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Organisational Culture
The Power
of Culture
"We
encounter organisational cultures all
the time. When they are not our own, their
most visible and unusual qualities seem
striking: the look of the traditionally
dressed IBM salesman, the commitment to
firm and product expressed by employees
at Honda or Matsushita, the informality
of Apple and many other high-tech companies.
When the cultures are our own, they often
go unnoticed-until we try to implement
a new strategy or program that is incompatible
with their central norms and values. Then
we observe, first hand, the power of culture."
John
P. Kotter & James L. Heskett, Corporate
Culture & Performance (Free Press
1992), p. 3.
Culture
and the Bottom-Line: Important Lessons from
the Research
Kotter
and Heskett's landmark study Corporate
Culture and Performance documented results
for 207 large U.S. companies in 22 different
industries over an eleven-year period.
Kotter and Heskett reported that companies
that managed their cultures well saw revenue
increases of 682% versus 166% for the
companies that did not manage their cultures
well; stock price increases of 901% versus
74%; and net income increases of 756%
versus 1%. (1)
Denison's
research of 34 large American firms-one
of the most frequently cited studies of
culture & performance-found that companies
with a participative culture reap an ROI
that averages nearly twice as high as
those in firms with less efficient cultures.
Denison's study provides hard evidence
that the cultural and behavioral aspect
of organisations are intimately linked
to both short-term and long-term survival.
(2)
Many
companies complain that their employees
are de-motivated, unproductive, and disloyal.
Jeffrey Pfeffer, a business professor
from Stanford University, argues that
these companies get exactly what they
deserve. If you create a "toxic"
or dysfunctional work environment, you
are going to get toxic behavior from your
employees. According to Pfeffer's research,
companies that manage people right will
outperform companies that don't by 30%
to 40%. (3)
The
top five performing stocks from 1972 to
1992 were Plenum Publishing (with a return
of 15,689%), Circuit City (a video &
appliance retailer; 16,410%), Tyson Foods
(a poultry producer; 18,118%), Wal-Mart
(19,807%), and Southwest Airlines (21,775%).
Yet during this period, these industries
as a whole performed very poorly. What
these five extremely successful firms
have in common is that their sustained
advantage did not rely on technology,
patents, or strategic proposition, but
rather on how they managed their workforce.
(4)
Three
quarters of reengineering, total quality
management, and downsizing efforts have
failed entirely or have created problems
serious enough that the survival of the
organisation was threatened. Most frequently
citied reason for failure: a neglect of
the organisation's culture. (5)
In
a 1992 study by Coopers & Lybrand
of 100 companies with failed or troubled
mergers, 85% of the executives polled
said that differences in management style
and practices were the major problem.
(6)
In
1996, the British Institute of Management
surveyed executives involved in a number
of acquisitions and concluded, "The
major factor in failure was the underestimation
of difficulties of merging two cultures."
(7)
Notes:
1.
John P. Kotter & James L. Heskett,
Corporate Culture & Performance (Free
Press 1992), p. 11.
2. Daniel R. Denison, "Bringing Corporate
Culture to the Bottom Line," Organisational
Dynamics (Winter 1984).
3. Jeffrey Pfeffer, "Danger: Toxic
Company," Fast Company (November
1998), pp. 152-161.
4. Jeffrey Pfeffer, Competitive Advantage
through People (Harvard Business School
Press 1995).
5. Kim S. Cameron and Robert E. Quinn.
Diagnosing and Changing Organisational
Culture (Addison Wesley 1999), p. 1.
6. Robert J. Carleton, "Cultural
Due Diligence," Training (November
1997), pp. 67-75.
7. Robert J. Carleton, "Cultural
Due Diligence," Training (November
1997), pp. 67-75.
Culture
Management as a Key Leadership Competency
and Organisational Capability
The
data from the following studies can be
used to benchmark your skills and identify
opportunities for development, both for
yourself and for your organisation. If
these are the critical challenges facing
executives and organisations today, then
strong skills in any two or three of these
areas should benefit both your career
development and the success of your organisation.
This data is listed here, however, because
it demonstrates again how important organisational
culture is. Note that culture makes the
"top three" in all of these
research studies.
The
10 Most Important Leadership Capabilities:
(1)
- Be
a catalyst / manager of strategic
change
- Be
a catalyst / manager of culture change
- Articulate
a tangible vision, values & strategy
- Exhibit
strong customer orientation
- Empower
others to do their best
- Get
results: manage strategy to action
- Communicate
effectively on a day-to-day basis
- Think
integratively about the total business
- Be
flexible & adaptive
- Take
risks & initiative
The
7 Most Important Organisational Capabilities:
(2)
- Attracting,
developing, and retaining management
talent
- Being
able to change rapidly and comfortably
- Clear
vision & shared mindset
- Aligning
performance measures & rewards
to strategic priorities
- Being
the customer service leader
- Effective
team processes across boundaries
- Culture:
flexible, adaptable
4
Key Competitive Challenges Facing Organisations:
(2)
- Adaptive
Culture: capacity for change
- Becoming
a Global Competitor
- Attracting,
Developing, & Retaining Leaders
- Becoming
a Customer Responsive Organisation
12
Key Challenges Facing Executives Today:
(3)
- Attracting,
keeping, & developing good people
- Thinking
and planning strategically
- Maintaining
a high-performance climate
- Improving
customer satisfaction
- Managing
time and stress
- Staying
ahead of the competition
- Aligning
vision, strategy, and behavior
- Maintaining
work and life balance
- Improving
internal processes
- Stimulating
innovation in the organisation
- Improving
the bottom line
- Leading
culture change in the organisation
8
Distinguishing Characteristics of Competitive
Companies: (4)
- Value:
consistent focus on adding value rather
than being busy
- Commitment:
management is dedicated to a long-term
core strategy
- Culture:
proactive development of a culture
that helps the business win
- Communication:
extraordinary concern for communicating
with all stakeholders
- Partnering
with Stakeholders: involving partners
both within and outside the firm in
many decisions
- Collaboration/Alignment:
high level of collaboration &
involvement within and between all
functions
- Innovation
& Risk: willingness and ability
to be creative and make change
- Competitive
Passion: never satisfied; constantly
search for improvements; actively
seek out and incorporate ideas from
all sources
Notes:
1 According to a study of 1,213
managers in 8 countries. Source: Yeung
& Ready, "Developing Leadership
Capabilities of Global Corporations,"
Human Resource Management Journal (1995):
529-547. Items 7-10 are from Doug Ready,
Champions of Change (1,451 respondents),
University of Michigan's HREP (March 1998).
2 Based on feedback from 40 "thought
leaders" (25 U.S. and 15 European).
Source: Ulrich and Eichinger, "SOTA96,"
Human Resource Planning Journal 20, no.
2 (1997): 50-61.
3 From a survey of 1,969 mid-level
and senior executives from a range of
industries. Source: "1st Annual Pressing
Problems Survey," University of Michigan,
Executive Education Center (2000).
4 According to a Saratoga Institute
study of over 1,000 businesses, these
eight factors distinguish the consistently
highest performing companies from their
competitors. Source: Jac Fitz-enz, The
8 Practices of Exceptional Companies (Amacom,
1997).
Definitions
& Descriptions of Organisational Culture
Definitions:
Source: Mintzberg, Ahlstrand,
& Lampel, Strategy Safari (Free Press
1998), chapter 9.
- Culture
knits a collection of individuals into
an integrated entity called "organisation."
- Culture
is the shared meaning that a group of
people creates over time through shared
experiences and history.
- Culture
is essentially composed of interpretations
of a world and the activities & artefacts
that reflect these.
- Culture
is the shared beliefs & values that
are reflected in traditions & habits
as well as more tangible manifestations-stories,
symbols, even buildings & products.
- The
process of acculturation or socialization-acquiring
beliefs & values-happens by hearing
the stories, seeing the symbols, participating
in the rituals, observing the examples
people set, and also by reading the manuals
and newsletters, listening to corporate
communications, reward & punishment,
and so on.
Other
Descriptions of Culture:
- An
organisation's self-identity: What we
really think about who we are and where
we are going.
- Employee
beliefs, attitudes, and behaviors: Not
what the fancy marketing brochures say,
but what we actually believe & value;
not the way things should be done, but
the way things actually get done; not
how we "talk the talk" but how
we "walk the walk."
- Culture
is what people fall back on when there
are no instructions. It gives you rules
for when there are no rules, and it provides
a common language for moving forward.
(David House, Chairman and CEO of Bay
Networks, cited in Fast Company, October
1998.)
- A
strong culture is a system of informal
rules that spells out how people are to
behave most of the time. A strong culture
helps people feel better about what they
do, so they are more likely to work harder.
(Fitz-enz)
- Cultural
unity affects performance because it focuses
employee attention on the right issues.
(Ulrich and Lake)
The
Challenge of Culture:
- Members
of a culture can never fully describe
the beliefs that underpin their culture.
- Culture
is always complex and multidimensional.
An organisation's culture is never fully
unified; there are always subcultures
within any organisation.
- Reciprocal
Causality: Do you improve the business
and wait to see culture begin to change?
Or do you change the culture in order
to improve the business? Culture management
requires a holistic approach that works
from both directions simultaneously.
- It
is the job of each and every manager to
create the culture and mindset that bring
about the behaviour that helps the organisation
achieve its vision and strategy.
Leadership
Challenge:
- What
cultural attributes does your organisation
most need to successfully achieve its
vision and strategy?
- What
support is your organisation giving its
managers to create and manage your desired
culture?
Resources
- Argyris,
"Education for Leading-Learning,"
Organisational Dynamics 21, 3 (Winter
1993): 4-17.
- Ashkenas,
Ulrich, Jick, & Kerr. The Boundaryless
Organisation (Jossey-Bass 1995).
- Bernick,
"When Your Culture Needs a Makeover,"
Harvard Business Review (June 2001): 53-61.
- Cameron
& Quinn. Diagnosing and Changing Organisational
Culture (Addison-Wesley 1999).
- Carleton,
J. Robert, "Cultural Due Diligence,"
Training (November 1997): 67-75.
- Collins
& Porras. Built to Last (Harper Business
1997).
- Denison,
"Bringing Corporate Culture to the
Bottom Line," Organisational Dynamics
(Winter 1984).
- Fitz-Enz,
The Eight Practices of Exceptional Companies
(Amacom 1997), chapter 4.
- Hamel,
"Reinvent Your Company," Fortune
(June 19, 2000): 98-118.
- Heskett,
Sasser, & Schlesinger. The Service
Profit Chain (Free Press, 1997).
- Kaplan
& Norton, "Building a Strategy
Focused Organisation," Ivey Business
Journal (May-June 2001): 12-19.
- Kotter
& Heskett, Culture & Performance
(Free Press 1992).
- Mintzberg,
Ahlstrand, & Lampel, Strategy Safari
(Free Press 1998), chapter 9.
- Pfeffer,
Competitive Advantage through People (HBS
Press 1995).
- ___
. The Human Equation: Building Profits
by Putting People First (HBS Press 1998).
- ___
. "Danger: Toxic Company," Fast
Company (November 1998): 152-161.
- Schein.
Organisational Culture & Leadership,
2nd Edition (Jossey-Bass 1997).
- Ulrich.
Human Resource Champions (Harvard Business
School Press 1997): 168-184, 243-244.
- Ulrich
& Lake. Organisational Capability
(Wiley 1990), chapter 4.
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