TOPIC 2

ORGANISATIONAL CULTURE

Organisational Culture

Organisational Culture refers to a system of shared meaning held by the members that distinguishes the organisation from other organisations Seven primary characteristics
1. 2. 3. 4. 5. 6. 7.

Innovation and risk taking Attention to detail Outcome orientation People orientation Team orientation Aggressiveness Stability

Organisational Culture (cont.)

Each of these characteristics exists on a continuum from low to high Appraising the organisational on these 7 characteristics, then, gives a composite picture of the organisations culture

Do Organisations Have Uniform Cultures?

Organisational culture is concerned with how employee perceive the characteristics of an organisationals culture, not with whether they like them that is, its a descriptive term Dominant Culture Expresses the core values that are shared by a majority of the organisations members Subcultures Minicultures within an organisation, typically defined by department designations and geographical separation

Do Organisations Have Uniform Cultures? (Cont.)

Core Values The primary or dominant values that are accepted throughout the organisation Strong Culture A culture in which the core values are intensely held and widely shared

What Do Cultures Do?

Functions of Organisational Cultures:

1.

2. 3.

4. 5.

Defines the boundary between one organisation and others Conveys a sense of identity for its members Facilitates the generation of commitment to something larger than self-interest Enhances the stability of the social system Serves as a sense-making and control mechanism for fitting employees in the organisation

Culture as a Liability
Culture enhances organisational commitment and increases consistency of employee behaviour, but we should not ignore the potential dysfunctional aspects of culture can lead to serious challenges. 1. Institutionalisation A company can become institutionalised where it is valued for itself and not for the goods or services it provides. Institutionalisation refers to the condition that occurs when an organisation take on a life of its own, apart from its founders or any of its members.

Culture as a Liability (Cont.)

2.

3.

Barrier to change Occurs when cultures values are not aligned with the values necessary for rapid change in the organisations environment Eg: challenges executives have recently faced at Citigroup, Yahoo, Airbus Barrier to diversity Strong cultures put considerable pressure on employees to conform, which may lead lost of diverse behaviours and unique strengths Eg: Texaco Inc. was sued for racial discrimination in Nov 1996 settled for $176m for 1,400 employees

Culture as a Liability (Cont.)

4.

Barrier to acquisitions and mergers Acquisition or merger decisions could bring financial advantages and product synergy. Incompatible cultures can destroy an otherwise successful merger. Eg: $183 billion merger between American Online and Time Warner in 2001 was a disaster. Time Warners share price was $25 per share in late 2009 vs. $200 before merger

How Culture Begins

Stems from the actions of the founders:

Founders hire and keep only employees who think and feel the same way they do. Founders indoctrinate and socialise these employees to their way of thinking and feeling. The founders own behavior acts as a role model that encourages employees to identify with them and thereby internalise their beliefs, values, and assumptions.

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Stages in the Socialisation Process

Socialisation is the process that helps new employees adapt to the prevailing culture. Pre-arrival The period of learning prior to a new employee joining the organisation. Encounter When the new employee sees what the organisation is really like and confronts the possibility that expectations and reality may diverge.

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Stages in the Socialisation Process

Metamorphosis When the new employee changes and adjusts to the work, work group, and organisation

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Summary: How Organisational Cultures Form

Organisational cultures are derived from the founder. They are sustained through managerial action.

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How Employees Learn Culture

Stories Anchor the present into the past and provide explanations and legitimacy for current practices Rituals Repetitive sequences of activities that express and reinforce the key values of the organisation.

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How Employees Learn Culture (Cont.)

Material Symbols Acceptable attire, office size, opulence of the office furnishings, and executive perks that convey to employees who is important in the organisation Language Jargon and special ways of expressing ones self to indicate membership in the organisation.

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Creating an Ethical Organisational Culture

Characteristics of organisations that develop high ethical standards High tolerance for risk Low to moderate in aggressiveness Focus on means as well as outcomes

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Creating an Ethical Organisational Culture (cont.)

Managerial practices promoting an ethical culture Being a visible role model Communicating ethical expectations Providing ethical training Rewarding ethical acts and punishing unethical ones Providing protective mechanisms

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Creating a Positive Organisational Culture

Positive organisational culture

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A culture that: Builds on employee strengths Focus is on discovering, sharing, and building on the strengths of individual employees Rewards more than it punishes Articulating praise and catching employees doing something right Emphasises individual vitality and growth Helping employees learn and grow in their jobs and careers

Creating a Positive Organisational Culture (Cont.)

Limits of positive culture:

May not work for all organisations or everyone within them

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Spirituality and Organisational Culture

Workplace Spirituality

The recognition that people have an inner life that nourishes, and is nourished by, meaningful work that takes place in the context of the community NOT about organised religious practices

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People seek to find meaning and purpose in their work.

Why Spirituality Now?

As a counterbalance to the pressures and stress of a turbulent pace of life. Contemporary lifestyles (eg: single-parent families, new technologies, the temporary nature of jobs) creates distance between people and the lack of community many people feel; and their increased need for involvement and connection. Job demands have made the workplace dominant in many peoples lives, yet they continue to question the meaning of work.

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Why Spirituality Now? (cont.)

Formalised religion hasnt worked for many people, and they continue to look for anchors to replace lack of faith and to fill a growing feeling of emptiness. The desire to integrate personal life values with ones professional life. An increasing number of people are finding that the pursuit of more material acquisitions leaves them unfulfilled.

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Characteristics of a Spiritual Organisation

Concerned with helping people develop and reach their full potential Directly addresses problems created by work/life conflicts Four characteristics of spiritual organisations:
1. 2. 3. 4.

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Strong sense of purpose Trust and respect Humanistic work practices Toleration of employee expression

Criticisms of Spirituality

What is the scientific foundation?

It is still pending: needs more research

Are spiritual organisations legitimate? Do they have the right to impose values on employees?

Spirituality is not about God or any religious values It is an attempt to help employees find meaning and value in their work

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Criticisms of Spirituality (Cont.)

Are spirituality and profits compatible?

Initial evidence suggests that they are Spirituality may result in greater productivity and dramatically lower employee turnover

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Global Implications

Organisational cultures, while strong, cant ignore local culture Managers should be more culturally sensitive by:

Adjusting speech to cultural norms Listening more Avoiding discussions of controversial topics

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All global firms (not just U.S. firms) need to be more culturally sensitive

Can culture be managed as a means of control?

It seems that cultures can be managed only to a limited extent Many of the prescriptions for cultural control through creating strong cultures as a means of manipulating members - is somewhat crude, unsophisticated and touching only on the surface manifestations of organisational life.

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Summary and Managerial Implications

Strong cultures are difficult for managers to change In the short run, strong cultures should be considered fixed Selecting new hires that fit well in the organisational culture is critical for motivation, job satisfaction, commitment, and turnover

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Summary and Managerial Implications (cont.)

Socialisation into the corporate culture is important A managers actions as a role model help create the cultural values of ethics, spirituality, and a positive culture

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Costvolumeprofit(CVP) analysis

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Cost volume profit (CVP) analysis

A technique used to determine the effects of changes in an organisations sales volume on its costs, revenue and profit Can be used in profit-seeking organisations and not-for-profit organisations CVP model is usually use in the context of a short-term (or tactical) decision tool view

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CVP assumptions
The behaviour of total revenue is linear The behaviour of total costs is linear over a relevant range Costs can be categorised as fixed, variable or semivariable Labour productivity, production technology and market conditions do not change There are no capacity changes during the period under consideration 32

CVP assumptions (cont)

For both variable and fixed costs, sales volume is the only cost driver In manufacturing firms, the levels of inventory at the beginning and end of the period are the same Thus, the number of units produced and sold during a period are equal

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Cost volume profit (CVP) analysis

Please

refer to lecture illustration

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