. A positive organizational culture emphasizes building on employee A culture that emphasizes building on strengths, rewards more than it punishes, and encourages individual vitality and growth.74 Let’s consider each of these areas. employee strengths, rewards more than Building on employee Strengths Although a positive organizational culture does not ignore problems, it does emphasize showing workers how they can punishes, and emphasizes individual vitality capitalize on their strengths. As management guru Peter Drucker said, “Most Americans do not know what their strengths are. When you ask them, they look and growth. at you with a blank stare, or they respond in terms of subject knowledge, which is the wrong answer.” Wouldn’t it be better to be in an organizational culture that helped you discover your strengths and how to make the most of them? As CEO of Auglaize Provico, an agribusiness based in Ohio, Larry Hammond used this approach in the midst of the firm’s worst financial struggles. When the organization had to lay off one-quarter of its workforce, he took advantage of what was right, rather than dwelling on what went wrong. “If you really want to [excel], you have to know yourself—you have to know what you’re good at, and you have to know what you’re not so good at,” he said. With the help of Gallup consultant Barry Conchie, Hammond focused on discovering and using employee strengths to help the company turn itself around. “You ask Larry [Hammond] what the difference is, and he’ll say that it’s individuals using their natural talents,” says Conchie.75 Rewarding more than Punishing Although most organizations are sufficiently focused on extrinsic rewards such as pay and promotions, they often for- get about the power of smaller (and cheaper) rewards such as praise. Part of creating a positive organizational culture is “catching employees doing something right.” Many managers withhold praise because they’re afraid employees will coast or because they think praise is not valued. Employees generally don’t ask for praise, and managers usually don’t realize the costs of failing to give it.

584 PART 4 The Organization System Consider El´zbieta Górska-Kolodziejczyk, a plant manager for International Paper’s facility in Kwidzyn, Poland. Employees worked in a bleak windowless basement. Staffing became roughly one-third its prior level, while production tripled. These challenges had done in the previous three managers. So when she took over, at the top of her list were recognition and praise for staff. She initially found it difficult to give praise to those who weren’t used to it, especially men. “They were like cement at the beginning,” she said. “Like cement.” Over time, however, she found they valued and even reciprocated praise. One day a department supervisor pulled her over to tell her she was doing a good job. “This I do remember, yes,” she said.76 encouraging Vitality and Growth No organization will get the best from employees who see themselves as mere cogs in the machine. A positive cul- ture recognizes the difference between a job and a career. It supports not only what the employee contributes to organizational effectiveness but how the organization can make the employee more effective—personally and profes- sionally. Top companies recognize the value of helping people grow. Safelite AutoGlass, Workforce Management’s 2012 Optima award winner for Competitive Advantage, attributes its success in part to its PeopleFirst Plan talent develop- ment initiative. “The only way we can stand out is if we have the best people,” says Senior Vice President Steve Miggo.77 It may take more creativity to encourage employee growth in some indus- tries. From the Masterfoods headquarters in Brussels, Philippe Lescornez led a team of sales promoters including Didier Brynaert, who worked in Lux- embourg, nearly 150 miles away. Lescornez decided Brynaert’s role could be improved if he were seen as an expert on the unique features of the Luxem- bourg market. So Lescornez asked Brynaert for information he could share with the home office. “I started to communicate much more what he did to other people [within the company], because there’s quite some distance between the Brussels office and the section he’s working in. So I started to communicate, communicate, communicate. The more I communicated, the more he started to provide material,” he said. As a result, “Now he’s recog- nized as the specialist for Luxembourg—the guy who is able to build a strong relationship with the Luxembourg clients,” says Lescornez. What’s good for Brynaert was, of course, also good for Lescornez, who got credit for helping Brynaert grow and develop.78 limits of Positive culture Is a positive culture a cure-all? Though many com- panies have embraced aspects of a positive organizational culture, it is a new enough idea for us to be uncertain about how and when it works best. Not all national cultures value being positive as much as the U.S. culture does and, even within U.S. culture, there surely are limits to how far orga- nizations should go. The limits may need to be dictated by the industry and society. For example, Admiral, a British insurance company, has established a Ministry of Fun in its call centers to organize poem writing, foosball, conkers (a British game involving chestnuts), and fancy-dress days, which may clash with an industry value of more serious cultures. When does the pursuit of a positive culture start to seem coercive? As one critic notes, “Promoting a social orthodoxy of positiveness focuses on a particular constellation of desir- able states and traits but, in so doing, can stigmatize those who fail to fit the template.”79 There may be benefits to establishing a positive culture, but an organization also needs to be objective and not pursue it past the point of effectiveness.

Organizational Culture CHAPTER 16 585 workplace spirituality The recognition a Spiritual culture that people have an inner life that nourishes What do Southwest Airlines, Hewlett-Packard, Ford, The Men’s Wearhouse, Tyson and is nourished by meaningful work that Foods, Wetherill Associates, and Tom’s of Maine have in common? They’re among a growing number of organizations that have embraced workplace spirituality. takes place in the context of community. What is Spirituality? Workplace spirituality is not about organized religious prac- tices. It’s not about God or theology. Workplace spirituality recognizes that people have an inner life that nourishes and is nourished by meaningful work in the context of community.80 Organizations that support a spiritual culture recognize that people seek to find meaning and purpose in their work and desire to con- nect with other human beings as part of a community. Many of the topics we have discussed—ranging from job design to corporate social responsibility (CSR)— are well matched to the concept of organizational spirituality. When a company emphasizes its commitment to paying Third World suppliers a fair (above-market) price for their products to facilitate community development—as did Starbucks— or encourages employees to share prayers or inspirational messages through e-mail—as did Interstate Batteries—it may encourage a more spiritual culture.81 Why Spirituality now? As noted in our discussion of emotions in Chapter 4, the myth of rationality assumed the well-run organization eliminated people’s feelings. Concern about an employee’s inner life had no role in the perfectly rational model. But just as we realize that the study of emotions improves our understanding of OB, an awareness of spirituality can help us better understand employee behavior. Of course, employees have always had an inner life. So why has the search for meaning and purposefulness in work surfaced now? We summarize the reasons in Exhibit 16-5. characteristics of a Spiritual organization The concept of workplace spirituality draws on our previous discussions of values, ethics, motivation, and leadership. Although research remains preliminary, several cultural characteristics tend to be evident in spiritual organizations:82 • Benevolence. Spiritual organizations value kindness toward others and the happiness of employees and other organizational stakeholders. • Strong sense of purpose. Spiritual organizations build their cultures around a meaningful purpose. Although profits may be important, they’re not the primary value. Exhibit 16-5 Reasons for the Growing interest in Spirituality • Spirituality can counterbalance the pressures and stress of a turbulent pace of life. Contemporary lifestyles—single-parent families, geographic mobility, the temporary nature of jobs, new technologies that create distance between people—underscore the lack of community many people feel and increase the need for involvement and connection. • Formalized religion hasn’t worked for many people, and they continue to look for anchors to replace lack of faith and to fill a growing feeling of emptiness. • Job demands have made the workplace dominant in many people’s lives, yet they continue to question the meaning of work. • People want to integrate personal life values with their professional lives. • An increasing number of people are finding that the pursuit of more material acquisitions leaves them unfulfilled.

586 PART 4 The Organization System • Trust and respect. Spiritual organizations are characterized by mutual trust, honesty, and openness. Employees are treated with esteem and value, consistent with the dignity of each individual. • Open-mindedness. Spiritual organizations value flexible thinking and creativity among employees. achieving Spirituality in the organization Many organizations have grown interested in spirituality but have experienced difficulty putting principles into practice. Several types of practices can facilitate a spiritual workplace,83 including those that support work–life balance. Leaders can demonstrate values, attitudes, and behaviors that trigger intrinsic motivation and a sense of fulfilling a calling through work. Second, encouraging employees to con- sider how their work provides a sense of purpose can help achieve a spiritual workplace; often this is done through group counseling and organizational development, a topic we take up in Chapter 18. Third, a growing number of companies, including Taco Bell and Sturdisteel, offer employees the counsel- ing services of corporate chaplains. Many chaplains are employed by agen- cies, such as Marketplace Chaplains USA, while some corporations, such as R.J. Reynolds Tobacco and Tyson Foods, employ chaplains directly. The workplace presence of corporate chaplains, who are often ordained Christian ministers, is obviously controversial, although their role is not to increase spirituality but to help human resources departments serve the employees who already have Christian beliefs.84 Similar roles for leaders of other faiths certainly must be encouraged. criticisms of Spirituality Critics of the spirituality movement in organizations have focused on three issues. First is the question of scientific foundation. What really is workplace spirituality? Is it just a new management buzzword? Second, are spiritual organizations legitimate? Specifically, do organizations have the right to claim spiritual values? Third is the question of economics: Are spiritual- ity and profits compatible? First, as you might imagine, there is comparatively little research on work- place spirituality. Spirituality has been defined so broadly in some sources that practices from job rotation to corporate retreats at meditation centers have been identified as spiritual. Questions need to be answered before the concept gains full credibility. Second, an emphasis on spirituality can clearly make some employees uneasy. Critics have argued that secular institutions, especially business firms, should not impose spiritual values on employees.85 This criticism is undoubt- edly valid when spirituality is defined as bringing religion and God into the workplace. However, it seems less stinging when the goal is limited to helping employees find meaning and purpose in their work lives. If the concerns listed in Exhibit 16-5 truly characterize a large segment of the workforce, then perhaps organizations can help. Finally, whether spirituality and profits are compatible objectives is a relevant concern for managers and investors in business. The evidence, although limited, indicates they are. In one study, organizations that provided their employees with opportunities for spiritual development outperformed those that didn’t.86 Other studies reported that spirituality in organizations was positively related to creativity, employee satisfaction, job involvement, and organizational commitment.87

Organizational Culture CHAPTER 16 587 How do i learn to lead? career oBjectives I’ll be starting a new job in a few practices can also help you develop The best leadership transitions in- weeks. It’s my first time working as a techniques to harness the team’s clude learning what the situation calls leader for a team, and I know I have a strengths and overcome challenges. for, and setting your team up for suc- lot to learn. Is there any way I can be • Build relationships with other lead- cess from the start. sure I’ll achieve success as a leader? ers. Remember—you were put into this role for a reason, and the Be proactive! — Gordon company wants to see you succeed, Dear Gordon: so make the most of the resources Sources: T. B. Harris, N. Li, W. R. Boswell, Learning about a new job is always com- of others. Take detailed notes re- X.  Zhang, and Z. Xie, “Getting What’s New plicated. Learning how to be a leader is garding specific activities and strat- from Newcomers: Empowering Leadership, doubly complicated. It’s expected that egies that were successful, and Creativity, and Adjustment in the Socialization you have the capacity to provide direc- schedule a check-in to discuss how Context,” Personnel Psychology 67 (2014): tion and purpose for employees, and these strategies have worked over 567–604; Y. H. Ji, N. A. Cohen, A. Daly, K. that you will respect the existing culture time. If you can show you are truly Finnigan, and K. Klein, “The Dynamics of of the group as well as the capacities of engaged in the learning process, Voice Behavior and Leaders’ Network Ties in individual members. Here are a few key you’ll find others are more willing Times of Leadership Successions,” Academy insights toward making your transition to provide you with assistance and of Management Proceedings, 2014, 16324; into leadership successful: advice. and B. Eckfeldt, “5 Things New CEOS Should • Start small. Much has been writ- Focus On,” Business Insider, June 1, 2015, • Ask questions. New leaders are ten about the importance of gaining http://www.businessinsider.com/5-things- often anxious about asking ques- small wins early on to build your rep- new-ceos-should-focus-on-2015-6. tions of direct reports for fear of utation. The old saying “you never being seen as incompetent or weak. get a second chance to make a first The opinions provided here are of the However, inquiring about how things impression” definitely holds true in managers and authors only and do not have been done in the past and ask- the workplace. Try to develop new necessarily reflect those of their organi- ing about individual goals signals initiatives with clear outcomes that zations. The authors or managers are not that you are concerned about the will allow you to demonstrate your responsible for any errors or omissions, or team members. Familiarizing your- leadership traits. for the results obtained from the use of this self with the group’s culture and information. In no event will the authors or managers, or their related partnerships or corporations thereof, be liable to you or anyone else for any decision made or action taken in reliance on the opinions provided here. 16-6 Show how national The Global Context culture can affect the way organizational We considered global cultural values (collectivism–individualism, power dis- culture is transported tance, and so on) in Chapter 5. Here our focus is a bit narrower: How is orga- to another country. nizational culture affected by the global context? Organizational culture is so powerful that it often transcends national boundaries. But that doesn’t mean organizations should, or could, ignore local culture. Organizational cultures often reflect national culture. The culture at AirAsia, a Malaysian-based airline, emphasizes openness and friendships. The carrier has lots of parties, participative management, and no private offices, reflect- ing Malaysia’s relatively collectivistic culture. The culture of many U.S. airlines do not reflect the same degree of informality. If a U.S. airline were to merge with AirAsia, it would need to take these cultural differences into account. Organizational culture differences are not always due to international culture

588 PART 4 The Organization System differences, however. One of the chief challenges of the merger of US Airways and American Airlines was the integration of US Airway’s “open-collar” culture with American’s “button-down” culture.88 One of the primary things U.S. managers can do is to be culturally sensitive. The United States is a dominant force in business and in culture—and with that influence comes a reputation. “We are broadly seen throughout the world as arrogant people, totally self-absorbed and loud,” says one U.S. executive. Some ways in which U.S. managers can be culturally sensitive include talking in a low tone of voice, speaking slowly, listening more, and avoiding discussions of reli- gion and politics. The management of ethical behavior is one area where national culture can rub against corporate culture.89 U.S. managers endorse the supremacy of anonymous market forces as a moral obligation for business organizations. This worldview sees bribery, nepotism, and favoring personal contacts as highly unethical. They also value profit maximization, so any action that deviates from profit maximization may suggest inappropriate or corrupt behavior. In contrast, managers in developing economies are more likely to see ethical decisions as embedded in the social environment. That means doing special favors for fam- ily and friends is not only appropriate but possibly even an ethical responsibility. Managers in many nations view capitalism skeptically and believe the interests of workers should be put on a par with the interests of shareholders, which may limit profit maximization. Creating a multinational organizational culture can initiate strife between employees of traditionally competing countries. When Swedish, Norwegian, Finnish, and Danish banks combined to form Nordea Bank AB, the stereo- types some employees held based on the countries’ historical relationships created tensions. Finland had originally been a colony of Sweden, and Norway had been a part of Denmark and then of Sweden. The fact that none of the employees had yet been born when their countries were colonies didn’t matter; complex alliances within Nordea formed along nationalistic lines. To bridge these gaps, Nordea employed storytelling to help employees identify with posi- tive aspects of their shared geographical region. The organization reinforced the shared identity through press releases, corporate correspondence, equal country representation in top management, and championing of shared val- ues. Although the organization continues to struggle with a multinational culture, the successes it has enjoyed can be attributed to careful attention to national differences.90 As national organizations seek to employ workers in overseas operations, management must decide whether to standardize many facets of organizational culture. For example, should organizations offer wellness plans and work–life balance initiatives from the home country to the satellite offices, or tailor the plans for the norms of each society? Either can be problematic. For instance, when U.S. company Rothenberg International introduced its alcohol abuse remediation plan to Russian employees as part of its employee assistance pro- gram (EAP), it didn’t foresee that Russians resist the concept of “assistance” and prefer “support” instead. Rothenberg was able to adjust, but sometimes local laws intercede (as a help or a hindrance) when employers roll out home- land plans. Brazil has a government anti-HIV plan that employers can use, for instance, and the U.K.’s National Health Service pays for smoking cessation pro- grams, while in Germany private insurance must pay for wellness plans.91 At this point, there is no clear consensus on the best course of action, but the first step is for companies to be sensitive to differing standards.

Organizational Culture CHAPTER 16 589 Exhibit 16-6 how organizational cultures have an impact on employee Performance and Satisfaction Objective factors Perceived as Organizational Strength Performance • Innovation and risk culture High Satisfaction taking • Attention to detail Low • Outcome orientation • People orientation • Team orientation • Aggressiveness • Stability Summary Exhibit 16-6 depicts the impact of organizational culture. Employees form an over- all subjective perception of the organization based on factors such as the degree of risk tolerance, team emphasis, and support of individuals. This overall perception represents, in effect, the organization’s culture or personality and affects employee performance and satisfaction, with stronger cultures having greater impact. Implications for Managers ●● Realize that an organization’s culture is relatively fixed in the short term. To effect change, involve top management and strategize a long-term plan. ●● Hire individuals whose values align with those of the organization; these employees will tend to remain committed and satisfied. Not surprisingly, “misfits” have considerably higher turnover rates. ●● Understand that employees’ performance and socialization depend to a considerable degree on their knowing what to do and not do. Train your employees well and keep them informed of changes to their job roles. ●● You can shape the culture of your work environment, sometimes as much as it shapes you. All managers can especially do their part to create an ethical culture and to consider spirituality and its role in creating a posi- tive organizational culture. ●● Be aware that your company’s organizational culture may not be “trans- portable” to other countries. Understand the cultural relevance of your organization’s norms before introducing new plans or initiatives overseas. PeRSOnAl InvenTORy ASSeSSMenTS P I A PERSONAL INVENTORY comfort with change Scale ASSESSMENT Do you like change? Hate change? Few people are neutral about their preference for change. Take this PIA to see how comfortable you are with change.

590 PART 4 The Organization System OrganizationOsrgsahnouizladtisotnriavlectuoltcurereate a Positive POInt COunterPOInt Organizations should do everything they can to establish a posi- T here are many unanswered questions about the merits of using tive culture, because it works. Scores of studies have shown positive organizational scholarship to build positive organiza- that individuals who are in positive states of mind at work and tional cultures. let’s focus on three. in life lead happier, more productive, and more fulfilling lives. Given What is a positive culture? The employment relationship can be the accumulating evidence, researchers are now studying ways to amicable and even mutually beneficial. However, glossing over natural make that happen. differences in interests with the frosting of positive culture is intel- lectually dishonest and potentially harmful. From time to time, any In a Harvard Business Review article, Adam Grant discusses an organization needs to undertake unpopular actions. Can anyone ter- interesting concept: outsourcing inspiration. What does he mean by minate an employee positively (and honestly), or explain to someone that? Grant writes: “A growing body of research shows that end users— why others received a raise? There’s a danger in trying to sugarcoat. customers, clients, patients, and others who benefit from a company’s Positive relationships will develop—or not—on their own. We’d be bet- products and services—are surprisingly effective in motivating people ter off preaching that people, and organizational cultures, should be to work harder, smarter, and more productively.” honest and fair, rather than unabashedly positive. Some tangible examples of how this can work: Is practice ahead of science? Before we start beseeching organi- zations to build positive cultures, we should make sure these initia- ●● northwestern University’s “buddy program” introduces Al- tives work as expected. Many have unintended consequences, and zheimer’s patients to scientists working to develop treatments we simply don’t have enough research to support the claims. As one for the disease. reviewer noted, “everyone wants to believe they could have greater control over their lives by simply changing the way they think. Research ●● At a Merrill lynch branch, weekly team meetings begin that supports this idea gets promoted loudly and widely.” But it’s not with stories about how the team has made a difference in based on a mountain of evidence. customers’ lives. Is building a positive culture manipulative? Psychologist lisa ●● “All Medtronic employees have a ‘defining moment’ in which Aspinwall writes of “saccharine terrorism,” where employees are co- they come face-to-face with a patient whose story deeply erced into positive mindsets by happiness coaches. you may think touches them,” writes former CeO Bill George. this an exaggeration, but companies like UBS, American express, KPMG, Fedex, Adobe, and IBM have used happiness coaches to do Of course, there are other ways of creating a positive organizational exactly that. As one critic noted, “encouraging people to maintain a culture, including building on strengths and rewarding more than pun- happy outlook in the face of less-than-ideal conditions is a good way ishing. of keeping citizens under control in spite of severe societal problems, or keeping employees productive while keeping pay and benefits low.” Outsourcing inspiration is a great way for employees to feel appre- Rather than insisting on positive cultures, how about promoting honest ciated, to experience empathy, and to see the impact of their work—all cultures as an idea? motivating outcomes that will lead organizations to be more effective and individuals more fulfilled in their work. Creating a positive orga- nizational culture is not magic, but it tends to have extremely positive benefits for organizations that embrace it. Sources: B. Azar, “Positive Psychology Advances, with Growing Pains,” Monitor on Psychology, April 2011, 32–36; A. Grant, “How Customers Can Rally your Troops,” Harvard Business Review, June 2011, downloaded on July 12, 2011, from http:// hbr.org/; and J. McCarthy, “5 Big Problems with Positive Thinking (And Why you Should Do It Anyway),” Positive Psychology, October 2010, downloaded on July 10, 2011, from http://psychologyofwellbeing.com/.

Organizational Culture CHAPTER 16 591 cHaPter review MyManagementLab Go to mymanagementlab.com to complete the problems marked with this icon. QuestiOns FOr review 16-5 What are the similarities and differences in 16-1 What is organizational culture, and what are its creating an ethical culture, a positive culture, and a spiritual culture? common characteristics? 16-6 How does national culture affect what happens 16-2 What are the functional and dysfunctional when an organizational culture is transported to another effects of organizational culture? country? 16-3 What factors create and sustain an organization’s culture? 16-4 How is culture transmitted to employees? exPerientiaL exercise Greeting Newcomers Divide into groups of 3–4 students. Discuss these four Design a Program primary issues: Use the material from the chapter to develop an “ideal” program that could be used to introduce new students • Describe your first impressions of the university when to the culture. This might closely resemble what you’ve you applied. This is important because it helps to experienced, of it may be very different. The goal should identify assumptions other new students may have be to reduce student anxiety and stress during the tran- coming in. sition, and to promote a culture that helps newcomers meet their goals as efficiently and effectively as possible. • Describe some of your early experiences in the new Your socialization program should include pre-entry environment, and how they either reinforced or messages, like recruiting information, early orientation changed your pre-entry expectations. Include activi- sessions, and long-term follow-up. You’ll want to deter- ties officially sponsored by your school, as well as mine, at each phase, who should be sending these mes- unplanned experiences that told you what the sages so they have the most impact on newcomers. culture was like. 16-7. Based on your observations and group discussion, • Identify key issues you wish you had learned more about what seem to be the most important elements of when you arrived. Think of the sorts of things that the culture that newcomers need to adjust to? caused the most trouble for you, or that were difficult for you to figure out on your own. 16-8. Do you think your school doesn’t communicate some aspects of the culture to newcomers? If so, • Contrast your early experiences with your current knowledge why? of what the culture is like. How has long-term interac- tion changed your ideas about the culture of the 16-9. How is the introduction to a business organization- university? al culture and department similar to, or different from, introduction into a university and field of After describing your school’s culture as a whole, con- study? sider the same four issues as they relate to your major field of study.

592 PART 4 The Organization System etHicaL DiLemma Culture of Deceit committee chair, noted, “To support the change we need a culture that censures inappropriate behavior and enforces We have noted throughout this chapter, and the text over- rules vigorously, fairly, and [is] responsive.” There is gen- all, that honesty is generally the best policy in managing eral consensus that to overcome corruption, those in po- OB. But that doesn’t mean honest dealing is always the sitions of authority must demonstrate commitment to an rule in business. ethical culture. As Scala noted, “It is the leaders’ tone that ensures it is embedded at all levels of the organization. Studies have found, in fact, that whole industries may This must be honest and communicated with sincerity in encourage dishonesty. In one experiment, subjects were both words and actions.” There may well be a tendency first asked either to think about their professional iden- to become dishonest when there’s money to be made, so tities, or to complete a generic survey. They were then leaders may need to be especially vigilant and communi- asked to report on a series of coin flips; they were told cate clear expectations for ethical behavior. in advance that the more times the coin showed heads, the more money they would make. The bankers who Fortunately, evidence shows that asking people to focus took the generic survey were about as honest in report- on relationships and the way they spend their time can ing coin flips as people who worked in other fields. The actually make them behave more honestly and helpfully. bankers told to think about their professional identi- This suggests that a focus on the social consequences of ties, however, exaggerated how often the coin turned up our actions can indeed help to overcome corruption. heads. People in other professions didn’t do so—the tie between professional identity and dishonesty was unique Questions to those who worked in banking. These results are cer- 16-10. What are the negative effects of a culture that en- tainly not limited to the banking industry. Many other ways of priming people to think about financial trans- courages dishonesty and corruption on its reputa- actions seem to generate more dishonesty. And studies tion and employees? have also found that many individuals feel pressured to 16-11. Why might some organizations push employees engage in dishonest behavior to meet the bottom line. to behave in a dishonest or corrupt manner? Are Whenever there is money under consideration, there are there personal benefits to corruption that culture powerful motives. can counteract? 16-12. What actions can you take as a new employee if you Money motivations are strong in professional sports. are pressured to violate your own ethical standards For example, the number of top leaders in FIFA (world at work? How might mid-level employees’ respons- soccer’s governing body) who were indicted in 2015 sug- es to this question differ from those of more senior gests that behaving dishonestly has been accepted within managers? FIFA, and covering up for the dishonesty of others has been encouraged. Domenico Scala, FIFA’s audit and compliance Sources: F. Gino, “Banking Culture Encourages Dishonesty,” Scientific American, December 30, 2014, http://www.scientificamerican.com/article/banking-culture-encourages-dishonesty/; A. Cohn, Alain, E. Fehr, and M. A. Maréchal, “Business Culture and Dishonesty in the Banking Industry,” Nature, 2014, doi: 10.1038/nature13977; L. Geggel, “FIFA Scandal: The Complicated Science of Corruption,” Scientific American, May 31, 2015, http://www.scientificamerican.com/article/fifa-scandal-the- complicated-science-of-corruption/; and K. Radnedge, “Culture Change Required If FIFA Is to Eliminate Wrongdoing,” World Soccer, May 29, 2015, http://www.worldsoccer.com/columnists/ keir-radnedge/culture-change-required-if-fifa-is-to-eliminate-wrongdoing-362278.

Organizational Culture CHAPTER 16 593 case inciDent 1 The Place Makes the People At Gerson Lehrman Group, you won’t find an employee and lack of consistent locations, this may be an even less working in a cubicle day after day. You also won’t find an controlled environment than an open office. However, employee working in a free-form open office area consis- it does signal a culture that values the autonomy of in- tently either. The reason is that Gerson Lehrman is invested dividual workers to choose their own best environment in “activity based working.” In this system, employees have at a particular time. The lack of consistency creates oth- access to cubicle spaces for privacy, conference rooms for er problems, though. Workers cannot achieve even the group meetings, café seating for working with a laptop, modest level of personal control over any specific space and full open-office environments. Where you work on a that they had with the open design. Design expert Louis particular day is entirely up to you. Lhoest notes that managers in an activity-based office “have to learn to cope with not having people within It may be hard to remember, but office allocations were their line of sight.” This is a difficult transition for many a uniform signal of hierarchical status and part of orga- managers to make, especially if they are used to a com- nizational culture until fairly recently. As organizations mand-and-control culture. have become flatter and the need for creativity and flex- ibility has increased, the “open office” plan has become a Whether a traditional, open, or activity-based design mainstay of the business world. The goal is to encourage is best overall is obviously hard to say. Perhaps the better free-flowing conversation and discussion, enhance creativ- question is, which type will be appropriate for each orga- ity, and minimize hierarchy—in other words, to foster a nization? creative and collaborative culture and remove office space from its status position. Questions 16-13. The case describes activity-based working and the Research on open offices, however, shows there is a downside. Open offices decrease the sense of privacy, re- ways in which the office and work are organized. duce the feeling of owning your own space, and create a What are the inherent managerial concerns or distracting level of background stimulation. As psychology problems with this approach and office design? writer Maria Konnikova noted, “When we’re exposed to 16-14. Can the effects of a new office design be assessed too many inputs at once—a computer screen, music, a col- objectively? How could you go about measuring league’s conversation, the ping of an instant message—our whether new office designs are improving the orga- senses become overloaded, and it requires more work to nizational culture? achieve a given result.” 16-15. What types of jobs do you think might benefit most from the various forms of office design described So is the activity-based hybrid described earlier a above? potential solution? With its constantly shifting workspace Sources: B. Lanks, “Don’t Get Too Cozy,” Bloomberg Businessweek, October 30, 2014, http://www .businessweekme.com/Bloomberg/newsmid/190/newsid/271; M. Konnikova, “The Open-Office Trap,” New Yorker, January 7, 2014, http://www.newyorker.com/business/currency/the-open-office- trap; N. Ashkanasy, O. B. Ayoko, and K. A. Jehn, “Understanding the Physical Environment of Work and Employee Behavior: An Affective Events Perspective,” Journal of Organizational Behavior 35 (2014): 1169–84.

594 PART 4 The Organization System case inciDent 2 Active Cultures business while thinking about the environment and think- ing about your team and community.” As Patagonia CEO Employees at many successful companies start the day Rose Marcario says, “People recognize Patagonia as a com- by checking the economic forecast. Patagonia’s Ventura, pany that’s . . . looking at business through a more holistic California, employees start the day by checking the surf lens other than profit.” However, she is quick to add, “Prof- forecast. The outdoor clothing company encourages its it is important; if it wasn’t you wouldn’t be talking to me.” workforce to take time from the work day to get outside and get active. For Patagonia, linking employees with the Patagonia’s culture obviously makes for an ideal work- natural environment is a major part of the culture. place for some people—but not for others who don’t share its values. People who are just not outdoor types would New hires are introduced to this mindset very quickly. likely feel excluded. While the unique mission and values Soon after starting at Patagonia, marketing executive Joy of Patagonia may not be for everyone, for its specific niche Howard was immediately encouraged to go fly fishing, in the product and employment market, the culture fits surfing, and rock climbing all around the world. She notes like a glove. that all this vacationing is not just playing around—it’s an important part of her job. “I needed to be familiar with the Questions products we market,” she said. Other practices support this 16-16. What do you think are the key dimensions of cul- outdoors-oriented, healthy culture. The company has an on-site organic café featuring locally grown produce. Em- ture that make Patagonia successful? How does the ployees at all levels are encouraged through an employee organization help to foster this culture? discount program to try out activewear in the field. And 16-17. Does Patagonia use strategies to build its culture highly flexible hours ensure that employees feel free to that you think could work for other companies? Is take the occasional afternoon off to catch the waves or get the company a useful model for others that aren’t out of town for a weekend hiking trip. so tied to a lifestyle? Why or why not? 16-18. What are the drawbacks of Patagonia’s culture? Are there bottom-line benefits to this organizational Might it sometimes be a liability, and if so, in what culture? Some corporate leaders think so. As Neil Blu- situations? menthal, one of the founders of Warby Parker eyewear, observes, “they’ve shown that you can build a profitable Sources: J. Murphy, “At Patagonia, Trying New Outdoor Adventures Is a Job Requirement,” Wall Street Journal, March 10, 2015, http://www.wsj.com/articles/at-patagonia-trying-new-outdoor-adventures- is-a-job-requirement-1425918931; B. Schulte, “A Company That Profits as It Pampers Workers,” Washington Post, October 25, 2014, http://www.washingtonpost.com/business/a-company-that- profits-as-it-pampers-workers/2014/10/22/d3321b34-4818-11e4-b72e-d60a9229cc10_story.html; and D. Baer, “Patagonia CEO: ‘There’s No Way I Should Make One Decision Based on Quarterly Results,’” Business Insider, November 19, 2014, http://www.businessinsider.com/patagonia-ceo- interview-2014-11. MyManagementLab Go to mymanagementlab.com for the following Assisted-graded writing questions: 16-19. From your reading of Case Incident 1, in what ways can office design shape culture? 16-20. In regard to Case Incident 2, what might Patagonia do to further reinforce its culture? 16-21. MyManagementLab Only – comprehensive writing assignment for this chapter.

Organizational Culture CHAPTER 16 595 enDnOtes 10See S. Maitlis and M. Christianson, “Sense- 18A. Simha and J. B. Cullen, “Ethical Climates making in Organizations: Taking Stock and and Their Effects on Organizational Out- 1See, for example, B. Schneider, M. G. Ehrhart, Moving Forward,” The Academy of Management comes: Implications from the Past and Proph- and W. H. Macey, “Organizational Climate and Annals 8 (2014): 57–125; K. Weber and ecies for the Future,” Academy of Management, Culture,” Annual Review of Psychology, 2013, M. T. Dacin, “The Cultural Construction of November 2012, 20–34. 361–88. Organizational Life,” Organization Science 22 19Ibid. 2I. Borg, P. J. F. Groenen, K. A. Jehn, W. (2011): 287–98. 20Simha and Cullen, “Ethical Climates and Bilsky, and S. H. Schwartz, “Embedding the 11Y. Ling, Z. Simsek, M. H. Lubatkin, and Their Effects on Organizational Outcomes.” Organizational Culture Profile into Schwartz’s J. F. Veiga, “Transformational Leadership’s 21A. 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