Organizational Culture Alignment - Moving Toward a … · 2014-01-13 · Organizational Culture...

MARKET EVALUATION SURVEYING DATA ANALYSIS BENCHMARKING INNOVATIVE PRACTICES LITERATURE REVIEW

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Organizational Culture Alignment: Moving Toward a Market Culture

In this report, Hanover Research discusses organizational culture, focusing on market organizational culture as defined in the Competing Values Framework. We provide several examples of organizations that have either adopted a market culture or instituted a culture change. Lastly, we also include a section on organizational effectiveness models.

2© 2010 Hanover Research – Academy Administration Practice

HANOVER RESEARCH NOVEMBER 2010

Introduction The organizational culture of a corporation has a profound impact on many aspects of its operations. University of Michigan professors Kim Cameron and Thomas Quinn point to companies such as Southwest Airlines and Wal-Mart as examples of corporations that have entered tough industries but have still managed to succeed while many of their competitors have faltered. In an attempt to identify the cause for this success, the authors highlight one characteristic that both corporations share – a distinctive organizational culture that permeates all company activities.1 Organizational culture can also have a similar impact on institutions of higher education. The culture and tone that the university leadership sets for the rest of the institution filters down into interactions between professors and again into the student body. Institutional leaders can begin a process of changing the organizational culture, a move which is frequently undertaken to improve firm performance, employee performance, and employee morale. A transformation to one of the four primary types of organizational culture – a market culture – frequently creates a demanding environment characterized by high performance, competition, and external focus on customers and the bottom line. This report works to define organizational culture and to describe how a market culture can impact an organization and its operations. We include several cases studies of organizations that have adopted a market culture, describing the organizational outcomes of such a transition. We also include a discussion of organizational effectiveness related to total quality management. The report is organized into the following sections: Key Findings and Best Practices Organizational Culture and Organizational Change Organizational Change Case Studies Measures of Organizational Effectiveness Appendix

1 Cameron, K. and R. Quinn. “Diagnosing and Changing Organizational Culture.” http://webuser.bus.umich.edu/cameronk/culture%20book-chapter%201.pdf



Key Findings and Best Practices

Our research yielded the following key findings:

The most popular and widely used definition of organizational culture comes from Kim Cameron and Thomas Quinn’s Competing Values Framework: The four types of organizational culture Cameron and Quinn have established include market, clan, adhocracy, and hierarchy.

Cameron and Quinn have also created a metric to assess organizational culture called the “Organizational Culture Assessment Instrument:” The assessment allows employees to measure their organization’s culture now and in the future.

In a market culture, management places the most significant emphasis on organizational performance: The CEOs of major companies, such as Philips and General Electric, have been forced to cut non- or low-profit divisions in adherence with a market and performance-driven culture.

Employees should have clear expectations for their work and performance: This is the first step in creating a high-performance culture.

Management should provide clear incentives for employees who perform well: Performance incentives could include heavily basing salary on employee and firm performance, as Nucor does for its employees.

Management should also provide rewards and recognition for employee performance: Conemaugh Medical Center’s use of “Within Our Walls” certificates is an example of this type of employee recognition.

Goals must be manageable and practical: If goals are overly ambitious to the point where they are impractical, then there is a strong possibility for negative consequences for the organization.



Defining Organizational Culture and Organizational Change Perhaps the most appropriate definition of organizational culture is one that acknowledges that an organization’s culture is frequently hard to verbalize but easy to identify and sense.2 In this section, we discuss two competing definitions of organizational culture, as well as the “Competing Values Framework” which describes different organizational culture classifications. Definitions of Organizational Culture An organization’s culture is often understood as its personality. One definition of organizational culture, adapted from Carter McNamara’s book Field Guide to Leadership and Supervision, states that an organization’s culture is comprised of the “assumptions, values, norms, and tangible signs (artifacts) of organization members and behaviors.”3 Other specific indicators of an organization’s culture may be the office furniture arrangement, the dress code, and the types of conversations members of the organization have with each other. In his research, McNamara also identifies four “types” of organizational culture. He classifies them as follows: Academy Culture: Employees are highly skilled and tend to stay in the

organization, while working their way up the ranks. The organization provides a stable environment in which employees can develop and exercise their skills. Examples are universities, hospitals, large corporations, etc.

Baseball Team Culture: Employees are ‘free agents’ who have highly prized skills. They are in high demand and can rather easily get jobs elsewhere. This type of culture exists at fast-paced, high-risk organizations, such as investment banking, advertising, etc.

Club Culture: The most important requirement for employees in this culture is to fit into the group. Usually employees start at the bottom and stay with the organization. The organization promotes from within and highly values seniority. Examples are the military, some law firms, etc.

Fortress Culture: Employees don’t know if they’ll be laid off or not. These organizations often undergo massive reorganization. There are many opportunities for those with timely, specialized skills. Examples are savings and loans, large car companies, etc.4

2 McNamara, C. 2000. “Organizational Culture.” Authenticity Consulting, LLC. Accessed through the Free Management Library. http://managementhelp.org/org_thry/culture/culture.htm 3 Ibid. 4 Bulleted points reproduced verbatim from: Ibid.



Academics Edgar Schein, Kim Cameron, Robert Quinn, and Cornelis De Kluyver have used a different, and more prominent, definition of organizational culture in several academic articles. This definition holds that the culture of an organization is “the ambience of a given enterprise created by a shared set of values, underlying assumptions, and beliefs within a company that provides guidance to every aspect of [a] shared endeavor.”5 Under this definition, organizational culture incorporates the company’s expectations and collective memories, as well as the definitions that structure how the company accomplishes its goals. The culture the company creates establishes a shared sense of identity among employees.6 Competing Values Framework Scholars Cameron and Quinn have expanded on this definition of organizational culture through the “Competing Values Framework” (CVF) model. They developed the CVF model to help organizations identify their own organizational culture and use this knowledge to make the organization as a whole more effective. Cameron and Quinn conducted their research using the following three questions as a guideline:

What are the main criteria for determining if an organization is effective or not? What key factors define organizational effectiveness? When people judge an organization to be effective, what indicators do they have in mind?7

These three key questions led Cameron and Quinn to the development of two “dimensions” of organizational culture. The first dimension of organizational culture “differentiates a focus on flexibility, discretion, and dynamism from a focus on stability, order, and control.”8 The second dimension of organizational culture “differentiates a focus on an internal orientation, integration, and unity from a focus on an external orientation, differentiation, and rivalry.”9 With these dimensions as a framework, Cameron and Quinn subsequently developed four organizational culture “archetypes,” one of which can be assigned to most organizations. Below, we describe the primary characteristics of each archetype:

Control or Hierarchy: The control culture is less flexible and internally focused. It utilizes a more formal structure than other culture types and most often requires changes to be made incrementally. Oftentimes, organizations that fall under this archetype have adopted very tightly defined procedures that dictate how the organization operates.

5 “The Competing Values Framework: Enhancing the Effectiveness of Changes in Organizational Culture.” 2010. Article accessed through HubPages. 6 Ibid. 7 Bulleted points reproduced verbatim from: Ibid. 8 Ibid. 9 Ibid.



Compete or Market: The compete, or market, culture is also less flexible, but, unlike the control culture, it is externally focused. The market culture emphasizes “profitability, bottom-line results, strength in market niches, stretch targets, and secure customer bases.”10

Collaborate or Clan: The collaborate culture is most similar to a family-run organization, with loyalty and a shared vision being prime motivators. The organization is less focused on structure and control and maintains more flexibility than a market culture.

Create or Adhocracy: The create culture is more flexible than the others and is externally focused. An office that adheres to a create culture can be described as a “dynamic, entrepreneurial, and creative workplace.”11 This culture is the archetype most likely to be used to describe a 21st century workplace.

The Competing Values Framework can also be communicated visually, as illustrated in Figures 1 and 2.

Figure 1: Competing Values Framework

Adapted from: Diagnosing and Changing Organizational Culture12

10 Ibid. 11 Ibid. 12 Ibid. And: Cameron, K.S. and Quinn, R.E. Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework. San Francisco: Jossey-Bass, 2006.



Figure 2: Competing Values Framework

Adapted from: Diagnosing and Changing Organizational Culture13

Market Organizational Culture The qualities of a market organizational culture first developed in American offices during the 1960s as a result of the increasing competitive pressure American organizations faced from foreign firms. Firms with a market culture tend to emphasize the importance of relationships with “suppliers, contractors, unions, legislators, consultants, [and] regulators,” among other parties.14 These types of companies are primarily concerned with competitiveness, and the company’s performance is more important than the process taken to achieve results. Such a company’s success is often defined by its market share or achievement of other tangible goals and targets.15 Measuring Organizational Culture As part of their work with the Competing Values Framework, Cameron and Quinn developed an instrument that can be used to measure an organization’s culture, called the “Organizational Culture Assessment Instrument” (OCAI). The OCAI requires employees to assess six aspects of organizational culture in order to determine accurately how the organization operates and what values best characterize it.16

13 Ibid. And: Cameron, K.S. and Quinn, R.E. Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework. San Francisco: Jossey-Bass, 2006. 14 Tharp, B. 2009. “Four Organization Culture Types.” Haworth. 3. http://www.haworth.com/en-us/Knowledge/Workplace-Library/Documents/Four-Organizational-Culture-Types_6.pdf 15 Ibid., 5. 16 Cameron, K.S. and Quinn, R.E. 2000. “Organizational Cultural Assessment Instrument.” http://www.tiplady.org.uk/pdfs/ocai.doc



Employees rate the organization in the following areas: dominant characteristics, organizational leadership, employee management, organizational glue, strategic emphases, and criteria of success. Each category contains four questions and two categories – “Now” and “Preferred.” Subjects rate their organization using a 100-point scale across each of the four questions for the Now category, and then complete the same exercise for the Preferred category in terms of where they hope their organization will be in five years.17 After completing the six categories, respondents then add up the scores – assigned an “A,” “B,” “C,” or “D” – and calculate the average. The “A” response for each category corresponds with Clan, the “B” with Adhocracy, the “C” correspond with Market, and the “D” with Hierarchy. The averaged score represents the organizational culture archetype that exists at the respondent’s organization.18 For a complete copy of the Organizational Culture Assessment Instrument, please refer to the Appendix. Developing an Adaptive Culture As organizations with a market culture stress external relations and stability, being able to adapt to the surrounding environment is a crucial part of maintaining the culture. Organizations that emphasize an adaptive culture typically alter their internal mechanisms when confronted with external challenges. Institutions of higher education, however, can sometimes be guilty of inertia – being slow and resistant to change – within the organizational structure. Nevertheless, factors such as demographic shifts, changes and advancements in technology, and market demands provide strong motivation for changes in the higher education setting.19 The resulting changes may be structural, such as “reengineering, networking, and outsourcing,” strategies which scholars Patricia Gumport and Stuart Snydman applaud as “adaptive responses to environmental demands.”20 In a 2002 article, Gumport and Snydman examine how institutions of higher education have responded to external challenges and explore various organizational change theories. One of these theories, written by Peter Michael Blau, looks specifically at the effects of organizational size on structural change. He argues that organizational change and “innovation” within departments is a result of the level of stability evident within those departments. As the size of an institution increases, the overall stability allows for more academic “differentiation, specialization, and

17 Ibid. 18 Ibid. 19 Craig, C. 2004. “Higher Education Culture and Organizational Change in the 21st Century.” The Community College Exercise. 4. Accessed through ProQuest Education Journals. 20 Gumport, P. and Snydman, S. 2002. “The Formal Organization of Knowledge: An Analysis of Academic Structure.” The Journal of Higher Education. 382-383. http://www.stanford.edu/group/ncpi/documents/pdfs/1-09_academicstructure.pdf



bureaucratization.”21 Gumport and Snydman expand upon this theory, as they also consider how programmatic and curricular shifts can be part of an adaptive culture at a college or university.22 The authors offer San Jose State University in California as an example of an institution of a higher education that has actively adapted to its external environment. San Jose State created a new expanded mission statement due to its inclusion in the California State College system (now the California State University system) in 1961. As part of this new mission statement, the institution also vastly expanded its curricular offerings, degree options, and the number of academic departments it maintained.23

21 Ibid, 383. 22 Ibid. 23 Ibid, 388.



Organizational Change Case Studies In this section, we discuss several examples of organizations that have implemented or are in the midst of implementing key organizational changes. Where possible, we focus on organizational transitions toward a market culture. We profile the following organizations: Philips Electronics General Electric Siemens Nucor Corporation Conemaugh Memorial Medical Center Texas A & M University Sears/Ford Motor Company

Philips Electronics In the early 1990s, Philips lost a significant portion of its European market share.24 In addition, in 1990, the company posted losses of $2.6 billion.25 The company encountered difficulties as it strived to convert its innovations and new ideas into products that could be readily sold to consumers. Furthermore, its high manufacturing costs allowed little room for error in its profit margins.26 After realizing that weak consumer markets in Europe were not the sole cause of the financial losses, a new CEO instituted corporation-wide restructuring efforts to change the culture of the company. Labeled “Centurion,” Philips’ overarching goal of restructuring the company was to change its culture from a “relatively complacent, arrogant, hierarchy to a culture driven by customer focus, premium returns on assets, and improved corporate competitiveness – a market culture.”27 To achieve these goals, Philips sold off unprofitable divisions and assets, cut jobs, and closed down some of its manufacturing facilities.28 These cut assets and divisions included a 32 percent reduction of the company’s equity stake in the German consumer electronics company Grundig to 5 percent. Philips also sold its cable operations, car navigation systems, and Super-Club video-rental chain divisions.29 24 Diagnosing and Changing Organizational Culture. Op. cit., 40. 25 “Restructuring Phillips – Care Intro 1.” ICMR IBS Center for Management Research. http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/Restructuring%20Philips.htm 26 “Restructuring Phillips – Excerpts.” ICMR IBS Center for Management Research. http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/Restructuring%20Philips-Business%20Strategy-excerpts.htm 27 Diagnosing and Changing Organizational Culture. Op. cit. 28 “Restructuring Phillips – Care Intro 1.” Op. cit. 29 “Restructuring Phillips – Excerpts.” ICMR IBS Center for Management Research. Op. cit.



General Electric Under CEO Jack Welch, General Electric instituted a culture change in the late 1980s and 1990s to create a more competitive organizational culture. During his 21-year tenure as CEO of General Electric, Welch bought and sold over 300 businesses. He operated under the premise that if a General Electric business was not first or second in its market, than it would be sold. As Cameron and Quinn write, “the GE culture under Welch was known as a highly competitive, results-or-else, take-no-prisoners type of culture. It reflected a stereotypical market culture.”30 Welch pioneered the idea of “forced ranking,” a structure under which managers must rank their employees into three groups – a top 20 percent, a middle 70 percent, and a bottom 10 percent. Many within the bottom 10 percent were subsequently let go as a result of their performance reviews. GE has modified its procedures regarding employee review since Welch left the company, though it maintains the 20/70/10 split as a basic guideline to help managers identify top employees.31 Welch also created new programs that ultimately aimed to improve GE’s bottom line, including a series of town-hall meetings called “Work-Out.” Management encouraged employees to use these meetings as forums to share ideas and provide feedback.32 Finally, the company adopted a leadership development program to nurture new talent. Each year, 9,000 employees take classes at the company’s leadership center.33 Siemens Siemens creates a market organizational culture by striving for a high-performance workplace. The corporation institutes this type of workplace by ensuring that all employees know where they fit within the overall business strategy and how they contribute to progress toward business goals. Each employee has clear expectations for his or her work, and Siemens creates both overall targets and individual targets.34 The illustration on the following page depicts Siemens’s philosophy that, within a performance-oriented culture, as team performance improves, overall results improve as well.

30 Diagnosing and Changing Organizational Culture. Op. cit. 31 “The Struggle To Measure Performance.” 2006. Bloomberg Businessweek. http://www.businessweek.com/magazine/content/06_02/b3966060.htm 32 Kotelnikov, V. “Creating an Extraordinary Organization – Case Study: General Electric (GE).” e-Coach. http://www.1000ventures.com/business_guide/cs_inex_ge.html 33 Blakely, L. “Models for People Management: Best Buy, Google, GE, Semco.” BNET. http://www.bnet.com/article/models-for-people-management-best-buy-google-ge-semco/237201 34 “Creating a High Performance Culture.” The Times 100. http://www.thetimes100.co.uk/case-study--creating-a-high-performance-culture--89-256-4.php



Figure 3: High Performance Culture at Siemens

Source: The Times 10035

Human resource development and talent management also play crucial roles in the Siemens high performance culture. Called “People Excellence,” the company’s human resource development platform consists of four components:36 Achieving a high performance culture Increasing the global talent pool Strengthening expert careers Siemens’ Leadership Excellence program (SLE)

Siemens also stresses the importance of employee development. As part of its talent management program, the company provides employees with:

Job enrichment – Where individuals are encouraged to take on extra tasks and responsibilities within an existing job role to make work more rewarding

Job enlargement – Where the scope of the existing job is extended to give a broader range of responsibility, plus extra knowledge and skills development.37

Below is an illustration of Siemens’ philosophy on talent management.

Figure 4: Talent Management Global Philosophy38


35 Ibid. 36 “Talent Management – Managing People.” The Times 100. http://www.thetimes100.co.uk/case-study--creating-a-high-performance-culture--89-256-5.php 37 Bulleted points quoted verbatim from: Ibid. 38 Ibid.



Through this structure, the company ensures that it operates at peak efficiency and is able to clearly determine which employees carry the most potential for advancement. Siemens also uses the “Performance Management Process” to manage its employees. Every employee receives goals based on his or her position within the corporation. The accomplishment of these individual goals across the organization enables Siemens to reach its company-wide goals.39 The following figure illustrates this process.

Figure 5: Performance Management Process40


Nucor The steel company Nucor moved to a performance-based, market culture in the 1980s under its CEO, F. Kenneth Iverson. The company began to offer performance-based incentives to its employees. Nucor also created an egalitarian workforce within a market culture through a unique pay structure.41 An average Nucor steelworker makes a base salary of $10 an hour. This hourly wage is comparably less than steelworkers at other firms, who usually earn $16-$21 per hour. In addition, Nucor’s upper level managers earn only 75 percent to 90 percent of the market value for their positions. However, the base salary of Nucor’s employees is frequently supplemented by performance-based financial incentives. Sixty-six percent of a Nucor steelworker’s annual salary is tied to his performance, and up to 20 percent of the performance-based portion of the salary is tied to the company’s overall performance. The average steelworker at Nucor can earn up to $99,000 for the year depending on the company’s performance.42 Nucor’s performance-based salary incentives have had a positive effect on employee and firm performance. Employee absenteeism is only 1 percent each year. Moreover, in 2005 Nucor produced more steel than any other U.S. steel company. Bloomberg BusinessWeek 50 also ranked Nucor first in its 2005 rankings and fourth in its 2007 rankings.43 39 Ibid. 40 Ibid. 41 Belt, K. “Nucor: Building a Performance-Based Culture.”Institute for Corporate Ethics. http://www.darden.virginia.edu/corporate-ethics/leading_practices_nucor_culture.htm 42 Ibid. 43 Ibid.



Conemaugh Memorial Medical Center Conemaugh Memorial Medical Center provides an example of an organization that has undergone a culture change to improve external relations. The hospital’s senior leadership realized that the facility’s level of patient satisfaction was inevitably tied to employee satisfaction. One means to improve performance in this latter area and to successfully manage employee wellness, they realized, was to introduce a formal recognition program. Senior-level staff commissioned groups of employees to devise recognition programs that had “specific objectives and action plans that measure performance and investment in recognition.”44 Within five years, both employee and patient satisfaction levels had improved, along with employee performance following the creation of formal recognition programs. Employee focus groups reported that more employees felt their superiors were recognizing their strong work. The ability to track “Within Our Walls” (WOW) certificates allowed for both employee recognition and an employee performance metric. Management now tracks the number of awards it handed out, as well as how many employees redeem their award certificates for other types of rewards. Each quarter, the medical center’s CEO receives updates on the number of WOW certificates awarded.45 Conemaugh Memorial Medical Center’s initiatives that focused on employee and customer satisfaction through a culture change proved to be successful. Its market share increased by 9 percent in the five years after it introduced formal employee recognition programs, and employee satisfaction increased from the 71st percentile to the 79th percentile of polled hospitals. The hospital also ranked in the 93rd percentile in patient satisfaction. Lastly, Conemaugh received a Success Story Award from the health care consulting firm Press Ganey, Inc. Press Ganey also gave a presentation about the hospital’s success story at its National Client Conference.46 Texas A & M University and the Texas Public Policy Foundation Texas A & M University is currently undergoing an organizational culture reform in an effort to better serve its students. In September 2010, the University released a profit and loss statement for its faculty members in which it juxtaposed faculty salaries against the number of students, tuition generated, and research grants obtained. Despite an uproar from the faculty, the University released these figures as

44 Childers, P. 2005. “Organizational culture affects the bottom line: Conemaugh Medical Center's story is an awesome example of how an unpleasant workplace can evolve into a thriving one, as long as the right recognition and results are tracked.” HR Magazine. BNET. http://findarticles.com/p/articles/mi_m3495/is_9_50/ai_n15627804/?tag=content;col1 45 Ibid. 46 Ibid.



part of a public audit held to ensure that it was judiciously spending taxpayer money.47 One metric included on the faculty balance sheet was the dollar amount each professor earned per student taught. This metric revealed a large contrast in how different faculty members serve the student body.48 The conservative think tank Texas Public Policy Foundation first proposed these types of accountability measures. The organization stresses that its intent is to simply notify state taxpayers exactly where their money is going, and its five recommendations to ensure accountability at public universities in Texas are:49,50 Require [public] universities to make budgets, faculty salaries, curriculum vitae,

and student evaluations of faculty, course syllabi, graduation rates, 5-year-out student surveys and other information publicly available and easily accessible.

Follow uniform reporting standards. Post all collected data on a public website that can be easily accessed and

interpreted. Minimize the negative effects of secretive, bureaucratic accountability

measures. Put check registers online to allow for spending transparency.

Texas A & M is a leader among Texas public universities in implementing these types of reforms within its organizational culture. These new policies are meant to ensure that focus and attention will be directed externally to the customer base of the university, the students, and not solely toward the desires and needs of the faculty. As the research director of the American Association of University Professors said, these types of reforms are “a reflection of a much more corporate model of running a university.”51 Sears and the Ford Motor Company These two companies represent examples of corporations that took the “goal-oriented” aspects of a market organizational culture too far and, as a result, encountered negative consequences. In the 1990s, Sears created a revenue generation goal for its automobile mechanics of $147 per hour. This ambitious goal caused employees to fabricate unnecessary repairs to improve their bottom line, often

47 Banchero, S. and Simon, S. “Putting a Price on Professors.” The Wall Street Journal. October 22, 2010. http://online.wsj.com/article/SB10001424052748703735804575536322093520994.html 48 Ibid. 49 Sandefer, J. “Public Universities Belong to the Public, Not the Faculty.” The Texas Public Policy Foundation. http://www.texaspolicy.com/commentaries_single.php?report_id=2612 50 Young, E. 2009. “Are Texas Universities Making the Grade in Accountability? Improving Higher Education Transparency.” Texas Public Policy Foundation Policy Brief. pp. 4. http://www.texaspolicy.com/pdf/2009-06-PB17-HE-transparency-ey.pdf 51 Banchero and Simon. Op. cit.



deceiving customers whose automobiles did not actually need the level of “repair” they received. Sears’ chairman admitted that the sales quota “created an environment where mistakes did occur.”52 The Ford Motor Company also made a similar error in regard to its company-wide goals. In the late 1960s, the company faced heavy competition from foreign automobile manufacturers due to the foreign firms’ ability to produce smaller, more fuel-efficient cars. In response, Ford’s CEO announced that the company would deliver a car that would be “under 2,000 pounds and under $2,000” to the market by 1970. 53 As a result of the great difficulty and tight deadline for accomplishing the goal, Ford’s employees did not complete the requisite safety checks that normally occur in automobile production. The final product was the Ford Pinto, an automobile so poorly manufactured that it could ignite upon impact because the fuel tank was located too close to the rear axle. Ford knew of the design error before it put the car on the market, but the company decided that lawsuits associated with the Pinto would be less expensive than a total redesign of the car. Ford’s unrealistic goal caused it to sacrifice its brand value.54

52 Bazerman, M., Galinsky, A., Ordóñez, L., and Schweitzer, M. “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal-Setting.” 3. http://opimweb.wharton.upenn.edu/documents/research/goals_gone_wild.pdf 53 Ibid., 4. 54 Ibid.



Measures of Organizational Effectiveness In their 2008 report on the application of quality management practice in higher education, researchers Becket and Brookes found that assessment models based on the principles of Total Quality Management (TQM) were the ones most frequently adopted by postsecondary institutions.55 The report notes that the reviewed models espousing the TQM tool proved particularly successful in evaluating and improving administrative processes.56 Although TQM management models take many different forms, all are based on the tool’s central principles of collaboration and progressiveness to ensure quality. Becket and Brookes broadly define TQM as “a comprehensive management approach which requires contribution from all participants in the organization to work towards long-term benefits for those involved and society as a whole.”57 Globally, a large number of TQM models have been developed to ensure quality management in various industry spheres. This section will examine three strategic approaches to TQM: the European Framework for Quality Management (EFQM); the Balanced Scorecard; and the systems approach, also known as the Malcolm Baldrige award strategy. Hanover Research has selected these particular models due to the relatively large amount of research available on their implementation in higher education settings. In the subsections below, each TQM strategy will be reviewed and supported with higher education case studies where applicable. European Models of Quality Management Several different frameworks for quality management and self-evaluation are used commonly by public and private educational organizations across Europe. Although many specific models and variations exist, the examples described in this report include the European Framework for Quality Management (EFQM) and the Common Assessment Framework (CAF).58 European Framework for Quality Management The European Framework for Quality Management is a management tool developed in 1998 by a group of 14 large European companies, known as the European Foundation for Quality Management, as a model to underpin the European Quality

55 Becket, N. and Brookes, M. 2008. “Quality Management Practice in Higher Education – What Quality Are We Actually Enhancing?” Journal of Hospitality, Leisure, Sport and Tourism Education. 7:1, 40-54. See p. 40. http://www.heacademy.ac.uk/assets/hlst/documents/johlste/vol7no1/becket.pdf 56 Ibid., 44. 57 Ibid. 58 “Finnish National Board of Education ― Models of Self-Evaluation.” http://www.oph.fi/english/sources_of_information/projects/quality_in_vet_schools/about_self_evaluation/models_of_self_evaluation



Award. Initially developed as a business excellence model, EFQM aims to help public and private organizations evaluate, develop and streamline their own operations.59 EFQM is based on eight central concepts, or “characteristics of excellence:” results orientation; customer focus; leadership and constancy of purpose; management by processes and facts; people development and involvement; continuous learning, innovation and improvement; partnership development; and public responsibility.60 The EFQM model functions as a framework to evaluate nine specific areas of an organization. Five areas, called “enablers,” focus on organizational operations and look specifically at how an organization functions, while the other four areas, called “results,” focus on what the organization has achieved. Each of these evaluation areas includes several more detailed sub-criteria. By examining the “results” criteria, the “enablers” of an organization can ostensibly be improved and new objectives can be set through the evaluation process.61 Since it was initially developed for the business sector, the application of EFQM to higher education institutions requires some adaptation. In 2009, researchers from the University of Adelaide produced a report on the issue of adapting the EFQM model to education. This report constructs an input-process-output framework for aspects of the three core activities undertaken by higher education institutions (research, education, and service), which helps determine the appropriate “enabler” and “output” categories for EFQM. For example, inputs might include management, policy, staff, laboratory equipment, and funding; processes might include program curriculum, teaching and learning, assessment, community services, and staff training; and outputs might include stakeholder satisfaction, graduates, scientific papers and patents.62 The authors note that, in applying the evaluation framework to higher education, excellence should not be limited to the traditional business measures of profit/loss, but instead acknowledge broader achievement measures like leadership, people management, and satisfaction. In higher education, success under the EFQM model might encompass: Achievement of mission/vision Achieving/exceeding benchmarks and internal measures Best practice Community agreement Cost-effective

59 Arjomandi, M., Kestell, C., and Grimshaw, P. 2009. “An EFQM Excellence Model for Higher Education Quality Assessment.” University of Adelaide. http://aaee.com.au/conferences/AAEE2009/PDF/AUTHOR/AE090149.PDF 60 Finnish National Board of Education. Op. cit. 61 Ibid. 62 Arjomandi, Kestell, and Grimshaw. Op. cit., 1,108.



Customer/stakeholder satisfaction Dissemination of good practice nationally and internationally Learning outcomes Making optimal use of all resources – financial, human, assets Match between desired and actual perception Positive atmosphere in staff and student environments/integration in teaching

and research Quality of teaching and learning Achievement of targets relative to starting point63

Numerous universities across Europe have successfully adapted the EFQM model to help evaluate institutional processes. Examples include Valencia University of Technology in Spain, Danube University Krems in Austria, and Marmara University in Turkey, among others.64,65 Still, some researchers argue that the differences between higher education and business make this adaptation impractical. The following particular questions, informed by our research, should be considered in adapting the EFQM model to evaluate a higher education institution:66 What is the product of higher education? Who is the client of higher education? How does the hierarchy of an educational organization compare to that of a

business? How does the concept of quality in an educational organization compare to

that of a business? Who controls quality in higher education?

Common Assessment Framework The Common Assessment Framework (CAF) is a TQM model jointly developed in 2002 by the European Union member states and the European Commission. Relying on the principles of EFQM, CAF applies this framework to public sector organizations at both the national and local levels. As a slightly broader self-evaluation tool, CAF’s structure and content follow the same logic as EFQM; the model is intended to help introduce EFQM as a more detailed evaluative criteria. Specifically, CAF has four main purposes:

63 Bulleted points reproduced verbatim from: Ibid. 64 Pfeffer, T. and Soler, C.R. February 2010. “Quality Management in Higher Education.” 1-4. http://www.drc.uns.ac.rs/docs/QM_handout.pdf 65 “EFQM. ―EFQM Excellence Award – Past Winners.” http://www.efqm.org/en/PdfResources/EFQM%20Excellence%20Award%20-%20History%20and%20Past%20winners.pdf 66 Arjomandi, Kestell and Grimshaw. Op. cit.., 1,018.



To introduce public administrations to the principles of TQM and gradually guide them, through the use and understanding of self-assessment, from the current “Plan-Do” sequence of activities to a full fledged “Plan-Do-Check-Act (PCDA)” cycle

To facilitate the self-assessment of a public organization in order to arrive at a diagnosis and improvement actions

To act as a bridge across various models used in quality management To facilitate bench learning between public-sector organizations67

Like EFQM, the CAF model involves close scrutiny of the organization’s operations and achievement areas. Enabler areas include leadership, strategy and planning, human resources management, partnerships and resources, and process/change management; results areas are people results, customer/citizen-oriented results, society results and key performance results. In addition to its implementation in individual public-sector organizations, CAF has been used to identify good practices in public administration in different countries.68 Balanced Scorecard Balanced Scorecard is a system of strategic planning and management that has been used extensively across business and industry, government, and nonprofit organizations. The Balanced Scorecard approach was originally developed in 1990 as a performance measurement framework that presented both strategic non-financial performance measures and traditional financial metrics to give corporate leaders a more “balanced” view of organizational performance. Now, the Balanced Scorecard methodology has evolved into a broad strategic planning system, providing organizations with a “dashboard” document of performance measures that can help clarify corporate vision and translate it into action.69 The Balanced Scorecard approach involves viewing an organization from four different strategic perspectives, each of which is supported by metrics and data that are analyzed to determine progress, shortcomings, and goals. By dividing the functions of an organization into separate groups, the Balanced Scorecard method intends to help companies achieve a balance between different perspectives, all of which are essential to operations. According to the Balanced Scorecard Institute website, “the current emphasis on financials leads to [an] ‘unbalanced’ situation with regard to other perspectives.”

67 Bulleted points reproduced verbatim from: European Institute of Public Administration. “CAF – Common Assessment Framework.” http://www.eipa.eu/en/topic/show/&tid=191 68 Finnish National Board of Education. Op. cit. 69 Balanced Scorecard Institute. “Frequently Asked Questions about the Balanced Scorecard.” http://www.balancedscorecard.org/BSCResources/FAQs/tabid/60/Default.aspx



The four Balanced Scorecard perspectives include:70 The Learning and Growth Perspective: This perspective encompasses professional

training and corporate cultural attitudes related to both individual and corporate self-improvement. Metrics in this area can guide managers in distributing training funds where they are most needed, including continuing education, mentoring, and technological tools. This perspective helps managers ask, “To achieve our vision, how will we sustain our ability to change and improve?”

The Business Process Perspective: This perspective governs internal business

processes. Metrics based on this perspective can help managers understand how well their business is running and whether its products and services conform to the mission of the organization. This aspect of Balanced Scorecard should be carefully designed by leaders who are intimately familiar with the goals of the organization. This perspective helps managers ask, “To satisfy our shareholders and customers, what business processes must we excel at?”

The Customer Perspective: This perspective places an emphasis on customer focus

and satisfaction. Metrics in this area will examine customers from the perspective of analyzing what kinds of customers there are, and what processes are necessary to provide a product or service to those customer groups. This perspective helps managers ask, “To achieve our vision, how should we appear to our customers?”

The Financial Perspective: This perspective emphasizes the importance of timely

and accurate funding data, encouraging the implementation of a corporate funding database which aims to centralize and automate funds processing. It may be necessary to include additional financial-related data, such as risk assessment and cost-benefit data, in this category. This perspective helps managers ask, “To succeed financially, how should we appear to our shareholders?”

The Balanced Scorecard method encourages managers to understand the relationships between these perspectives through a practice called strategy mapping. For example, managers may generally find that by improving performance in the objectives of the Learning and Growth perspective, the organization can make progress towards Business Process objectives, which in turn enables it to achieve desirable results in the Customer and Financial perspectives.71

70 Balanced Scorecard Institute. “Balanced Scorecard Basics.” http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx 71 Ibid.



Systems Approach The systems thinking method of TQM is a general approach to management that is based on the concept of cohesion evident among the different processes of an overall system that support a specific goal. Leaders that adopt a systems management approach “guide synchronous actions across the entire organization, assuring alignment and integration of all units to maximize resources and productivity.”72 At an institution of higher education, the systems approach will involve all departments, processes and units – including marketing, recruitment, admissions and financial aid, as well as academic and student services units – in the realization of one institutional goal, such as increasing enrollment.73 Several models and frameworks exist for assisting campus leaders in the application of a systems framework to the evaluation of a higher education institution. One popular methodology is the framework behind the Malcolm Baldrige National Quality Award, first published in 1999 as the Baldrige Education Criteria for Performance Excellence. This document provides a detailed management model and criteria for implementing the systems perspective.74 The Malcolm Baldrige National Quality Award is a national program in the United States that is supported by the National Institute for Standards and Technology and the U.S. Department of Commerce. Thirty-six states support state programs for quality improvement based on the national Baldrige criteria;75 the criteria are republished each year as the Baldrige Education Criteria for Performance Excellence. The Baldrige Award framework rests on the categorization of an organization’s elements into seven groups: Leadership; Strategic Planning; Customer Focus; Measurement, Analysis, and Knowledge Management; Workforce Focus; Process Management; and Results. These categories are considered to be the Systems Operations of an organization, and are divided into two groups: Leadership, Strategic Planning, and Customer Focus represent the leadership triad; while Workforce Focus, Process Management and Results represent the results triad. The leadership categories are grouped together to reflect the impact of leadership on students, stakeholders and strategy. Results items represent a combination of student, stakeholder, market and financial, budgetary, and internal operational performance outcomes, including those relating to workforce, leadership, governance, and social responsibility.

72 Furst-Bowe, J. “Sustaining Performance Excellence in Higher Education. American Society for Quality.” pp. 1. http://www.asq.org/edu/2009/06/baldrige-national-quality-program/sustaining-performance-excellence-in-higher-education.pdf 73 Ibid. 74 Ibid, 3. 75 Dew, J. “Use State-Level Baldrige Framework to Support Continuous Improvement.” American Society for Quality. http://www.docstoc.com/docs/39268276/The-Malcolm-Baldrige-National-Quality-Award-is-a-premier



The following diagram illustrates the relationship of these elements within the Baldrige Award systems framework:76

Figure 6: Baldridge Education Criteria for Performance Excellence Framework77

Source: Baldridge National Quality Program

An organization’s adherence to this model should be guided by its unique organizational profile – shown at the top of the figure – which is composed of its environment, key working relationships, and strategic challenges and advantages. All elements of performance management should be informed by this factor. The foundation for the system, shown at the bottom of the model, is provided by an organization’s unique processes in measurement, analysis and knowledge management. As demonstrated by the arrows connecting the figures, all actions of the organization point toward “Results.”78

The Baldrige Education Criteria document provides organizations with a workbook to help them adapt the systems management model to their individual cases. Through detailed descriptions and questions for each category of the framework, the document assists organizational leaders in tailoring the management strategy to fit their institution. For example, some key questions in determining an organization‘s strategic situation include:79

76 Baldrige National Quality Program. 2009-2010. “Education Criteria for Performance Excellence.” National Institute of Standards and Technology. 1. http://www.nist.gov/baldrige/publications/upload/2009_2010_Education_Criteria.pdf 77Ibid., iv. 78 Ibid. 79 Ibid., 6.



What is your competitive position? What are the principal factors that determine your success relative to your

competitors and comparable organizations delivering similar services? What are your key education and learning, operational, human resource, and

community-related strategic challenges and advantages? What are the key elements of your performance improvement system,

including your evaluation, organizational learning, and innovation processes?

Some challenges a college or university may face in implementing a systems management perspective include organizational structures, shared governance, faculty autonomy and budget issues. Because university departments are often organized in a traditional hierarchy with numerous divisions, it may be difficult to achieve alignment and integration on campus-wide initiatives. Additionally, different groups of internal stakeholders, such as faculty, staff and students, often demonstrate conflicting motivations and priorities, which might make it difficult for institutions to move forward systematically with improvements to existing processes. Budget limitations may also be barriers to implementing systems thinking in a university setting.80

80 Furst-Bowe, J. Op. cit., 1-2.



Appendix

Organizational Culture Assessment Instrument81 The purpose of the OCAI is to assess six key dimensions of organizational culture. In completing the instrument, you will be providing a picture of how your organization operates and the values that characterize it. No right or wrong answers exist for these questions, just as there is no right or wrong culture. Every organization will most likely produce a different set of responses. Therefore, be as accurate as you can in responding to the questions so that your resulting cultural diagnosis will be as precise as possible. You are asked to rate your organization in the questions. To determine which organization to rate, you will want to consider the organization that is managed by your boss, the strategic business unit to which you belong, or the organizational unit in which you are a member that has clearly identifiable boundaries. Because the instrument is most helpful for determining ways to change the culture, you’ll want to focus on the cultural unit that is the target for change. Therefore, as you answer the questions, keep in mind the organization that can be affected by the change strategy you develop. The OCAI consists of six questions. Each question has four alternatives. Divide 100 points among these four alternatives depending on the extent to which each alternative is similar to your own organization. Give a higher number of points to the alternative that is most similar to your organization. For example, in question one, if you think alternative A is very similar to your organization, alternative B and C are somewhat similar, and alternative D is hardly similar at all, you might give 55 points to A, 20 points to B and C, and five points to D. Just be sure your total equals 100 points for each question. Note, that the first pass through the six questions is labelled “Now”. This refers to the culture, as it exists today. After you complete the “Now”, you will find the questions repeated under a heading of “Preferred”. Your answers to these questions should be based on how you would like the organization to look five years from now.

81 K. Cameron and R. Quinn. 2000. “Organizational Cultural Assessment Instrument.”



1. Dominant Characteristics Now Preferred

A

The organization is a very personal place. It is like an extended family. People seem to share a lot of themselves.

B

The organization is a very dynamic entrepreneurial place. People are willing to stick their necks out and take risks.

C

The organization is very results oriented. A major concern is with getting the job done. People are very competitive and achievement oriented.

D

The organization is a very controlled and structured place. Formal procedures generally govern what people do.

Total

2. Organizational Leadership Now Preferred

A

The leadership in the organization is generally considered to exemplify mentoring, facilitating, or nurturing.

B

The leadership in the organization is generally considered to exemplify entrepreneurship, innovating, or risk taking.

C

The leadership in the organization is generally considered to exemplify a no-nonsense, aggressive, results-oriented focus.

D

The leadership in the organization is generally considered to exemplify coordinating, organizing, or smooth-running efficiency.

Total

3. Management of Employees Now Preferred

A

The management style in the organization is characterized by teamwork, consensus, and participation.

B

The management style in the organization is characterized by individual risk-taking, innovation, freedom, and uniqueness.

C

The management style in the organization is characterized by hard-driving competitiveness, high demands, and achievement.

D

The management style in the organization is characterized by security of employment, conformity, predictability, and stability in relationships.

Total



4. Organization Glue Now Preferred

A

The glue that holds the organization together is loyalty and mutual trust. Commitment to this organization runs high.

B

The glue that holds the organization together is commitment to innovation and development. There is an emphasis on being on the cutting edge.

C

The glue that holds the organization together is the emphasis on achievement and goal accomplishment. Aggressiveness and winning are common themes.

D

The glue that holds the organization together is formal rules and policies. Maintaining a smooth-running organization is important.

Total

5. Strategic Emphases Now Preferred

A

The organization emphasizes human development. High trust, openness, and participation persist.

B

The organization emphasizes acquiring new resources and creating new challenges. Trying new things and prospecting for opportunities are valued.

C

The organization emphasizes competitive actions and achievement. Hitting stretch targets and winning in the marketplace are dominant.

D

The organization emphasizes permanence and stability. Efficiency, control and smooth operations are important.

Total

6. Criteria of Success Now Preferred

A

The organization defines success on the basis of the development of human resources, teamwork, employee commitment, and concern for people.

B

The organization defines success on the basis of having the most unique or newest products. It is a product leader and innovator.

C

The organization defines success on the basis of winning in the marketplace and outpacing the competition. Competitive market leadership is key.



D

The organization defines success on the basis of efficiency. Dependable delivery, smooth scheduling and low-cost production are critical.

Total

A Worksheet for Scoring the OCAI

NOW Scores 1A 1B

2A 2B

3A 3B

4A 4B

5A 5B

6A 6B

Sum (total of A responses) Sum (total of B responses)

Average (sum divided by 6) Average (sum divided by 6)

1C 1D

2C 2D

3C 3D

4C 4D

5C 5D

6C 6D

Sum (total of C responses) Sum (total of D responses)


PREFERRED Scores 1A 1B

2A 2B

3A 3B

4A 4B



5A 5B

6A 6B

Sum (total of A responses) Sum (total of B responses)


1C 1D

2C 2D

3C 3D

4C 4D

5C 5D

6C 6D

Sum (total of C responses) Sum (total of D responses)


Scoring Scoring the OCAI is very easy. It requires simple arithmetic calculations. The first step is to add together all A responses in the Now column and divide by six. That is, compute an average score for the A alternatives in the Now column. You may use the worksheet on the next page to arrive at these averages. Do this for all of the questions, A, B, C, and D. Once you have done this, transfer your answers to this page in the boxes provided below. Fill in your answers here from the previous page

NOW PREFERRED

A (Clan) A (Clan)

B (Adhocracy) B (Adhocracy)

C (Market) C (Market)

D (Hierarchy) D (Hierarchy)

Total Total



An Example of How Culture Ratings Might Appear

NOW PREFERRED

A 55 A 35

B 20 B 30

C 20 C 25

D 5 D 10

Total 100 Total 100

Summary of Assessment Data NOW Scores A B C D Total 100 Scores A B C D Total 100

PREFERRED Scores A B C D Total 100



Scores A B C D Total 100



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