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Chapter 16
Managing OrganizationalCulture
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Contents
Introduction
Culture and Organizational effectiveness
Culture and Formalization Creating, sustaining and transmitting a culture
Mergers and Acquisitions when cultures collide
Are cultures manageable For and Against Situational factors facilitating cultural change
Enacting cultural change
Summary2
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What is Organizational culture?
The norms which evolve over a period of time in working groups.
The dominant values that are espoused by the organization
The philosophy that guides the decisions & policies of an organization
The rules of the game that people must learn in order to get accepted
The feeling & climate that pervades and gets conveyed in the day to
day functioning of the organization.
Refers to a system of shared meaning. In every organization, there arepatterns of beliefs, symbols, rituals, myths & practices that have evolved over
time. These in turn create common understanding among members aboutwhat the organization is and how should members behave.
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Key characteristics of organizationalculture
Individual initiativeRisk tolerance Direction
IntegrationManagement
supportControl
Identity Reward system
Conflict tolerance&Communication
Patterns
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Dominant culture
Core values
Majority of members
Macro view of culture
Distinct personality
Subcultures
Common problems,situations, experiences
members face
Vertical and Horizontalsubculture
Defined by departmental
designations or geographicalseparations
Core values retained butmodified to reflect separated
units distinct situation5
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Culture and Organizational effectiveness
Core values intensely held, clearly ordered & widelyshared. E.g. AT&T
More no of members accept core values, agree onorder of importance and are highly committed
Strongculture
Weakculture
Young organizationsConstant turnoverMembers have not shared enough experiences tocreate common meanings
Effectiveness
Good external fit
Good internal fit
Culture, strategy, technology and technology
alignment. 6
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Culture and Formalization
Strong
Cultures
Behavioralconsistency
Powerfulmeans ofimplicitcontrol
Acts as asubstitute toformalization
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Creating, Sustaining and Transmittingculture
Creating
Past practices and the
degree of success
Founders impact on
early culture
Vision & Mission of
founders. E.g. IBM &
McDs
What original members
employed learnt fromown experiences
Sustaining
Selection
Top Management
Socialization
Transmitting
Stories
Rituals
Material Symbols
Language8
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When cultures collide Mergers and Acquisitions
A cultural mismatch is more likely to result in a disasterthan financial, technical, geographic or product mismatch
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Strength of organizations culture
Degree of difference
Success
M&A of strong cultures
Difficulty in blending if culture is well definedE.g. Mellon & Girard Bank merger
Compatibility if cultures highly similarE.g. R.J. Reynolds and Nabisco
M&A of weak cultures
Weak cultures adapt better to new situationsE.g. Mellon & Central Counties Bank merger
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Culture clashes in M&A
Cadbury and Kraft foods
Daimler and Chrysler
Sprint and Nextel
HP and Compaq
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Are cultures manageable For and Against
Case For
Times and conditions changeaffecting organizational
effectiveness
Management can alter thefactors that created and sustainthe current culture
E.g. Scott Papers culturalturnaround
Case Against
Cultures made up of stablecharacteristics that are difficult tochange
Difficult to unlearn experiences andmemories
Time frame for unlearning may makethe effort realistically impractical
Past practices work against culturalchange
Just because the management candescribe the desired culture doesntmean that it can be implemented
E.g. General Motors11
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Situational factors thatfacilitate cultural change
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Dramatic Crisis Leadership turnover Lifecycle stage
Age and Size of theorganization
Strength of currentculture
Absence ofSub-cultures
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Enacting cultural change
Cultural audit
How values came to be formed?
Ordering of these values
Cultures boundaries
What is the preferred culture being sought?
Desired culture compared with current values What cultural dimensions and values are out of alignment and
need changing?
Cultural
Analysis
Unfreeze entrenched culture
Makes crisis visible to all members of the organization Shakeup among key management personnel. E.g. Lee Iacocca
Communication of new values by top management
Move quickly to create new stories, symbols and rituals toreplace those currently in place
Change selection, socialization processes, evaluation & reward
systems to support employees who espouse new values sought
Changeefforts
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Summary
Organizations have personalities just like individuals called as organizationalcultures. Its a system of shared meaning
Key characteristics of organizational culture
Organizations have dominant cultures and subcultures
Strong cultures increase behavioral consistency and may act as a substitute forformalization
Ultimate source for organization culture is its founders
Sustained by selection and socialization process and action of top management
Transmitted through stories, rituals, material symbols and language
Cultures can be changed but a no of conditions necessary to bring about change
Even when conditions favorable, change can be measured in years rather than
months 14
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