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THE ROLE OF INTERNAL MARKETING IN CULTURAL CHANGE IN ORGANISATIONS

SAROLTA VRNAI BA (Hons), MSc Lecturer in Marketing & Management Keleti Kroly Faculty of Economics, Budapest Tech varnai.sarolta@kgk.bmf.hu DR JNOS FOJTIK Senior Lecturer in Marketing Department of Business Administration Faculty of Business and Economics at the University of Pcs fojtik@ktk.pte.hu ABSTRACT Marketing, according to the traditional view, focuses on external customers, rather than paying attention to the organisations employees as internal customers. Internal marketing is an important part of organisational development and change, moreover, if there is an absence of internal marketing in the given firm management may face with resistant staff toward change processes and adaptation. Marketing tools are essential and necessary in order to shape a given firm environment, also to establish the basis of the achievable new stage of change. Internal marketing in cultural change flows down from upper level management through the strategies, new values and objectives they set for the organisation. Therefore the elements of internal marketing have core competitive value in building effective business performance. Keywords: internal marketing, cultural change, change management Introduction

Marketing, according to the traditional view, should focus on external customers rather than paying attention to the organisations employees as internal customers. Since the second half of the 1970s in such industries as services it has been realised that employees have not been just a resource in traditional sense but they play a central role in attracting, building and maintaining relationships with customers. A number of firms have gradually recognised and utilised the internal marketing program. One possible reason for this has been the growing interest in internal marketing as a prerequisite for successful external marketing. In a number of services (insurance, etc.) it is a common sense that frontline officers would operate successfully only if they are deeply convinced in benefits of the service or product they offer

2 to customers. In addition, several authors (Gummesson 1987, Berry and Parasuraman 1991, Lings 2000) claim that implementing internal marketing campaigns will result in an increase of service quality. Essentially, internal marketing focuses on engendering marketing-oriented management (Varey 1995).

The recognition of the key role of employees in services marketing has given a rise the internal marketing programmes strongly oriented to employee development (Tansuhaj et al. 1988; Grnroos, 1994, p.14). It seems to be a very useful approach in service industries because the customer-employee interaction determines a significant part of the market offering. Others argue that the quality of service and efficiency of the distribution of the service as well as effectiveness of the communication effort would depend more directly on the actions of employees of the company. Greater attention to customer-employee interactions would result in an increase in perceived service quality, customer satisfaction and repeat purchase behaviour of service customers (Grnroos 2000). On the other hand, Berry (1984a) and Grnroos (2000) argue that treating employees as internal customers and their jobs as internal products will raise employee job satisfaction, as well.

Internal Marketing Defined and Approached

Rafiq and Ahmed (2000) claim that internal marketing was first proposed by Berry et al. (1976) as a solution to the problem of delivering consistently high service quality. It can also be claimed that internal marketing was probably first defined by Berry (1984a, p.32) as applying the philosophy and practices of marketing to the people that serve the external customers so that (1) the best possible people can be employed and retained, and (2) they will do the best possible work. At last, by the early 1990s it had been recognized that companies faced two kinds of markets and customers: internal and external (Piercy, 1995). This view, which had been successfully adopted by many organisations to manage the implementation of their strategies, has had important implications for the customer satisfaction issue both in analysing the barriers we may face, and in designing effective implementation strategies.

In its simplest form, internal marketing is exactly what one would presume it to be: the application of marketing techniques to the internal workplace. Or, in a more sophisticated manner: the attraction of the internal marketing framework for studying problems of

3 implementation and change is that we can use exactly the same models and methods inside the organisation as we do in the external marketplace. So, we can define internal marketing as the application of marketing inside an organisation to establish customer-focused values. In this sense, it bridges marketing with HR to attract, motivate, and retain employees, with an emphasis on getting employee commitment to marketing and organisational goals. Think of it as an umbrella concept encompassing all activities, events, internal public relations, etc., that reinforce the importance of customers and the employees who take care of them.

It should be noticed here that some experts, for instance the very active members of the Nordic School of Service Marketing, underline strongly that internal marketing, as well as being a set of marketing tools, is a philosophy that actively promotes motivation, rather than using the passive approach used traditionally.

In summary, we can say that the basis of the internal marketing concept has three aspects. Firstly, every employee working in the organisation has his/her own customers. These customers are so-called internal customers (Brown et al. 1994). Secondly, employers need to provide benefits and services for their employees, so as to satisfy them, and then, this will result in delivering better services to final customers in effective and efficient ways (Grnroos, 1990, p.8). Therefore, it is important for employers to apply the marketing strategies and tools used for external and/or final customers to the internal customers, i.e. employees. Thirdly, it is important to notice that internal marketing concept is a kind of corporate marketing philosophy which leads the organisation towards higher level of marketing success via higher level of (both internal and external) customer satisfaction and more integrated approach to marketing and human resource management. Elements of the latter approach to internal marketing which have been identified by several authors include: selecting right personnel (Berry 1984b, Tansuhaj et al. 1988, Grnroos 2000), effects of training (Harrell & Fors 1992, Cahill 1995, Grnroos 2000), considerations of empowerment (Shostack 1987, Brown et al. 1994, Grnroos, 2000), and effects of teamwork.

There are practitioners and scholars who approach internal marketing from a slightly different standpoint. A major literature review by Rafiq and Ahmed (2000) indicates that a number of internal marketing researchers have expanded the definition of internal marketing to include the concepts of change management and organisational strategy implementation. Supporters of this expanded definition believe that it is important to address issues of change

4 management and organisational strategy implementation because they provide a means by which organisations can encourage departments and the employees within them to overcome the inertia and resistance associated with organisational change. Although this understanding of internal marketing represents a revision and expansion on offerings of Berry (1984b) as well as Grnroos (1994), it is neatly tied together by the definition that Rafiq and Ahmed (2000, p.454) developed after conducting their review. According to them internal marketing is: A planned effort using a marketing-like approach to overcome organisational resistance to change and to align, motivate and interfunctionally co-ordinate and integrate employees towards the effective implementation of corporate and functional strategies in order to deliver customer satisfaction through a process of creating motivated and customer oriented employees.

This definition gives those interested in the practical application of internal marketing a place from which to proceed. Firstly, it encourages managers and those interested in implementing internal marketing programs to understand that internal marketing is an ongoing process. Secondly, it addresses the role that motivation plays in an employees willingness to deliver quality service to internal as well as external customers. Thirdly, the definition addresses the importance of enlisting every employee in every department in efforts to deliver high quality customer service. Finally, the definition adheres to internal marketings basic tenet that employee commitment, service quality, and customer satisfaction are undeniably linked.

On the basis above we can say that internal marketing is a process that operates among the various departments within the given firm, also between staff and management. Therefore, there is a strong need for marketers to motivate and influence employees to change the internal process as expected according to an effective external market orientation. This combines all the activities of the company to convince employees to respond to the market, which includes the capability of adapting quickly change within the external market.

According to Varey & Lewis (2000), internal marketing is an important part of organisational development and change, moreover, if there is an absence of internal marketing in the given organisation, management may face with resistant staff toward change processes and adaptation. Thus, applying internal marketing, an organisation can be able to develop an atmosphere and environment in which workers are appreciated and susceptible to improve business performance and generate long term competitive advantage through the creation of

5 strong organisational cultures. This can be generally attained through developing face-to-face, flexible, also efficient interaction between management and different groups within the given company instead of operating in a rather bureaucratic organisation (Ahmed & Rafiq 2003).

Intensive and high quality communication should be treated as a competitive advantage in order to inform employees always in time about the current nature of the external environment change. This is a general internal marketing activity that requires companies to focus on customers and adopt market orientation. Strong communication pushes staff to recognise the need of change, when it is required, also to make them feel comfortable about adopting quickly. This can be enough in itself to warrant success with marketing activities. Workers have to desire to provide individual effort required to adapt. Although a strong organisational culture which encourages and rewards positive responses to change provides the environment to generate high levels of job effort, it is, of course, relying on the individual discretion of each employee as to nature of the effort they will put in, that is whether they are willing to exceed requirements or to meet expectations.

The result of interaction between employees is seen as a strategic factor to the final product that the customer receives, especially in the service sector. According to Wheatley (1987), internal marketing should be also seen as a training asset, which through a firm can enhance its knowledge about their services, capabilities, awareness of market opportunities and marketing skills. From another aspect, this can be a distinctive competency of the firm that creates value for the customers. Internal marketing, therefore, can affect a change in behaviours and attitudes to market responsiveness, also the marketing orientation of the given firm. As it was seen by Ozment and Keller (1999), money is an important motivator in leading employees, however, not the only factor in guidance. Research has shown that employees are also looking for more interaction with management, therefore for more responsibility and control over those decisions that affect them and their environment. It means that open communication within effective internal market orientation are key factors to enabler staff retention. The relationship between internal marketing, internal marketing orientation, and relational competencies of individual employees should be taken in consideration. Organisations human resource approach, internal and also external marketing orientation must be deepened in order to improve both employee and company performance.

6 Cultural Change

That cultures do change is not in questions. No organisations culture is static, as external and internal influencing factors change, culture within the organisation changes as well. Cultural change should be recognised on two basic levels. On macro level, cultural change is a form of organisational transformation that usually managed radically, relative quickly in order to rebuild fundamental assumptions. On micro level, cultural change is about the people within the organisations that means it is locked into the beliefs, values and norms of each individual in the organisation, and because these are difficult constructs to alter, this type of organic change is rather incremental, developed step-by-step and slow, unless there is some major shock to the organisation (Boddy and Buchanan, 2002).

The Cultural-Change-Onion Model helps to recognise and understand the most important elements existing at different levels of awareness, namely basic assumptions, values, norms and artifacts. These factors were also analysed by Burnes (2004), however in a different setting.

Basic assumptions: this is the deepest level of cultural awareness, where assumptions are usually unconscious regarding the solutions of organisations problems. This means nonconfrontable presumption regarding the environment, nature of human being, activity and relationships.

Values: this is the second level of awareness, which includes general values regarding those activities that ought to be in an organisation. Values explain to the members of a given organisation what is important, and what they have to pay attention to. These rates are set by the firm, generally by the management, however the individuals behaviour can also form this level, moreover, this is the healthy attitude, when the different personalities have influence on the firms culture.

Norms: this is the third level, just under the surface of cultural awareness showing how members of an organisation should behave in a given situation. These are unwritten, however known and understood roles within an organisation. These are rather intrinsic, internal values, closely related to ethical behaviour. Of course, it is difficult to measure what is ethical and

7 not, it may vary among different countries and their cultures, parallel, it might differ among distinct business environments.

Artifacts: these are on the highest level. These include observable behaviours of members, as well as the structures, systems, procedures, rules, and physical aspects of the organisation, which are built on the former three levels. These hold together all those factors which provide an individual with an objective picture about the given firm that we look into and measure. Basic assumptions Values

Norms

Artifacts

Figure 1: Cultural-Change-Onion Model

8 Internal Marketing Orientation and Cultural Change

As it was mentioned previously, internal marketing orientation crosses marketing and human resource management functional boundaries. The role of management is to influence employees behaviours in ways that will positively affect customers perceptions of the levels of service they receive (Hartline and Ferrell, 1996). Therefore, managerial activities can be explained as the equivalent of an external market orientation of the firm. It means that a strategic overview of cultural change helps the given organisations marketing orientation as well.

Throughout the six-step guideline based on Cummings and Worley (2001), one may find a linkage between internal marketing orientation and cultural change program. According to this guideline, change should be valued as a strategic decision making process in order to meet customers needs:

Developing a clear strategic vision an effective change process should start with the formulation of a new, clear vision, strategy which includes the necessary shared values and expected behaviour in order to operate the new corporate strategy.

Top management involvement cultural change should be initialized by the top managers of the organisation, therefore, senior managers and leaders should be highly committed to the new values and the need to create continual pressure for change.

Model culture change at the highest level within the organisation top management should communicate the new culture and changes through their own actions. Their behaviours need to symbolize the values and norms being linked together with the new culture. It means they should be pioneer in order to push change through the organisation.

Modify the organisation to support corporate changes cultural change should be followed by supporting modifications in organisational structure, human resource system, information and control system, communication, public relation, operation and management style. These types of features can lead to a new type of orientation in peoples behaviours toward new culture.

9 Select the members of the new organisation, also terminate retentive persons it is important to change organisational membership in order to deepen the new cultures basis, therefore people can be selected in terms their fit with the new culture, and provided with an induction clearly showing required attitudes and behaviour. Those, who cannot adapt the changing environment, should be perhaps retired or terminated. This can be especially applied on the senior management level, in key leadership positions, where individual behaviour may hinder new values.

Develop ethical and legal sensitivity most cultural change programs promote values that highlight employee integration, control, equal opportunity and job security for instance. However, if it essential in the change process to keep those workers and recruit new staff who adopt smoothly the new attempts, it could contravene employment laws. Therefore, organisations should be especially clear about the rising ethical and legal issues, pitfalls.

Summary

The purpose of this paper was to consider the role of internal relationship marketing in sustaining long term customer relationships in business service organisations. Marketing tools are essential and necessary in order to shape a given firm environment, also to establish the basis of the achievable new stage of change. Internal marketing in cultural change flows down from upper level management through the strategies, new values and objectives they set for the organisation. Therefore the elements of internal marketing have core competitive value in building effective business performance.

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