BA105: Organizational Behavior

1
BA105 Organizational Behavior

• Professor Jim Lincoln
• Week 6 Lecture

2

• Last time Leadership vision and charisma as OB
  levers for change
• This week Analyzing and managing organizational
  culture

3
Class business exams next week

• Essay (Tuesday, March 2)
• You will analyze a case (announced Thursday) that
  deals with structure, culture, and leadership
• One or more exam questions will guide your
  analysis
• See p. 2 in the syllabus on how the exam will be
  evaluated.
• A model exam will be put on the website
• Objective Thursday, March 4
• 25-30 true-false, multiple-choice questions over
  required reading, lecture, and discussion
  material
• I will hold extended office hours on Thursday
  (330-530) and Friday (to be announced).

4
Class business Thursday agenda

• Team project proposal due
• Mary Kay video
• Body Shop case
• What is the culture of the Body Shop and where
  did it come from?
• How (and how effectively) did TBS manage its
  culture?
• Was the Body Shops penchant for modelling itself
  on the opposite of standard cosmetic industry
  practice a matter of core values or smart
  business strategy?
• Is the story of the Body Shop chiefly one of
  culture or one of leadership?
• Discuss upcoming exams

5
Organizational Design
Informal Organization (Culture, leadership,
networks, politics)
Input Environment (Competition,
change) Resources (munificence) History (age,
conditions at founding)
Formal Organization (job titles, departments,
reporting hierarchy, IT HR systems
Output Systems Unit Individual
Tasks (technologies, work flows)
Strategy (diversification
innovation)
People (ability, skills, motivation, biases)
6

• The nature of culture
• Fuzzy, ephemeral, intuitive
• No one can define the HP way. If it werent
  fuzzy, it would be a rule (HP Vice President)
• Emotional, charismatic, spiritual
• Takes emotional intelligence to navigate
• Holistic and enveloping

7
The Berkeley Way

• It's invisible but omnipresent. Most know it
  exists but few can actually define it. Newcomers
  are perplexed by it. Confronting it head on can
  be dangerous.
• The name of this nebulous creature? It's known
  on campus as "The Berkeley Way" -- an unwritten
  code of conduct that governs how people go about
  their business.
• The Berkeleyan, February 16, 2000

8
Where did the concept of organization culture
come from?

• Discovery of Japanese management in 80s
• William Ouchi Theory Z.
• Peters and Waterman In Search of Excellence
• Richard Pascale and Anthony Athos The Art of
  Japanese Management.
• Ezra Vogel Japan as No. 1.
• James Abegglen and George Stalk Kaisha

9
What is culture?

• Shared values, norms, beliefs/understandings
• Manifested in
• Ritual, ceremony, tradition
• Folklore, heroes, legends, stories
• Channeled through
• Informal networks
• Logos, slogans, PR, advertising, annual reports,
  websites

10
Southwest Airlines Values

• Value 1 Work should be funit can be playenjoy
  it
• Value 2 Work is importantdont spoil it with
  seriousness
• Value 3 People are importanteach one makes a
  difference.
• It used to be a business conundrum Who comes
  first? The employees, customers, or
  shareholders? Thats never been an issue to me.
  The employees come first. If theyre happy,
  satisfied, dedicated, and energetic, theyll take
  real good care of the customers. When the
  customers are happy, they come back. And that
  make the shareholders happy.
• Herb Kelleher

11
Ciscos core values

• Dedication to customer success
• Innovation and learning
• Partnerships
• Teamwork
• Doing more with less

12
KyoceraRespect the divine and respect people

• Our goal is to strive toward both the
  material and spiritual fulfillment of all
  employees in the Company, and through this
  successful fulfillment, serve mankind in its
  progress and prosperity.
• We are scientists constantly directing our
  efforts toward perfecting our technology. But we
  must not forget that complete process of living
  requires devotion to humanity as well as to
  science, to the emotional as with the rational,
  and to love equally with reason.
• Just as a family unites in a common bond of
  support and affection, let us all unite in a bond
  of love and respect.

13
Is making money a value?

• The culture paradox
• An organization whose core values transcend
  making money will make the most money
• Profits are to a corporation much like breathing
  is to life. Breathing is not the goal of life,
  but without breath, life ends. Similarly,
  without turning a profit, a corporation, too,
  will cease to exist.
• Dennis Bakke, CEO, AES Corporation

14
Other core organizational values

• Customer service (IBM, Nordstrom)
• Innovation, creativity (3M, Intel, HP)
• Competitiveness, aggressiveness (GE, Motorola,
  Pepsi)
• Social responsibility (Ben and Jerrys Levis
  The Body Shop Working Assets)
• Quality (Japanese companies Ford?)

15
Strong vs. weak cultures

• Strong Consistent, persistent, intense, shared,
  crystallized, consensual, consequential
• Weak Vague, fragmented, inconsistent,
  transitory, politicized, conflictual

16
Dimensions of culture strength
Intensity
Complacent country club culture Strong, organization-wide culture
Absence of culture (anomie) Subcultures
Sharing
17
Subcultures

• Around departments, occupations, divisions,
  demographics
• Source of in-group cohesion, out-group
  competition, conflict, and politics
• Is the overall organization culture strong enough
  to subsume subcultures?

18
(No Transcript)
19
Strong culture companies as cults, tribes,
cloisters, churches, the military

• What do the Branch Davidians and Microsoft
  have in common? Give up? Both organizations are
  cults. No joke. The only difference is one is
  religious (Davidians), while the other
  (Microsoft) is corporate. So says David Arnott,
  author of Corporate Cults The Insidious Lure of
  the All-Consuming Organization (AMACOM).
• Both are classified as cults because the
  members of these organizations are cut off from
  the real world and are obsessed with achieving
  the mission of their leaders. For the Davidians,
  it was the charismatic David Koresh for
  Microsoft, it's the world's richest man, Bill
  Gates.
• Bob Weinstein, March 5, 2000

20
Apple as tribe

• Apple is a lot like a tribe, with folklore
  handed down from generation to generation. The
  question is how can we channel it? We are trying
  to shift away from folk heroes and individualism
  in the organization, but we have selected people
  for this in the past, and we dont punish that
  kind of behavior. 
• --Apple executive

21
The church of IBM

• "IBM, more than any other big company, has
  institutionalized its beliefs the way a church
  does. They are expounded in numerous IBM
  internal publications to ensure that employees
  know what's expected of them. And they are
  reflected in codes of behavior(S)alespersons
  wear dark business suits and white shirts that's
  no longer a strict regulation but most IBM
  salesmen continue to dress that way
• ....the result is a company filled with ardent
  believers..
• The IBM culture is so pervasive that, as one
  nine-year former employee put it, leaving the
  company is like emigrating."
• Secrecy is one of IBM's hallmarks. One IBM
  watcher told Tim, if you understand the Marines,
  you can understand IBM."

22
What does culture do? It provides

• Motivation and commitment
• Vision and direction
• Coordination and alignment
• Ease of communication

23
Culture may align and coordinate functional,
product, or regional divisions
General Manager
Engineer- ing
Manufac- turing
Marketing
Product A Culture
24
Can culture help the bottom line?

• Lower cost
• Fewer formal control systems
• Better quality/productivity/customer service
• Culture as branding
• Apple, Southwest, Saturn, Japanese firms
• Culture as sustainable competitive advantage
• Hard-to-imitate capabilities

25
Culture as Hondas (Sonys) competitive advantage
and Toyotas (Matsushitas) competitive
disadvantage

• Honda executives say Toyota's aggressive
  moves don't concern them, arguing that their
  giant rival will have difficulty emulating
  Honda's unique culture. "All Toyota is doing is
  aping us and letting their money talk," says Ken
  Hashimoto, a senior Honda RD executive.
• Some of Honda's fears are already playing
  out. Toyota, in spite of its often-ridiculed
  "country boy" image, has been proving that it can
  successfully woo young car buyers, thanks to
  designers such as Takao Minai. Mr. Minai
  languished for a long time in Toyota's
  hierarchical culture but had a sudden leap in
  responsibilities two years ago. Under Mr. Okuda's
  guidance, the ponytailed 36-year-old amateur
  video jockey took charge of developing a dream
  car for male twentysomethings. Based on a sketch
  by another young designer, the 11-member team
  designed a small car shaped like a really clunky
  box. Toyota dubbed it "bB," short for black Box.

26
Are there downsides to strong culture?

• Rigidity/inertia
• Homogeneity
• Overconformity
• Narrowness/intolerance/xenophobia
• Extremism/obsessiveness
• Provincialism/insularity
• Goal displacement ends-means inversion

27
SAS Institute

• Some people say that SAS Institute reeks of
  paternalism or a plantation mentality in a world
  otherwise dominated by marketlike labor market
  transactions. For instance, an article in Forbes
  stated, More than one observer calls James
  Goodnights SAS Institute, Inc., the Stepford
  software company after the movie The Stepford
  Wives. In the movie people were almost robotlike
  in their behavior, apparently under the control
  of some outside force. Another article noted
  The place can come across as being a bit too
  perfect, as if working there might mean
  surrendering some of your personality.
• OReilly and Pfeffer Hidden Value.

28
Strong culture spells homogeneity at PG

• Few corporate cultures are as dominant as the
  "Procter Way." "It's such a strong culture, they
  really want sameness," says Ms. Beck, who later
  worked as a brand manager for Dunkin Donuts and
  as a vice president for Burger King. "The way
  women think and the way we do business has some
  inherently different qualities to it," Ms. Beck
  says. "In retrospect, there was a gender aspect
  to PG's culture that was not intentional, but
  was very, very real.
• WSJ, 9/9/98

29

• at one point product features became the
  religion, not the vision. This drove prices up
  and closed out individuals (as customers).
• --Apple executive

30
Enrons culture of corruption or the absence
of culture?

• The report (by three Enron non-executive
  directors) into the collapse of Enron, once one
  of America's top ten public companies, confirmed
  outsiders' suspicions about how badly the firm
  was run. The managements aims, the directors
  concluded, were to minimise taxes, maximise
  apparent profits and, in some cases, to line
  their own pockets. The directors' report was
  described by Senator Byron Dorgan, who is leading
  another investigation into the companys
  collapse, as devastating, adding that this is
  almost a culture of corporate corruption.
• --The Economist, 2/12/02

31
The critique of 1950s corporate culture
Overconformity and alienation

• William H. Whytes The Organization Man
• (Doubleday, 1956)
• The Man in the Gray Flannel Suit
• (20th Century Fox, 1956)

32
The Organization Man

• (A)s more and more lives have been encompassed
  by the organization way of life, the pressures
  for an accompanying ideological shift have been
  mounting. The pressures of the group, the
  frustrations of individual creativity, the
  anonymity of achievement are these defects to
  struggle against--or are they virtues in
  disguise? The organization man seeks a redemption
  of his place on earth--a faith that will satisfy
  him that what he must endure has a deeper meaning
  than appears on the surface. He needs, in short,
  something that will do for him what the
  Protestant Ethic did once. And slowly, almost
  imperceptibly, a body of thought has been
  coalescing that does that.
• (I)t could be called an organization ethic, or
  a bureaucratic ethic more than anything else it
  rationalizes the organization's demands for
  fealty and gives those who offer it
  wholeheartedly a sense of dedication in doing
  so--in extremis, you might say, it converts what
  would seem in other times a bill of no rights
  into a restatement of individualism.
• But there is a real moral imperative behind it,
  and whether one inclines to its beliefs or not he
  must acknowledge that this moral basis, not mere
  expediency, is the source of its power. Nor is it
  simply an opiate for those who must work in big
  organizations. The search for a secular faith
  that it represents can be found throughout our
  society--and among those who swear they would
  never set foot in a corporation or a government
  bureau.

33
Managing changing cultureStep I Study it

• Be culturally savvy (vs. clueless) pay attention
• Do a culture audit
• Find key informants
• oral histories with tribal elders
• map genealogies
• learn folklore
• Be a fly on the wall
• Ethnography participant observation
• Study texts
• Annual reports, websites, advertising
• Do value surveys

34
Step II understand its causes

• Leader/founder
• Family ownership
• Long history
• PG
• Society
• Asia/Europe
• Region
• Northern California/Manhattan/South
• Small town vs. big city
• Amana, Cummins, Corning, Chase, Citibank
• Product
• Apple, Coke
• Industry
• High tech/railroads/investment banking
• Structure
• Functional/divisional mechanistic/organic

35
Apples product-driven culture

• Heres the most interesting thing about our
  culture-- we are what we make. Ive never seen
  an organization where the personality of the
  organization is so intertwined with the
  personality of the product--individualistic,
  pure, uncompromised, ahead of everyone else, so
  elegant it cant fail. We are the Macintosh
  here.
• Apple Marketing Manager

36
Step III Align/realign the organization

• People
• Formal organization
• Structure
• Information/incentive systems

37
Aligning people

• Selection and socialization (buy or make)
• First, selection
• Select for fit or misfit to the culture
• Intensive screening

38
Selection at Microsoft

• In 1999, the average age of the more than
  31,000 Microsoft employees was only 34, and raw
  intelligence matters more than judgment or
  experience in determining who gets hired. Craig
  Mundie, senior vice president for consumer
  strategy, described Microsoft "as a company full
  of a lot of high IQ people who have relatively no
  experience."

39
Selection at Apple

• Sculley came to a company renowned for its
  exciting and countercultural work environment,
  where employees often wore T-shirts that
  proclaimed working 90 hours a week and loving
  it. Sculley described apple as the Ellis
  Island of American business because it
  intentionally attracted the dissidents who
  wouldnt fit into corporate America.
• Harvard Business School Press

40
Selecting for bad fit at HP(Wall Street
Journal interview with former CEO Lew Platt)

• WSJ Did you feel constrained running a company
  that had legendary founders and a culture
  enshrined in a book?
• Platt A little bit. There were certain
  constraints. There were certain traditions they
  wanted upheld.
• WSJ Give me an example.
• Platt They were very conservative -- heavy
  investment in RD, little debt. I was asked not
  to question those things.
• WSJ Ms. Fiorina is a woman, a nonengineer and an
  outsider -- all firsts for H-P. What should we
  read into that?
• Platt They wanted someone who could bring
  change, someone with a higher visibility. Most
  H-P people are pretty low-key. David Packard
  and Bill Hewlett were that way. I'm that way.
  Carly comes in without some of those constraints.
  She will question some of the thinking that I, as
  a 33-year employee, couldn't.

41
Aligning people

• Socialization
• Focus on firm-specific values and tacit skills
• Invest heavily in training, including OJT
• Mentoring
• Participation
• Rites of passage
• Humiliating-inducing experiences

42
Selection and socialization at PG

• Job candidates must pass a battery of tests
  measuring aptitude and leadership skills. Once
  hired, employees are schooled in all things
  Procter, even attending training seminars known
  as PG College. Memos, written in a distinct PG
  style, are valued over meetings. Employees are
  expected to have facts and data at their
  fingertips -- opinions and intuition are frowned
  upon.
• Juelene Beck, who worked as PG beverage
  brand assistant from 1984 to 1986, says
  supervisors once questioned whether a trendy
  haircut and suit were "appropriate" for PG.
  During performance reviews, she says, she was
  asked why she preferred sailing to socializing
  with co-workers.

43
Cultural integration of acquisitions through
mentoring at Cisco

• Ciscos acquisition identification process
  emphasizes cultural compatibilityCultural
  integration includes the use of integration teams
  who explain and model Ciscos values, the holding
  of orientation sessions, and the assignment of
  buddies. The buddy system involves pairing
  each new employee with a seasoned Cisco veteran
  of equal stature and similar job responsibility.
  The buddy offers personalized attention better
  suited to conveying the Cisco values and
  culture.
• OReilly and Pfeffer, Hidden Value

44
Hell Camp Extreme resocialization

• Founded nine years ago in the foothills of
  Mt. Fuji, Hell Camp claims to have subjected some
  100,000 Japanese salarymen to 13 days of speed
  drills, speechifying and hazing rituals. Its
  main message-- 100 liters of sweat 100 liters
  of tears was designed to counteract a growing
  fear among Japans corporate and government elite
  that the nations workers are becoming too
  Americanized, too soft. The schools solution,
  for nearly 3000 a pop to crush the individual
  ego with mindless and humiliating exercises and
  then rebuild it with a modern version of the
  Samurai code of selfless servitude called
  bushido.
• Japanese-style camp for managers is lost in
  translation in U. S. Hazing rituals and
  obeisance dont make it in Malibu even among
  freeloaders. WSJ, March 1, 1988.

45
(Re)Align the organization

• Structure
• Divisional/functional/matrix
• Mechanistic/organic

46
Ford Changing culture by restructuring

• Since the hard-charging 51-year-old
  executive took over in January (1999), he has
  picked up the whole organization by the lapels
  and shaken it. His goal? To reinvent the
  96-year-old industrial giant as a nimble,
  growth-oriented consumer powerhouse for the 21st
  century, when a handful of auto giants will
  battle across the globe.That's why Nasser has
  declared war on Ford's stodgy, overly analytic
  culture. In its place, he envisions a company in
  which executives run independent units--cut loose
  from a stifling bureaucracy and held far more
  accountable for success and failure. And with a
  consumer focus at the heart of his retooled Ford,
  he's banking on a future in which designers,
  engineers, and marketers someday will do a far
  better job of anticipating the wants and needs of
  car buyers.

47
Carly Fiorinas culture-structure realignment at
HP

• Most dramatically, she launched a plan to
  consolidate H-P's 83 businesses into only 12. She
  also aligned the reduced number of divisions into
  two "front-end" groups that would focus on
  customer activities, such as marketing and sales,
  and two "back-end" organizations devoted strictly
  to designing and making computer and printer
  products.
• Old-time H-P executives were shocked. "I was a
  deer caught in the headlights when she described
  the front and back end," says Carolyn Ticknor,
  who now presides over the merged printer unit.
  Several of these executives protested that
  employees weren't ready for a major
  reorganization.
• Some executives fretted that managers wouldn't
  wield "real" authority if they couldn't control
  both product development and marketing. "It took
  some of the glory, if you wish, out of the job,"
  says Mr. Perez, the departed executive.
• Consternation rippled through the ranks. Managers
  who had long aspired to run their own autonomous
  units, known as PLs, short for profit loss,
  suddenly saw most of those jobs disappear.
• WSJ, 8/22/2000

48
Changing the symbolism of structure

• Southwest
• People Department
• Culture Committee
• Executive ranks at Chumbo Corp.
• Grand Pooh-Bah
• Web Goddess
• Director of Something

49
(Re)align the organization

• HR systems
• Career design
• Long-term employment
• Job rotation
• Compensation design
• Reward group long-term performance
• Reward conformity with core values
• Innovators head new product divisions at 3M and
  HP
• Maintain equity, keep inequality low

50
Aligning rewards at Cisco

• Chambers is adamant about rewards being tied
  to customer satisfaction. He ties the
  compensation of all managers to measures of
  customer satisfaction really listening to the
  customer. We are the only company of anywhere
  near this size that does it.
• OReilly and Pfeffer Hidden Value

51
Excessive culture-HR alignment at Penneys

• To alter such deep-bred customer perceptions
  (that Penneys clothes are unfashionable) would
  require a feat of Herculean proportions, but
  Penney's, with a notoriously insular corporate
  culture, is averse to itinerant, superhero types.
  Of the company's top managers above the senior
  vice president level, only two have not spent
  their entire careers there.
• "The norm is to be there your whole career,
  several are even second generation," said Lucille
  Klein, who left as fashion director of Penney's
  women's division three years ago, but still
  consults with the company. "It leads to tunnel
  vision, like the Penney's way of doing things is
  the only way."

52
Culture takeaways

• Culture is an extremely powerful force in every
  organization
• It can lead to either success or to failure
• Culture may be soft but it can be managed and
  changed
• It does take time, commitment, and consistency