Student Self-administered case study

Organizationculture
Valuesandthewaythings
aredonehere

> 60

Case duration (Min):

Organizational Behaviour (OB)

Organization culture

Worldwide
Case summary:

AConversationwithRonWilliamsCEO,whoarrivedtofindacorporation(Aetna)inneedofchangehavinglost
$280millioninthepastyear.HediagnosedkeyareasoffailureandopportunityinAetnasvastenterprise.Williams
shapedapathtorecovery,focusingonabetterunderstandingofAetnascurrentcustomers,fromsmallemployers
tothelargestcorporations,andconcentratingonthebestwayofexpandingintonewmarkets.Todothis,Aetna
neededtobuildproductsandservicessuitedforthosegroups,andWilliamsstrategyinvolveddevelopingintegrated
informationsystemsforbothemployersandconsumers,toensurecosteffectiveandhighqualityhealthcare
delivery.WilliamsrepeatedlymadethecaseforthisnewstrategydirectlywithAetnasstaff.Hepressedtheissueof
values:integrity,employeeengagement,excellentserviceandhighqualityhealthcare,andimplementedemployee
surveysandbiannualperformancereviews.Employeeswereinvitedtoanswerwhethertheybelievedtheir
supervisorsheldtruetoAetnasvaluesandwhethertheywereproudtobeworkingwiththecompany.

Learningobjectives:
Discusswhatismeantbyorganisationalculture.
Distinguishbetweenvalues,espousedvalues,enactedvaluesandassumptions.
Describewhatismeantbyastrongcultureandevaluatehowsuchaculturemightimpactupon
organisationalperformance.
Evaluatetheleader'sroleinshapingandreinforcingculture.
Discusswhetherculturecanbemanaged.

Caseproblem:
Whatisorganizationalcultureandwhyisitanimportantconsiderationwhenseekingto
enhanceorganizationalperformance?

Company

Accident&HealthInsurance

Aetna, Inc
Aetna.com

Foundedin1853,Aetna,Inc.isanAmericandiversifiedhealthinsurancecompany,providinga
rangeoftraditionalandconsumerdirectedhealthcareinsuranceproductsandrelatedservices,
includingmedical,pharmaceutical,dental,behaviouralhealth,grouplife,longtermcare,and
disabilityplans,andmedicalmanagementcapabilities.Withrevenuesof$30.950billion(2008)
andaworkforcetotalling35,258(2008),AetnaisamemberoftheFortune100.Aetnaadvanced
uptheFortune500listin2009.Thecompanysstrong2008revenuegainswerelargelythe
resultofAetnasintegrationandsegmentationstrategies,whichledtostrongmembership
gains.
TheAetnaMission:Aetnaisdedicatedtohelpingpeopleachievehealthandfinancialsecurityby
providingeasyaccesstosafe,costeffective,highqualityhealthcareandprotectingtheir
financesagainsthealthrelatedrisks.Buildingonour156yearheritage,Aetnawillbealeader
cooperatingwithdoctorsandhospitals,employers,patients,publicofficialsandotherstobuild
astronger,moreeffectivehealthcaresystem.
Vision:Toearnthedistinction,financiallyandbyreputation,ofbeingthepreferredbenefits
companyinallaspectsofourbusiness.Westrivetobetheindustryleaderbyincludingthebest
ideasandperspectivesavailable.ThisinturnenablesAetnatodevelopthemostrelevant
solutionsforeachofourmarkets.
Strategy:Aetnawillbetheindustryleaderinthediversemarketplace.Wewilldeliverbestin
classservicetoourcustomersbecausewewantthemtobecomfortablewhendoingbusiness
withus.Toachievethismissionwewill:Createinnovativeandtailoredproductandservice
solutionsthatwillmeettheuniqueneedsofourcustomers.Developadiversesupplierbase,
reflectingourmulticulturalenvironment,thatsupportsinnovativewaystodeliverbestinclass
servicestothem.Buildaworkforcethatfullyunderstandsthediversecommunitieswherewe
dobusiness.Fosteracultureofinclusionthatgrowsadiversetalentpoolandrecognizesand
rewardsthecontributionsofeveryemployeewhilstallowingemployeestodotheirbestwork.

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Case media MIT World - Case study Dr Phil Kelly 2009

First, if you are taking a taught management course then consult with your tutor and ensure that the case has not been scheduled into a teaching class or
tutorial. If it has not:
1. Play/ read the media associated with the case. You may need to access the Internet and enter a URL to locate any video clips.
2. Attempt the Case study questions.
Consider attempting the case study as a group exercise; you could form a study group with fellow students.
3. Check the suggested answers - remember these are suggestions only and there are often many possible answers.
Discuss questions and answers with other students.
4. If you feel your answer(s) were weak then consider reading the relevant suggested readings again (also see the case study suggested references).

Title/
Mediatype
Leading Change: A Conversation with
Ron Williams.

Film

URL/Mediadescription
http://mitworld.mit.edu/video/614
Williamscasestudybeginsin2001,whenhearrivedtofindacorporation(Aetna)inneedof
changehavinglost$280millioninthepastyear.Hediagnosedkeyareasoffailureand
opportunityinAetnasvastenterprise:orchestratingmedical,dentalandotherhealthand
insurancebenefitsinanetworkof843thousandhealthcareprofessionalswith37million
members.Williamsshapedapathtorecovery,focusingonabetterunderstandingof
Aetnascurrentcustomers,fromsmallemployerstothelargestcorporations,and
concentratedonthebestwayofexpandingintonewmarketssuchasretailers,banksand
lawfirms.Todothis,Aetnaneededtobuildproductsandservicessuitedforthosegroups,
andWilliamsstrategyinvolveddevelopingintegratedinformationsystemsforboth
employersandconsumers,toensurecosteffectiveandhighqualityhealthcaredelivery.
WilliamsrepeatedlymadethecaseforthisnewstrategydirectlywithAetnasstaff.He
pressedtheissueofvalues:integrity,employeeengagement,excellentserviceandhigh
qualityhealthcare,andimplementedemployeesurveysandbiannualperformancereviews.
Employeeswereinvitedtoanswerwhethertheybelievedtheirsupervisorsheldtrueto
Aetnasvaluesandwhethertheywereproudtobeworkingwiththecompany.Williamshas
notedamarkedimprovementinresponsesoverjustafewyears.Externalbenchmarks
reflectpositivegrowthaswell:AetnahasreachedthenumberonespotasFortune
Magazinesmostadmiredhealthcarecompany,afteroccupyingthebottomposition.
Williamsinvestedagreatdealintechnologyhebelieveswillshapethefutureofhealth
care.HedescribesaCareEngine,containinganindividualmemberspersonalhealthrecord
anduptotheminutejournalinformationandhealthguidelinesthatareconvertedinto
computeralgorithms.Thissystemcandetectandfillgapsincareforpatientsconditions
thatgoundetected,teststhatshouldbeadministered,medicinethatshouldnotbe
prescribed.Williamshasalsogivenconsumerstheabilitytofindandcomparethecostsof
testsanddoctorvisits.Hebelieveswecancheckthetrillionsofdollarsinhealthcare
spendingthroughsmarttechnology.Forhim,healthcarereformmeanswegetandkeep
everyonecovered;maintaintheemployerbasedsystemreorientthesystemtoward
prevention,value,andqualityofcare;andusemarketincentivestoimprovecoverage,drive
downcostsandmakethesystemmoreconsumeroriented.
Tutorsandstudentsmaywatch(1)thewholefilmclipof56min,(2)thecorelecturefrom
4.30to40:00i.e.36minorselectedpartsseebelow:
00:0000:04:30|INTRODUCTIONS|Positionsthelectureacorporateturnaround:the
companywasfailingin2000/1,throughchangenewleadershipandastrategyfocusingon
customers,employees,companyvaluesandculture,informationtechnologyand
management,thecompanywasturnedaround.Fromalmostthebottomintherankingsto
thetopby2008.
00:04:30|RONWILLIAMSTAKESTHESTAGE|Explainshowthecompanyhadlostitsway/
outlinesthestructureofthepresentation

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Case media MIT World - Case study Dr Phil Kelly 2009

00:06:15|AETNATODAY(2008)|37millionmembersovereightcountries,35thousand
employees
00:09:00|STRATEGICPATHTOINDUSTRYLEADERSHIP|Williamsdescribesthreephases
(one)20014;(two)20046and(three)20068;foreachstageWilliamsevaluatesthe
strategic,operationalandfinancialperformance:inphaseonethecompanywaslosing
moneyandwentBACKTOBASICS,seekingtobetterunderstanditscustomers,theirneeds,
THECOMPANYANDITSVALUES;inphasetwo,thecompanywitnessedaveragereturns,
refinedsegmentationandfocussedonperfectionofthebasicsandinphasethree,the
companywasinthetoptieroftheindustrystrategicallytheyfocussedoninnovation,
informationandintegrationandSETOUTTODIFFERENTIATETHEMSELVESWITHUNIQUE
OPERATINGCAPABILITIESthestrategicpathtoindustryleadershipisexploredinmore
detailintheremainderofthelecture
00:11:3000:12:00|Change|Williamsdiscussesthestartofthepathtoindustryleadership;
hehadtomakethecaseforchangewhichinvolvescommunicationwithemployees.
Williamsargues,understandinghowtomanagechangeeffectivelyisanextremely
importanttoolandskillsetthatwillserveyouwell
00:12:00|Strategy|CreatedastrategycalledthethreeIs:information,innovationand
integration;anexecutivemanagementinformationsystem(dashboard)wascreatedand
madeavailabletoall,presentingoneversionofthetruthandimprovingthespeedand
qualityofdecisionmaking.Williamsemphasisestheneedforcommunicationofboth
problemsandsolutions
00:13:15|CULTURE|CREATEDTHEAETNAWAY:customerfocus,betterarticulatedand
demonstratedVALUES(integrity,qualityandvalue,excellenceandaccountability,employee
engagement)
00:14:10|asaleader|Williams,wheneverheaddressedagroupofemployeeswithinthe
company,wouldfirsttalkaboutthevaluesanddemonstratedtheirimportance
00:15:00|EMPLOYEEENGAGEMENT|Williamsemphasisedtheimportanceofemployee
engagement,suggestingthatanengagedworkforcewassatisfiedandthisledtoincreased
motivation
00:16:15||Employeesurveyswereimplemented:employeesurveysparticipationshifted
from<50%atthebeginningofthedecadetoalmost100%towardstheend(bestinclass)
similarchangeswereobservedinloyaltywithmoreemployeesindicatingtheywereproud
toworkforthecompanyandmoreemployeesbehavingintheAetnaway(astronger
culture)
00:19:45|Leadership|TheCompanyfocusedondevelopinghighperformingleaders
improvementsweremadeinperformancemanagement,successionplanning,leader
developmentandleadershipassessment
00:26:00|Milestones|
00:32:30|Environment|Theenvironmentisdiscussed:Healthexpenditureisgrowing,asare
costs
00:34:40|Leadershipstrategyandtheroleofinformationtechnology|Aetnawillleadthe
industryinprovidinghighquality,costeffectiveandpersonalisedhealthandrelated
solutionsthatleverageinformationtomeettheneedsofourtargetedcustomers.A
fundamentalpartofthestrategyrequiresinvestmentininformationsystems;suchsystems
haveenabledcapabilitiesthatcompetitorscannoteasilyemulatebecausemanyofthem
operatemultipleunintegratedsystems.Williamsmovesontodiscussthecareengine,
patientdata,aknowledgebase,decisionsupporttechnologies,findingandsuggestingcare
optionsandtheprovisionofinformationtocarers
00:35:50|Lessonslearned|
00:37:48|LEADINGANDMANAGING|Importanttoknowthedifferencebetweenleading
themanaging
00:40:00|Endlecture||Questionsession|
00:43:47|COREVALUES|WILLIAMSFURTHEREXPLAINSHOWTHEYDERIVEDCOREVALUES
WHICHWEREALREADYINEXISTENCEBUTWEREINNEEDOFBETTERPROMOTION
00:48:50|Principlesofleading,communication|Williamsexplainsthatpeoplehadnoidea
thatthecompanywaslosingmoneyi.e.theneedforchange;herecognisedtheneedto
informemployeesaboutthesituationonanongoingbasis.Hesetupregularmeetingsto

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cascadeperformanceandwhatneededtobedone
00:54:50|LEADERSHIPVERSUSMANAGEMENT|Amemberoftheaudienceposedthe
questioncansomeonewhoisnotseenasaleaderbeaneffectivemanager?Williams
arguesthattheycanbut

NOTES:

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Case media MIT World - Case study Dr Phil Kelly 2009

Casestudyquestions...
Pre/During/After
class

Action

LEVELS OF ORGANISATIONAL CULTURE:

VALUES:

SURVIVAL IN COMPETITIVE AND TURBULENT ENVIRONMENTS: FUNCTIONS OF ORGANIZATIONAL

CULTURE.

During

In your groups, drawing upon information from the film, text books and your wider experiences; discuss what is
meant by organisational culture. In your discussion, you should identify the common aspects of the many
definitions of organisational culture and comment upon levels of culture. Consider the film you have just
watched, which level of culture is mentioned most frequently?

During

Distinguish between values, espoused values, enacted values and assumptions; list the Aetna, Inc core
(espoused values) and discuss how they were created.

During

Peters and Waterman (1982) p75 argued 'the stronger the culture and the more it was directed toward the
marketplace, the less need was there for policy manuals, organization charts, or detailed procedures and rules.
What is meant by a strong culture and how might such a culture impact upon organisational performance (you
should consider both positive and negative consequences)?

ORGANISATIONAL PERFORMANCE:

During

Consider the role of culture in relation to organisational performance; explain what is meant by the Fit and the
adaptation perspective and evaluate these concepts in relation to Aetna, Inc.

THE ROLE OF THE LEADER IN SHAPING AND REINFORCING CULTURE:

MANAGING CULTURE:

During

Evaluate the leader's role (for example that of Ron Williams) in shaping and reinforcing culture.

During

Discuss whether culture can be managed and suggested approaches used to manage culture if you believe
that it can be managed. Evaluate why Aetna, Inc soared to develop a culture of empowerment and quality
amongst other things.

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Case media MIT World - Case study Dr Phil Kelly 2009

Answers...
ORGANISATIONAL
BEHAVIOUR
Thestudyand
understandingof
individualandgroup
behaviourandpatternsof
structureinordertohelp
improveorganisational
performanceand
effectiveness.
ORGANISATIONAL
CLIMATE
Relatingtotheprevailing
atmospheresurrounding
theorganisation,tothe
levelofmorale,andtothe
strengthoffeelingsor
belonging,careand
goodwillamongmembers.
Organisationalclimateis
basedontheperceptions
ofmemberstowardsthe
organisation.
ORGANISATIONAL
CULTURE.
Thisconceptincludes
sharedvalues,unwritten
rulesandassumptions
withintheorganisationas
wellasthepracticesthat
allgroupsshare.
Corporateculturesare
createdwhenagroupof
employeesinteractover
timeandarerelatively
successfulinwhatthey
undertake.
VALUES
Valuesareattheheartof
corporateculture.They
aremadeupofthekey
beliefsandconcepts
sharedbyan
organizationsemployees.
Successfulcompaniesare
clearaboutthesevalues
andtheirmanagers
publiclyreinforcethem.
Oftenvaluesare
unwrittenandoperateat
asubconsciouslevel.
EMPLOYEEINVOLVEMENT
Anumbrellatermthatis
inconsistentlyand
impreciselyusedto
embraceadiverserange
ofmanagementprocesses
involvingparticipation,
communication,
decisionmaking,industrial
democracyandemployee
motivation.

Question/Answer
1 LEVELSOFORGANISATIONALCULTURE:
Inyourgroups,drawinguponinformationfromthefilm,textbooksandyourwiderexperiences;
discusswhatismeantbyorganisationalculture.Inyourdiscussion,youshouldidentifythecommon
aspectsofthemanydefinitionsoforganisationalcultureandcommentuponlevelsofculture.Consider
thefilmyouhavejustwatched,whichlevelofcultureismentionedmostfrequently?
Culture - This concept includes shared values, unwritten rules and assumptions within the
organization as well as the practices that all groups share. Corporate cultures are created when a
group of employees interact over time and are relatively successful in what they undertake.
Corporate culture - Defined by Bower (1966) as the way we do things around here. Trice and
Beyer (1984) elaborated upon this, with their definition : the system of ... publicly and collectively
accepted meanings operating for a given group at a given time. Hofstede (1994) describes
corporate culture as the psychological assets of an organization, which can be used to predict
what will happen to its financial assets in five years time. See also Culture.
Corporate culture - The organization's norms and value systems.
Culture may be defined at the country or company level. Definitions of culture generally apply to
groups of people whose thinking and behaving share something in common.
Many scholars refer to 3 levels of organisational culture: artefacts, values and basic assumptions.
The level of organisational culture discussed most frequently in the film is values: Values are at the
heart of corporate culture. They are made up of the key beliefs and concepts shared by an
organizations employees. Successful companies are clear about these values and their managers
publicly reinforce them. Often values are unwritten and operate at a subconscious level.

2 VALUES:
Distinguishbetweenvalues,espousedvalues,enactedvaluesandassumptions;listtheAetna,Inccore
(espousedvalues)anddiscusshowtheywerecreated.
Values - Values are at the heart of corporate culture. They are made up of the key beliefs and
concepts shared by an organizations employees. Successful companies are clear about these values
and their managers publicly reinforce them. Often values are unwritten and operate at a
subconscious level.
Espoused values what members of an organisation say they value.
Enacted values - values reflected in the way individuals actually behave.
Assumptions - deeply held beliefs that guide behaviour and tell members of an organisation how to
perceive and think about things.
Core values at Aetna, Inc include: integrity, quality and value, excellence and accountability,
employee engagement-see the film clip (13.15), the Aetna way, customer focus etc, see also (42.40)
for comments on how the values were created. The espoused values already existed but had not
been overly promoted. People from around the organisation worked to identify these values,
which were then suggested to the executive committee who debated them and selected the most
appropriate for adoption as core values.

3 SURVIVALINCOMPETITIVEANDTURBULENTENVIRONMENTS:FUNCTIONSOFORGANIZATIONALCUL
PetersandWaterman(1982)p75argued'thestrongerthecultureandthemoreitwasdirectedtoward
themarketplace,thelessneedwasthereforpolicymanuals,organizationcharts,ordetailed
proceduresandrules.Whatismeantbyastrongcultureandhowmightsuchacultureimpactupon
organisationalperformance(youshouldconsiderbothpositiveandnegativeconsequences)?
Strong culture - an organisational culture with a consensus on the values that drive the company
and with an intensity recognisable even to outsiders (a homogenous culture).
Strong cultures are thought to enhance performance by ensuring goal alignment between
employee and employer, improving motivation and therefore discretionary effort and providing
control of employees without the detrimental effects of bureaucracy. When employees share the
same goal as the organisation, they will instinctively do what is in the best interests of the
organisation. Consequently, there is less need for formal control which can increase cost and
demotivate employees. However, in a strong culture, all employees tend to follow the same path-if
this is leading in the wrong direction then the organisation will cease to be effective.

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CULTURE
Thisconceptincludes
sharedvalues,unwritten
rulesandassumptions
withintheorganizationas
wellasthepracticesthat
allgroupsshare.
Corporateculturesare
createdwhenagroupof
employeesinteractover
timeandarerelatively
successfulinwhatthey
undertake.
BELIEFSYSTEM(FORMAL)
theexplicitsetof
organizationaldefinitions
thatseniormanagers
communicateformallyand
reinforcesystematicallyto
providebasicvalues,
purpose,anddirectionfor
theorganization.
ORGANISATIONAL
IDEOLOGY
Basedonthebeliefs,
valuesandattitudesofthe
individuals,determines
thecultureofthe
organisationandprovides
asetofprincipleswhich
governtheoverallconduct
oftheorganisation.
CORPORATECULTURE
Theorganization'snorms
andvaluesystems
CORPORATECULTURE
DefinedbyBower(1966)
asthewaywedothings
aroundhere.Triceand
Beyer(1984)elaborated
thisas:thesystemof...
publiclyandcollectively
acceptedmeanings
operatingforagiven
groupatagiventime.
Hofstede(1994)describes
corporatecultureasthe
psychologicalassetsofan
organization,whichcanbe
usedtopredictwhatwill
happentoitsfinancial
assetsinfiveyearstime.
SeealsoCulture.
ESPOUSEDVALUES

4 ORGANISATIONALPERFORMANCE:
Considertheroleofcultureinrelationtoorganisationalperformance;explainwhatismeantbythe
FitandtheadaptationperspectiveandevaluatetheseconceptsinrelationtoAetna,Inc.
The Fit perspective argues that the culture is good only if it fits the industry or the organisation's
strategy. Within the industry, the competitive environment, customer requirements and social
expectations may determine the culture. Aetna, Inc operate in a competitive environment where
they have been losing market share; consequently they devised a strategy that supported a greater
customer focus through the behaviour of employees, the product range, segmentation and the use
of information system technologies.
An organisational culture which encourages confidence and risk-taking amongst employees, has
leadership that produces change, and focuses on the changing needs of customers is said to have an
Adaptive culture. Such cultures are desirable in turbulent environments where the organisation
must continually adapt. Aetna, Inc operates in a turbulent environment where innovation and
entrepreneurial activity, creativity and risk-taking may lead to competitive advantage.

5 THEROLEOFTHELEADERINSHAPINGANDREINFORCINGCULTURE:
Evaluatetheleader'srole(forexamplethatofRonWilliams)inshapingandreinforcingculture.
Leaders play a crucial role as employees watch what they focus upon and to what they give their
attention. How leaders react to crisis communiqus aspects of the culture and the way leaders
behave can reinforce the values that support the organisational culture. Employees often imitate
leader behaviour. Employees will also be guided by the allocation of rewards and punishments
which will be used to signal desirable behaviours. Williams frequently communicates
organisational problems and provide a focus for attention. He never talks to a group of employees
without talking about the values (14.10) and suggests that unless the values are important to him
and he demonstrates their importance they will be unimportant. He considers it important to live
by a core set of values (35.50) and holds regular management meetings (45.50) where he
communicates the successes and failures of the past quarter.

6 MANAGINGCULTURE:
Discusswhetherculturecanbemanagedandsuggestedapproachesusedtomanagecultureifyou
believethatitcanbemanaged.EvaluatewhyAetna,Incsoaredtodevelopacultureofempowerment
andqualityamongstotherthings.
Scholars are in disagreement as to whether culture can indeed be managed. Whereas the
assumptions may be harder to change, more surface level aspects of culture may be more easily
changed. Attempts to change culture typically involve the rule of the leader described in the
previous question and the development and communication of values. The selection of employees
with congruent values, induction, socialisation and inculcation may all be used as tactics to
develop organisational culture. Similarly, employees who think and behave in a manner radically
different from the organisational culture may be removed.
In turbulent environments, constant change renders the formalised work procedures redundant
and bureaucratic forms of control not only stifle creativity but delay important decision-making. A
culture that empowers employees can unleash creativity, speed up decision-making and allow the
organisation to benefit from continuous improvement.

whatmembersofan
organisationsaytheyvalue
ENACTEDVALUES
valuesreflectedintheway
individualsactuallybehave
ASSUMPTIONS
deeplyheldbeliefsthat
guidebehaviourandtell
membersofan
organisationhowto
perceiveandthinkabout
things

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STRONGCULTURE
anorganisationalculture
withaconsensusonthe
valuesthatdrivethe
companyandwithan
intensitythatis
recognisableevento
outsiders
ADAPTIVECULTURE
anorganisationalculture
thatencourages
confidenceandrisktaking
amongstemployees,has
leadershipthatproduces
change,andfocuseson
thechangingneedsof
customers

Casestudyreferences
Cole,GA.andKelly,PP.(2011)'ManagementTheoryandPractice',Ed.7.CengageEMEA.
Kelly,PP.(2009)'InternationalBusinessandManagement',CengageLearningEMEA.
Martin,J.(2005)'OrganizationalBehaviourandManagement',Ed.3.ThomsonLearning.
Nelson,DL.andQuick,JC.(2009)'ORGB',Ed.1.SouthWestern.
Peters,T.andWaterman,R.(1982)'InSearchofExcellence',Ed.1995.HarperCollinsBusiness.
Schein,E.(1997)'OrganizationalCultureandLeadership',Ed.2.SanFrancisco:JosseyBass.

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