Chapter 16

Managing Organizational
Culture

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

Summary
2

What is Organizational culture?

Refers to a system of shared meaning. In every organization, there are
patterns of beliefs, symbols, rituals, myths & practices that have evolved over
time. These in turn create common understanding among members about
what the organization is and how should members behave.

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.
3

Key characteristics of organizational

culture

Individual initiative

Integration

Identity

Risk tolerance

Direction

Management
support

Control

Reward system

Conflict tolerance
&
Communication
Patterns

Dominant culture

Subcultures

Core values

Common problems,
situations, experiences
members face

Majority of members

Vertical and Horizontal

subculture

Macro view of culture

Defined by departmental
designations or geographical
separations

Distinct personality

Core values retained but

modified to reflect separated
units distinct situation
5

Culture and Organizational effectiveness

Strong
culture

Core values intensely held, clearly ordered & widely

shared. E.g. AT&T
More no of members accept core values, agree on
order of importance and are highly committed

Weak
culture

Young organizations
Constant turnover
Members have not shared enough experiences to
create common meanings

Effectiveness

Good external fit

Good internal fit
Culture, strategy, technology and technology
alignment.
6

Culture and Formalization

Behavioral
consistency

Strong
Cultures
Acts as a
substitute to
formalization

Powerful
means of
implicit
control
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Creating, Sustaining and Transmitting

culture
Creating

Sustaining

Transmitting

Past practices and the

degree of success

Selection

Stories

Founders impact on
early culture

Top Management

Rituals

Vision & Mission of

founders. E.g. IBM &
McDs

Socialization

Material Symbols

What original members

employed learnt from
own experiences

Language
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When cultures collide

Mergers and Acquisitions
A cultural mismatch is more likely to result in a disaster
than financial, technical, geographic or product mismatch

Degree of difference
Success

M&A of strong cultures

M&A of weak cultures

Strength of organizations culture

Difficulty in blending if culture is well defined
E.g. Mellon & Girard Bank merger

Compatibility if cultures highly similar

E.g. R.J. Reynolds and Nabisco
Weak cultures adapt better to new situations
E.g. Mellon & Central Counties Bank merger
9

Culture clashes in M&A

Cadbury and Kraft foods
Daimler and Chrysler

Sprint and Nextel

HP and Compaq
10

Are cultures manageable

For and Against
Case For
Times and conditions change
affecting organizational
effectiveness
Management can alter the
factors that created and sustain
the current culture
E.g. Scott Papers cultural
turnaround

Case Against
Cultures made up of stable
characteristics that are difficult to
change
Difficult to unlearn experiences and
memories
Time frame for unlearning may make
the effort realistically impractical
Past practices work against cultural
change
Just because the management can
describe the desired culture doesnt
mean that it can be implemented
E.g. General Motors
11

Situational factors that

facilitate cultural change

Dramatic Crisis

Leadership turnover

Lifecycle stage

Age and Size of the

organization

Strength of current
culture

Absence of
Sub-cultures

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Enacting cultural change

Cultural
Analysis

Change
efforts

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?

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 to
replace those currently in place
Change selection, socialization processes, evaluation & reward
systems to support employees who espouse new values13sought

Summary
Organizations have personalities just like individuals called as organizational
cultures. 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 for
formalization
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
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