Culture, Climate, and Ethical Decisions
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Organizational Culture
Chapter 15Organizational Culture
LEARNING OBJECTIVES
After reading this chapter, you should be able to do the following:
1. Describe organizational culture and why it is important for an organization.
2. Understand the dimensions that make up a company’s culture.
3. Distinguish between weak and strong cultures.
4. Understand factors that create culture.
5. Understand how to change culture.
6. Understand how organizational culture and ethics relate.
7. Understand cross-cultural differences in organizational culture.
Customer Service Culture: The Case of Nordstrom
Figure 15.1
Nordstrom’s unique customer service culture distinguishes it from its competitors.
Source: http://commons.wikimedia.org/wiki/image: nordstrom.jpg .
Nordstrom Inc. is a Seattle-based department store rivaling the likes of Saks Fifth Avenue, Neiman Marcus, and Bloomingdale’s. Nordstrom is a Hall of Fame member of Fortune Magazine’s “100 Best Companies to Work for” list, including being ranked 34th in 2008. Nordstrom is known for its quality apparel, upscale environment, and generous employee rewards. However, what Nordstrom is most famous for is its delivery of customer service above and beyond the norms of the retail industry. Stories about Nordstrom service abound. For example, according to one story the company confirms, in 1975 Nordstrom moved into a new location that had formerly been a tire store. A customer brought a set of tires into the store to return them. Without a word about the mix-up, the tires were accepted and the customer was fully refunded the purchase price. In a different story, a customer tried on several pairs of shoes but failed to find the right combination of size and color. As she was about to leave, the clerk called other Nordstrom stores, but could only locate the right pair at Macy’s, a nearby competitor. The clerk had Macy’s ship the shoes to the customer’s home at Nordstrom’s expense. In a third story, a customer describes wandering into a Portland, Oregon Nordstrom looking for an Armani tuxedo for his daughter’s wedding. The sales associate took his measurements just in case one was found. The next day, the customer got a phone call, informing him that the tux was available. When pressed, she revealed that using her connections she found one in New York, had it put on a truck destined to Chicago, and dispatched someone to meet the truck in Chicago at a rest stop. The next day she shipped the tux to the customer’s address, and the customer found that the tux had already been altered for his measurements and was ready to wear. What is even more impressive about this story is that Nordstrom does not sell Armani tuxedos.
How does Nordstrom persist in creating these stories? If you guessed that they have a large number of rules and regulations designed to emphasize quality in customer service, you’d be wrong. In fact, the company gives employees a 5½-inch by 7½-inch card as the employee handbook. On one side of the card, the company welcomes employees to Nordstrom, states that their number one goal is to provide outstanding customer service, and for this they have only one rule. On the other side of the card, the single rule is stated: “Use good judgment in all situations.” By leaving it in the hands of Nordstrom associates, the company seems to have managed to empower employees who deliver customer service heroics every day.
Sources: Adapted from information in Chatman, J. A., & Eunyoung Cha, S. (2003). Leading by leveraging culture. California Management Review, 45, 19–34; McCarthy, P. D., & Spector, R. (2005). The Nordstrom way to customer service excellence: A handbook for implementing great service in your organization. Hoboken, NJ: John Wiley; Pfeffer, J. (2005). Producing sustainable competitive advantage through the effective management of people. Academy of Management Executive, 19, 95–106.
Just like individuals, you can think of organizations as having their own personalities, more typically known as organizational cultures. The opening case illustrates that Nordstrom is a retailer with the foremost value of making customers happy. At Nordstrom, when a customer is unhappy, employees are expected to identify what would make the person satisfied, and then act on it, without necessarily checking with a superior or consulting a lengthy policy book. If they do not, they receive peer pressure and may be made to feel that they let the company down. In other words, this organization seems to have successfully created a service culture. Understanding how culture is created, communicated, and changed will help you be more effective in your organizational life. But first, let’s define organizational culture.
15.1 Understanding Organizational Culture
LEARNING OBJECTIVES
1. Define organizational culture.
2. Understand why organizational culture is important.
3. Understand the different levels of organizational culture.
What Is Organizational Culture?
Organizational culture refers to a system of shared assumptions, values, and beliefs that show employees what is appropriate and inappropriate behavior.Chatman, J. A., & Eunyoung Cha, S. (2003). Leading by leveraging culture. California Management Review, 45, 19–34; Kerr, J., & Slocum, J. W., Jr. (2005). Managing corporate culture through reward systems. Academy of Management Executive, 19, 130–138. These values have a strong influence on employee behavior as well as organizational performance. In fact, the term organizational culture was made popular in the 1980s when Peters and Waterman’s best-selling book In Search of Excellence made the argument that company success could be attributed to an organizational culture that was decisive, customer oriented, empowering, and people oriented. Since then, organizational culture has become the subject of numerous research studies, books, and articles. However, organizational culture is still a relatively new concept. In contrast to a topic such as leadership, which has a history spanning several centuries, organizational culture is a young but fast-growing area within organizational behavior.
Culture is by and large invisible to individuals. Even though it affects all employee behaviors, thinking, and behavioral patterns, individuals tend to become more aware of their organization’s culture when they have the opportunity to compare it to other organizations. If you have worked in multiple organizations, you can attest to this. Maybe the first organization you worked was a place where employees dressed formally. It was completely inappropriate to question your boss in a meeting; such behaviors would only be acceptable in private. It was important to check your e-mail at night as well as during weekends or else you would face questions on Monday about where you were and whether you were sick. Contrast this company to a second organization where employees dress more casually. You are encouraged to raise issues and question your boss or peers, even in front of clients. What is more important is not to maintain impressions but to arrive at the best solution to any problem. It is widely known that family life is very important, so it is acceptable to leave work a bit early to go to a family event. Additionally, you are not expected to do work at night or over the weekends unless there is a deadline. These two hypothetical organizations illustrate that organizations have different cultures, and culture dictates what is right and what is acceptable behavior as well as what is wrong and unacceptable.
Why Does Organizational Culture Matter?
An organization’s culture may be one of its strongest assets, as well as its biggest liability. In fact, it has been argued that organizations that have a rare and hard-to-imitate organizational culture benefit from it as a competitive advantage.Barney, J. B. (1986). Organizational culture: Can it be a source of sustained competitive advantage? Academy of Management Review, 11, 656–665. In a survey conducted by the management consulting firm Bain & Company in 2007, worldwide business leaders identified corporate culture as important as corporate strategy for business success.Why culture can mean life or death for your organization. (2007, September). HR Focus, 84, 9. This comes as no surprise to many leaders of successful businesses, who are quick to attribute their company’s success to their organization’s culture.
Culture, or shared values within the organization, may be related to increased performance. Researchers found a relationship between organizational cultures and company performance, with respect to success indicators such as revenues, sales volume, market share, and stock prices.Kotter, J. P., & Heskett, J. L. (1992). Corporate culture and performance. New York: Free Press; Marcoulides, G. A., & Heck, R. H. (1993, May). Organizational culture and performance: Proposing and testing a model. Organizational Science, 4, 209–225. At the same time, it is important to have a culture that fits with the demands of the company’s environment. To the extent shared values are proper for the company in question, company performance may benefit from culture.Arogyaswamy, B., & Byles, C. H. (1987). Organizational culture: Internal and external fits. Journal of Management, 13, 647–658. For example, if a company is in the high-tech industry, having a culture that encourages innovativeness and adaptability will support its performance. However, if a company in the same industry has a culture characterized by stability, a high respect for tradition, and a strong preference for upholding rules and procedures, the company may suffer as a result of its culture. In other words, just as having the “right” culture may be a competitive advantage for an organization, having the “wrong” culture may lead to performance difficulties, may be responsible for organizational failure, and may act as a barrier preventing the company from changing and taking risks.
In addition to having implications for organizational performance, organizational culture is an effective control mechanism for dictating employee behavior. Culture is in fact a more powerful way of controlling and managing employee behaviors than organizational rules and regulations. When problems are unique, rules tend to be less helpful. Instead, creating a culture of customer service achieves the same result by encouraging employees to think like customers, knowing that the company priorities in this case are clear: Keeping the customer happy is preferable to other concerns such as saving the cost of a refund.
Figure 15.2
© The New Yorker Collection. 1994. Mick Stevens from cartoonbank.com. All rights reserved.
Levels of Organizational Culture
Organizational culture consists of some aspects that are relatively more visible, as well as aspects that may lie below one’s conscious awareness. Organizational culture can be thought of as consisting of three interrelated levels.Schein, E. H. (1992). Organizational culture and leadership. San Francisco: Jossey-Bass.
Figure 15.3
Organizational culture consists of three levels.
Source: Adapted from Schein, E. H. (1992). Organizational culture and leadership. San Francisco: Jossey-Bass.
At the deepest level, below our awareness lie basic assumptions. Assumptions are taken for granted, and they reflect beliefs about human nature and reality. At the second level, values exist. Values are shared principles, standards, and goals. Finally, at the surface we have artifacts, or visible, tangible aspects of organizational culture. For example, in an organization one of the basic assumptions employees and managers share might be that happy employees benefit their organizations. This assumption could translate into values such as social equality, high quality relationships, and having fun. The artifacts reflecting such values might be an executive “open door” policy, an office layout that includes open spaces and gathering areas equipped with pool tables, and frequent company picnics in the workplace. For example, Alcoa Inc. designed their headquarters to reflect the values of making people more visible and accessible, and to promote collaboration.Stegmeier, D. (2008). Innovations in office design: The critical influence approach to effective work environments. Hoboken, NJ: John Wiley. In other words, understanding the organization’s culture may start from observing its artifacts: the physical environment, employee interactions, company policies, reward systems, and other observable characteristics. When you are interviewing for a position, observing the physical environment, how people dress, where they relax, and how they talk to others is definitely a good start to understanding the company’s culture. However, simply looking at these tangible aspects is unlikely to give a full picture of the organization. An important chunk of what makes up culture exists below one’s degree of awareness. The values and, at a deeper level, the assumptions that shape the organization’s culture can be uncovered by observing how employees interact and the choices they make, as well as by inquiring about their beliefs and perceptions regarding what is right and appropriate behavior.
KEY TAKEAWAY
Organizational culture is a system of shared assumptions, values, and beliefs that help individuals within an organization understand which behaviors are and are not appropriate within an organization. Cultures can be a source of competitive advantage for organizations. Strong organizational cultures can be an organizing as well as a controlling mechanism for organizations. And finally, organizational culture consists of three levels: assumptions, which are below the surface, values, and artifacts.
EXERCISES
1. Why do companies need culture?
2. Give an example of an aspect of company culture that is a strength and one that is a weakness.
3. In what ways does culture serve as a controlling mechanism?
4. If assumptions are below the surface, why do they matter?
5. Share examples of artifacts you have noticed at different organizations.
15.2 Characteristics of Organizational Culture
LEARNING OBJECTIVES
1. Understand different dimensions of organizational culture.
2. Understand the role of culture strength.
3. Explore subcultures within organizations.
Dimensions of Culture
Which values characterize an organization’s culture? Even though culture may not be immediately observable, identifying a set of values that might be used to describe an organization’s culture helps us identify, measure, and manage culture more effectively. For this purpose, several researchers have proposed various culture typologies. One typology that has received a lot of research attention is the organizational culture profile (OCP), in which culture is represented by seven distinct values.Chatman, J. A., & Jehn, K. A. (1991). Assessing the relationship between industry characteristics and organizational culture: How different can you be? Academy of Management Journal, 37, 522–553; O’Reilly, C. A., III, Chatman, J. A., & Caldwell, D. F. (1991). People and organizational culture: A profile comparison approach to assessing person-organization fit. Academy of Management Journal, 34, 487–516. We will describe the OCP as well as two additional dimensions of organizational culture that are not represented in that framework but are important dimensions to consider: service culture and safety culture.
Figure 15.4 Dimensions of Organizational Culture Profile (OCP)
Source: Adapted from information in O’Reilly, C. A., III, Chatman, J. A., & Caldwell, D. F. (1991). People and organizational culture: A profile comparison approach to assessing person-organization fit. Academy of Management Journal, 34, 487–516.
Innovative Cultures
According to the OCP framework, companies that have innovative cultures are flexible and adaptable, and experiment with new ideas. These companies are characterized by a flat hierarchy in which titles and other status distinctions tend to be downplayed. For example, W. L. Gore & Associates Inc. is a company with innovative products such as GORE-TEX® (the breathable fabric that is windproof and waterproof), Glide dental floss, and Elixir guitar strings, earning the company the distinction of being elected as the most innovative company in the United States by Fast Company magazine in 2004. W. L. Gore consistently manages to innovate and capture the majority of market share in a wide variety of industries, in large part due to its unique culture. In this company, employees do not have bosses in the traditional sense, and risk taking is encouraged by celebrating failures as well as successes.Deutschman, A. (2004, December). The fabric of creativity. Fast Company, 89, 54–62. Companies such as W. L. Gore, Genentech Inc., and Google also encourage their employees to take risks by allowing engineers to devote 20% of their time to projects of their own choosing.Deutschman, A. (2004, December). The fabric of creativity. Fast Company, 89, 54–62; Morris, B., Burke, D., & Neering, P. (2006, January 23). The best place to work now. Fortune, 153, 78–86.
Aggressive Cultures
Figure 15.5
Microsoft, the company that Bill Gates cofounded, has been described as having an aggressive culture.
Source: http://simple.wikipedia.org/wiki/Image:Bill_Gates_in_Poland_cropped.jpg .
Companies with aggressive cultures value competitiveness and outperforming competitors: By emphasizing this, they may fall short in the area of corporate social responsibility. For example, Microsoft Corporation is often identified as a company with an aggressive culture. The company has faced a number of antitrust lawsuits and disputes with competitors over the years. In aggressive companies, people may use language such as “We will kill our competition.” In the past, Microsoft executives often made statements such as “We are going to cut off Netscape’s air supply.…Everything they are selling, we are going to give away.” Its aggressive culture is cited as a reason for getting into new legal troubles before old ones are resolved.Greene, J., Reinhardt, A., & Lowry, T. (2004, May 31). Teaching Microsoft to make nice? Business Week, 3885, 80–81; Schlender, B. (1998, June 22). Gates’ crusade. Fortune, 137, 30–32. Recently, Microsoft founder Bill Gates established the Bill & Melinda Gates foundation and is planning to devote his time to reducing poverty around the world.Schlender, B. (2007, December 10). Bill Gates. Fortune, 156, 54. It will be interesting to see whether he will bring the same competitive approach to the world of philanthropy.
Outcome-Oriented Cultures
The OCP framework describes outcome-oriented cultures as those that emphasize achievement, results, and action as important values. A good example of an outcome-oriented culture may be Best Buy Co. Inc. Having a culture emphasizing sales performance, Best Buy tallies revenues and other relevant figures daily by department. Employees are trained and mentored to sell company products effectively, and they learn how much money their department made every day.Copeland, M. V. (2004, July). Best Buy’s selling machine. Business 2.0, 5, 92–102. In 2005, the company implemented a results oriented work environment (ROWE) program that allows employees to work anywhere and anytime; they are evaluated based on results and fulfillment of clearly outlined objectives.Thompson, J. (2005, September). The time we waste. Management Today, pp. 44–47. Outcome-oriented cultures hold employees as well as managers accountable for success and utilize systems that reward employee and group output. In these companies, it is more common to see rewards tied to performance indicators as opposed to seniority or loyalty. Research indicates that organizations that have a performance-oriented culture tend to outperform companies that are lacking such a culture.Nohria, N., Joyce, W., & Roberson, B. (2003, July). What really works. Harvard Business Review, 81, 42–52. At the same time, some outcome-oriented companies may have such a high drive for outcomes and measurable performance objectives that they may suffer negative consequences. Companies overrewarding employee performance such as Enron Corporation and WorldCom experienced well-publicized business and ethical failures. When performance pressures lead to a culture where unethical behaviors become the norm, individuals see their peers as rivals and short-term results are rewarded; the resulting unhealthy work environment serves as a liability.Probst, G., & Raisch, S. (2005). Organizational crisis: The logic of failure. Academy of Management Executive, 19, 90–105.
Stable Cultures
Stable cultures are predictable, rule-oriented, and bureaucratic. These organizations aim to coordinate and align individual effort for greatest levels of efficiency. When the environment is stable and certain, these cultures may help the organization be effective by providing stable and constant levels of output.Westrum, R. (2004, August). Increasing the number of guards at nuclear power plants. Risk Analysis: An International Journal, 24, 959–961. These cultures prevent quick action, and as a result may be a misfit to a changing and dynamic environment. Public sector institutions may be viewed as stable cultures. In the private sector, Kraft Foods Inc. is an example of a company with centralized decision making and rule orientation that suffered as a result of the culture-environment mismatch.Thompson, S. (2006, September 18). Kraft CEO slams company, trims marketing staff. Advertising Age, 76, 3–62. Its bureaucratic culture is blamed for killing good ideas in early stages and preventing the company from innovating. When the company started a change program to increase the agility of its culture, one of their first actions was to fight bureaucracy with more bureaucracy: They created the new position of VP of business process simplification, which was later eliminated.Boyle, M. (2004, November 15). Kraft’s arrested development. Fortune, 150, 144; Thompson, S. (2005, February 28). Kraft simplification strategy anything but. Advertising Age, 76, 3–63; Thompson, S. (2006, September 18). Kraft CEO slams company, trims marketing staff. Advertising Age, 77, 3–62.
People-Oriented Cultures
People-oriented cultures value fairness, supportiveness, and respect for individual rights. These organizations truly live the mantra that “people are their greatest asset.” In addition to having fair procedures and management styles, these companies create an atmosphere where work is fun and employees do not feel required to choose between work and other aspects of their lives. In these organizations, there is a greater emphasis on and expectation of treating people with respect and dignity.Erdogan, B., Liden, R. C., & Kraimer, M. L. (2006). Justice and leader-member exchange: The moderating role of organizational culture. Academy of Management Journal, 49, 395–406. One study of new employees in accounting companies found that employees, on average, stayed 14 months longer in companies with people-oriented cultures.Sheridan, J. (1992). Organizational culture and employee retention. Academy of Management Journal, 35, 1036–1056. Starbucks Corporation is an example of a people-oriented culture. The company pays employees above minimum wage, offers health care and tuition reimbursement benefits to its part-time as well as full-time employees, and has creative perks such as weekly free coffee for all associates. As a result of these policies, the company benefits from a turnover rate lower than the industry average.Weber, G. (2005, February). Preserving the counter culture. Workforce Management, 84, 28–34; Motivation secrets of the 100 best employers. (2003, October). HR Focus, 80, 1–15. The company is routinely ranked as one of the best places to work by Fortune magazine.
Team-Oriented Cultures
Companies with team-oriented cultures are collaborative and emphasize cooperation among employees. For example, Southwest Airlines Company facilitates a team-oriented culture by cross-training its employees so that they are capable of helping each other when needed. The company also places emphasis on training intact work teams.Bolino, M. C., & Turnley, W. H. (2003). Going the extra mile: Cultivating and managing employee citizenship behavior. Academy of Management Executive, 17, 60–71. Employees participate in twice daily meetings named “morning overview meetings” (MOM) and daily afternoon discussions (DAD) where they collaborate to understand sources of problems and determine future courses of action. In Southwest’s selection system, applicants who are not viewed as team players are not hired as employees.Miles, S. J., & Mangold, G. (2005). Positioning Southwest Airlines through employee branding. Business Horizons, 48, 535–545. In team-oriented organizations, members tend to have more positive relationships with their coworkers and particularly with their managers.Erdogan, B., Liden, R. C., & Kraimer, M. L. (2006). Justice and leader-member exchange: The moderating role of organizational culture. Academy of Management Journal, 49, 395–406.
Detail-Oriented Cultures
Organizations with detail-oriented cultures are characterized in the OCP framework as emphasizing precision and paying attention to details. Such a culture gives a competitive advantage to companies in the hospitality industry by helping them differentiate themselves from others. For example, Four Seasons Hotels Ltd. and the Ritz-Carlton Company LLC are among hotels who keep records of all customer requests, such as which newspaper the guest prefers or what type of pillow the customer uses. This information is put into a computer system and used to provide better service to returning customers. Any requests hotel employees receive, as well as overhear, might be entered into the database to serve customers better. Recent guests to Four Seasons Paris who were celebrating their 21st anniversary were greeted with a bouquet of 21 roses on their bed. Such clear attention to detail is an effective way of impressing customers and ensuring repeat visits. McDonald’s Corporation is another company that specifies in detail how employees should perform their jobs by including photos of exactly how French fries and hamburgers should look when prepared properly.Fitch, S. (2004, May 10). Soft pillows and sharp elbows. Forbes, 173, 66–78; ford, R. C., & Heaton, C. P. (2001). Lessons from hospitality that can serve anyone. Organizational Dynamics, 30, 30–47; Kolesnikov-Jessop, S. (2005, November). Four Seasons Singapore: Tops in Asia. Institutional Investor, 39, 103–104; Markels, A. (2007, April 23). Dishing it out in style. U.S. News & World Report, 142, 52–55.
Service Culture
Service culture is not one of the dimensions of OCP, but given the importance of the retail industry in the overall economy, having a service culture can make or break an organization. Some of the organizations we have illustrated in this section, such as Nordstrom, Southwest Airlines, Ritz-Carlton, and Four Seasons are also famous for their service culture. In these organizations, employees are trained to serve the customer well, and cross-training is the norm. Employees are empowered to resolve customer problems in ways they see fit. Because employees with direct customer contact are in the best position to resolve any issues, employee empowerment is truly valued in these companies. For example, Umpqua Bank, operating in the northwestern United States, is known for its service culture. All employees are trained in all tasks to enable any employee to help customers when needed. Branch employees may come up with unique ways in which they serve customers better, such as opening their lobby for community events or keeping bowls full of water for customers’ pets. The branches feature coffee for customers, Internet kiosks, and withdrawn funds are given on a tray along with a piece of chocolate. They also reward employee service performance through bonuses and incentives.Conley, L. (2005, April). Cultural phenomenon. Fast Company, 93, 76–77; Kuehner-Herbert, K. (2003, June 20). Unorthodox branch style gets more so at Umpqua. American Banker, 168, 5.
What differentiates companies with service culture from those without such a culture may be the desire to solve customer-related problems proactively. In other words, in these cultures employees are engaged in their jobs and personally invested in improving customer experience such that they identify issues and come up with solutions without necessarily being told what to do. For example, a British Airways baggage handler noticed that first-class passengers were waiting a long time for their baggage, whereas stand-by passengers often received their luggage first. Noticing this tendency, a baggage handler notified his superiors about this problem, along with the suggestion to load first-class passenger luggage last.Ford, R. C., & Heaton, C. P. (2001). Lessons from hospitality that can serve anyone. Organizational Dynamics, 30, 30–47. This solution was successful in cutting down the wait time by half. Such proactive behavior on the part of employees who share company values is likely to emerge frequently in companies with a service culture.
Figure 15.6
The growth in the number of passengers flying with Southwest Airlines from 1973 until 2007. In 2007, Southwest surpassed American Airlines as the most flown domestic airline. While price has played a role in this, their emphasis on service has been a key piece of their culture and competitive advantage.
Source: Adapted from http://upload.wikimedia.org/wikipedia/commons/6/69/Southwest-airlines-passengers.jpg .
Safety Culture
Some jobs are safety sensitive. For example, logger, aircraft pilot, fishing worker, steel worker, and roofer are among the top ten most dangerous jobs in the United States.Christie, L. (2005). America’s most dangerous jobs. Survey: Loggers and fisherman still take the most risk; roofers record sharp increase in fatalities. CNN/Money. Retrieved from http://money.cnn.com/2005/08/26/pf/jobs_jeopardy/. In organizations where safety-sensitive jobs are performed, creating and maintaining a safety culture provides a competitive advantage, because the organization can reduce accidents, maintain high levels of morale and employee retention, and increase profitability by cutting workers’ compensation insurance costs. Some companies suffer severe consequences when they are unable to develop such a culture. For example, British Petroleum experienced an explosion in their Texas City, Texas, refinery in 2005, which led to the death of 15 workers while injuring 170. In December 2007, the company announced that it had already depleted the $1.6-billion fund to be used in claims for this explosion.Tennissen, M. (2007, December 19). Second BP trial ends early with settlement. Southeast Texas Record. A safety review panel concluded that the development of a safety culture was essential to avoid such occurrences in the future.Hofmann, M. A. (2007, January 22). BP slammed for poor leadership on safety. Business Insurance, 41, 3–26. In companies that have a safety culture, there is a strong commitment to safety starting at management level and trickling down to lower levels. M. B. Herzog Electric Inc. of California, selected as one of America’s safest companies by Occupational Hazards magazine in 2007, had a zero accident rate for the past 3 years. The company uses safety training programs tailored to specific jobs within the company, and all employees are encouraged to identify all safety hazards they come across when they are performing their jobs. They are also asked to play the role of an OSHA (Occupational Safety and Health Administration) inspector for a day to become more aware of the hidden dangers in the workplace. Managers play a key role in increasing the level of safe behaviors in the workplace, because they can motivate employees day-to-day to demonstrate safe behaviors and act as safety role models. A recent study has shown that in organizations with a safety culture, leaders encourage employees to demonstrate behaviors such as volunteering for safety committees, making recommendations to increase safety, protecting coworkers from hazards, whistleblowing, and in general trying to make their jobs safer.Hofmann, D. A., Morgeson, F. P., & Gerras, S. J. (2003). Climate as a moderator of the relationship between leader-member exchange and content specific citizenship: Safety climate as an exemplar. Journal of Applied Psychology, 88, 170–178; Smith, S. (2007, November). Safety is electric at M. B. Herzog. Occupational Hazards, 69, 42.
Strength of Culture
A strong culture is one that is shared by organizational members.Arogyaswamy, B., & Byles, C. M. (1987). Organizational culture: Internal and external fits. Journal of Management, 13, 647–658; Chatman, J. A., & Eunyoung Cha, S. (2003). Leading by leveraging culture. California Management Review, 45, 20–34. In other words, if most employees in the organization show consensus regarding the values of the company, it is possible to talk about the existence of a strong culture. A culture’s content is more likely to affect the way employees think and behave when the culture in question is strong. For example, cultural values emphasizing customer service will lead to higher quality customer service if there is widespread agreement among employees on the importance of customer service-related values.Schneider, B., Salvaggio, A., & Subirats, M. (2002). Climate strength: A new direction for climate research. Journal of Applied Psychology, 87, 220–229.
Figure 15.7
Walt Disney created a strong culture at his company, which has evolved since the company’s founding in 1923.
Source: http://en.wikipedia.org/wiki/Image:Walt_disney_portrait.jpg .
It is important to realize that a strong culture may act as an asset or liability for the organization, depending on the types of values that are shared. For example, imagine a company with a culture that is strongly outcome oriented. If this value system matches the organizational environment, the company outperforms its competitors. On the other hand, a strong outcome-oriented culture coupled with unethical behaviors and an obsession with quantitative performance indicators may be detrimental to an organization’s effectiveness. An extreme example of this dysfunctional type of strong culture is Enron.
A strong culture may sometimes outperform a weak culture because of the consistency of expectations. In a strong culture, members know what is expected of them, and the culture serves as an effective control mechanism on member behaviors. Research shows that strong cultures lead to more stable corporate performance in stable environments. However, in volatile environments, the advantages of culture strength disappear.Sorensen, J. B. (2002). The strength of corporate culture and the reliability of firm performance. Administrative Science Quarterly, 47, 70–91.
One limitation of a strong culture is the difficulty of changing a strong culture. If an organization with widely shared beliefs decides to adopt a different set of values, unlearning the old values and learning the new ones will be a challenge, because employees will need to adopt new ways of thinking, behaving, and responding to critical events. For example, the Home Depot Inc. had a decentralized, autonomous culture where many business decisions were made using “gut feeling” while ignoring the available data. When Robert Nardelli became CEO of the company in 2000, he decided to change its culture, starting with centralizing many of the decisions that were previously left to individual stores. This initiative met with substantial resistance, and many high-level employees left during his first year. Despite getting financial results such as doubling the sales of the company, many of the changes he made were criticized. He left the company in January 2007.Charan, R. (2006, April). Home Depot’s blueprint for culture change. Harvard Business Review, 84, 60–70; Herman, J., & Wernle, B. (2007, August 13). The book on Bob Nardelli: Driven, demanding. Automotive News, 81, 42.
A strong culture may also be a liability during a merger. During mergers and acquisitions, companies inevitably experience a clash of cultures, as well as a clash of structures and operating systems. Culture clash becomes more problematic if both parties have unique and strong cultures. For example, during the merger of Daimler AG with Chrysler Motors LLC to create DaimlerChrysler AG, the differing strong cultures of each company acted as a barrier to effective integration. Daimler had a strong engineering culture that was more hierarchical and emphasized routinely working long hours. Daimler employees were used to being part of an elite organization, evidenced by flying first class on all business trips. On the other hand, Chrysler had a sales culture where employees and managers were used to autonomy, working shorter hours, and adhering to budget limits that meant only the elite flew first class. The different ways of thinking and behaving in these two companies introduced a number of unanticipated problems during the integration process.Badrtalei, J., & Bates, D. L. (2007). Effect of organizational cultures on mergers and acquisitions: The case of DaimlerChrysler. International Journal of Management, 24, 303–317; Bower, J. L. (2001). Not all M&As are alike—and that matters. Harvard Business Review, 79, 92–101. Differences in culture may be part of the reason that, in the end, the merger didn’t work out.
Do Organizations Have a Single Culture?
So far, we have assumed that a company has a single culture that is shared throughout the organization. However, you may have realized that this is an oversimplification. In reality there might be multiple cultures within any given organization. For example, people working on the sales floor may experience a different culture from that experienced by people working in the warehouse. A culture that emerges within different departments, branches, or geographic locations is called a subculture. Subcultures may arise from the personal characteristics of employees and managers, as well as the different conditions under which work is performed. Within the same organization, marketing and manufacturing departments often have different cultures such that the marketing department may emphasize innovativeness, whereas the manufacturing department may have a shared emphasis on detail orientation. In an interesting study, researchers uncovered five different subcultures within a single police organization. These subcultures differed depending on the level of danger involved and the type of background experience the individuals held, including “crime-fighting street professionals” who did what their job required without rigidly following protocol and “anti-military social workers” who felt that most problems could be resolved by talking to the parties involved.Jermier, J. M., Slocum, J. W., Jr., Fry, L. W., & Gaines, J. (1991, May). Organizational subcultures in a soft bureaucracy: Resistance behind the myth and facade of an official culture. Organization Science, 2, 170–194. Research has shown that employee perceptions regarding subcultures were related to employee commitment to the organization.Lok, P., Westwood, R., & Crawford, J. (2005). Perceptions of organisational subculture and their significance for organisational commitment. Applied Psychology: An International Review, 54, 490–514. Therefore, in addition to understanding the broader organization’s values, managers will need to make an effort to understand subculture values to see its impact on workforce behavior and attitudes. Moreover, as an employee, you need to understand the type of subculture in the department where you will work in addition to understanding the company’s overall culture.
Sometimes, a subculture may take the form of a counterculture. Defined as shared values and beliefs that are in direct opposition to the values of the broader organizational culture,Kerr, J., & Slocum, J. W., Jr. (2005). Managing corporate culture through reward systems. Academy of Management Executive, 19, 130–138. countercultures are often shaped around a charismatic leader. For example, within a largely bureaucratic organization, an enclave of innovativeness and risk taking may emerge within a single department. A counterculture may be tolerated by the organization as long as it is bringing in results and contributing positively to the effectiveness of the organization. However, its existence may be perceived as a threat to the broader organizational culture. In some cases this may lead to actions that would take away the autonomy of the managers and eliminate the counterculture.
KEY TAKEAWAY
Culture can be understood in terms of seven different culture dimensions, depending on what is most emphasized within the organization. For example, innovative cultures are flexible and adaptable, and they experiment with new ideas, while stable cultures are predictable, rule-oriented, and bureaucratic. Strong cultures can be an asset or a liability for an organization but can be challenging to change. Organizations may have subcultures and countercultures, which can be challenging to manage.
EXERCISES
1. Think about an organization you are familiar with. Based on the dimensions of OCP, how would you characterize its culture?
2. Out of the culture dimensions described, which dimension do you think would lead to higher levels of employee satisfaction and retention? Which one would be related to company performance?
3. What are the pros and cons of an outcome-oriented culture?
4. When bureaucracies were first invented they were considered quite innovative. Do you think that different cultures are more or less effective at different points in time and in different industries? Why or why not?
5. Can you imagine an effective use of subcultures within an organization?
15.3 Creating and Maintaining Organizational Culture
LEARNING OBJECTIVES
1. Understand how cultures are created.
2. Learn how to maintain a culture.
3. Recognize organizational culture signs.
How Are Cultures Created?
Where do cultures come from? Understanding this question is important so that you know how they can be changed. An organization’s culture is shaped as the organization faces external and internal challenges and learns how to deal with them. When the organization’s way of doing business provides a successful adaptation to environmental challenges and ensures success, those values are retained. These values and ways of doing business are taught to new members as the way to do business.Schein, E. H. (1992). Organizational culture and leadership. San Francisco: Jossey-Bass.
Figure 15.8 Culture Creation and Maintenance
The factors that are most important in the creation of an organization’s culture include founders’ values, preferences, and industry demands.
Founder’s Values
A company’s culture, particularly during its early years, is inevitably tied to the personality, background, and values of its founder or founders, as well as their vision for the future of the organization. This explains one reason why culture is so hard to change: It is shaped in the early days of a company’s history. When entrepreneurs establish their own businesses, the way they want to do business determines the organization’s rules, the structure set-up in the company, and the people they hire to work with them. As a case in point, some of the existing corporate values of the ice cream company Ben & Jerry’s Homemade Holdings Inc. can easily be traced to the personalities of its founders Ben Cohen and Jerry Greenfield. In 1978, the two ex-hippie high school friends opened up their first ice-cream shop in a renovated gas station in Burlington, Vermont. Their strong social convictions led them to buy only from the local farmers and devote a certain percentage of their profits to charities. The core values they instilled in their business can still be observed in the current company’s devotion to social activism and sustainability, its continuous contributions to charities, use of environmentally friendly materials, and dedication to creating jobs in low-income areas. Even though the company was acquired by Unilever PLC in 2000, the social activism component remains unchanged and Unilever has expressed its commitment to maintaining it.Kiger, P. J. (April, 2005). Corporate crunch. Workforce Management, 84, 32–38; Rubis, L., Fox, A., Pomeroy, A., Leonard, B., Shea, T. F., Moss, D., Kraft, G., & Overman, S. (2005). 50 for history. HR Magazine, 50, 13, 10–24; Smalley, S. (2007, December 3). Ben & Jerry’s bitter crunch. Newsweek, 150, 50. There are many other examples of founders’ instilling their own strongly held beliefs or personalities to the businesses they found. For example, as mentioned earlier, Microsoft’s aggressive nature is often traced back to Bill Gates and his competitiveness. According to one anecdote, his competitive nature even extends to his personal life such that one of his pastimes is to compete with his wife in solving identical jigsaw puzzles to see who can finish faster.Schlender, B. (1998, June 22). Gates’ crusade. Fortune, 137, 30–32. Similarly, Joseph Pratt, a history and management professor, notes, “There definitely is an Exxon way. This is John D. Rockefeller’s company, this is Standard Oil of New Jersey, this is the one that is most closely shaped by Rockefeller’s traditions. Their values are very clear. They are deeply embedded. They have roots in 100 years of corporate history.”Mouawad, J. (2008, November 16). Exxon doesn’t plan on ditching oil. International Herald Tribune. Retrieved November 16, 2008, from http://www.iht.com/articles/2008/11/16/business/16exxon.php.
Figure 15.9
Ben & Jerry’s has locations around the world, including this store in Singapore.
Source: http://commons.wikimedia.org/wiki/Image:BenJerry-UnitedSquare.jpg .
Founder values become part of the corporate culture to the degree they help the company be successful. For example, the social activism of Ben & Jerry’s was instilled in the company because founders strongly believed in these issues. However, these values probably would not be surviving three decades later if they had not helped the company in its initial stages. In the case of Ben & Jerry’s, these charitable values helped distinguish their brand from larger corporate brands and attracted a loyal customer base. Thus, by providing a competitive advantage, these values were retained as part of the corporate culture and were taught to new members as the right way to do business. Similarly, the early success of Microsoft may be attributed to its relatively aggressive corporate culture, which provided a source of competitive advantage.
Industry Demands
While founders undoubtedly exert a powerful influence over corporate cultures, the industry characteristics also play a role. Industry characteristics and demands act as a force to create similarities among organizational cultures. For example, despite some differences, many companies in the insurance and banking industries are stable and rule oriented, many companies in the high-tech industry have innovative cultures, and companies in the nonprofit industry tend to be people oriented. If the industry is one with a large number of regulatory requirements—for example, banking, health care, and nuclear power plant industries—then we might expect the presence of a large number of rules and regulations, a bureaucratic company structure, and a stable culture. Similarly, the high-tech industry requires agility, taking quick action, and low concern for rules and authority, which may create a relatively more innovative culture.Chatman, J. A., & Jehn, K. A. (1994). Assessing the relationship between industry characteristics and organizational culture: How different can you be? Academy of Management Journal, 37, 522–553; Gordon, G. G. (1991). Industry determinants of organizational culture. Academy of Management Review, 16, 396–415. The industry influence over culture is also important to know, because this shows that it may not be possible to imitate the culture of a company in a different industry, even though it may seem admirable to outsiders.
How Are Cultures Maintained?
As a company matures, its cultural values are refined and strengthened. The early values of a company’s culture exert influence over its future values. It is possible to think of organizational culture as an organism that protects itself from external forces. Organizational culture determines what types of people are hired by an organization and what types are left out. Moreover, once new employees are hired, the company assimilates new employees and teaches them the way things are done in the organization. We call these processes attraction-selection-attrition and onboarding processes. We will also examine the role of leaders and reward systems in shaping and maintaining an organization’s culture. It is important to remember two points: The process of culture creation is in fact more complex and less clean than the name implies. Additionally, the influence of each factor on culture creation is reciprocal. For example, just as leaders may influence what type of values the company has, the culture may also determine what types of behaviors leaders demonstrate.
Attraction-Selection-Attrition (ASA)
Organizational culture is maintained through a process known as attraction-selection-attrition. First, employees are attracted to organizations where they will fit in. In other words, different job applicants will find different cultures to be attractive. Someone who has a competitive nature may feel comfortable and prefer to work in a company where interpersonal competition is the norm. Others may prefer to work in a team-oriented workplace. Research shows that employees with different personality traits find different cultures attractive. For example, out of the Big Five personality traits, employees who demonstrate neurotic personalities were less likely to be attracted to innovative cultures, whereas those who had openness to experience were more likely to be attracted to innovative cultures.Judge, T. A., & Cable, D. M. (1997). Applicant personality, organizational culture, and organization attraction. Personnel Psychology, 50, 359–394. As a result, individuals will self-select the companies they work for and may stay away from companies that have core values that are radically different from their own.
Of course this process is imperfect, and value similarity is only one reason a candidate might be attracted to a company. There may be other, more powerful attractions such as good benefits. For example, candidates who are potential misfits may still be attracted to Google because of the cool perks associated with being a Google employee. At this point in the process, the second component of the ASA framework prevents them from getting in: Selection. Just as candidates are looking for places where they will fit in, companies are also looking for people who will fit into their current corporate culture. Many companies are hiring people for fit with their culture, as opposed to fit with a certain job. For example, Southwest Airlines prides itself for hiring employees based on personality and attitude rather than specific job-related skills, which are learned after being hired. This is important for job applicants to know, because in addition to highlighting your job-relevant skills, you will need to discuss why your personality and values match those of the company. Companies use different techniques to weed out candidates who do not fit with corporate values. For example, Google relies on multiple interviews with future peers. By introducing the candidate to several future coworkers and learning what these coworkers think of the candidate, it becomes easier to assess the level of fit. The Container Store Inc. ensures culture fit by hiring among their customers.Arnold, J. T. (2007, April). Customers as employees. HR Magazine, 77–82. This way, they can make sure that job candidates are already interested in organizing their lives and understand the company’s commitment to helping customers organize theirs. Companies may also use employee referrals in their recruitment process. By using their current employees as a source of future employees, companies may make sure that the newly hired employees go through a screening process to avoid potential person-culture mismatch.
Even after a company selects people for person-organization fit, there may be new employees who do not fit in. Some candidates may be skillful in impressing recruiters and signal high levels of culture fit even though they do not necessarily share the company’s values. Moreover, recruiters may suffer from perceptual biases and hire some candidates thinking that they fit with the culture even though the actual fit is low. In any event, the organization is going to eventually eliminate candidates who do not fit in through attrition. Attrition refers to the natural process in which the candidates who do not fit in will leave the company. Research indicates that person-organization misfit is one of the important reasons for employee turnover.Kristof-Brown, A. L., Zimmerman, R. D., & Johnson, E. C. (2005). Consequences of individuals’ fit at work: A meta-analysis of person-job, person-organization, person-group, and person-supervisor fit. Personnel Psychology, 58, 281–342; O’Reilly, III, C. A., Chatman, J. A., & Caldwell, D. F. (1991). People and organizational culture: A profile comparison approach to assessing person-organization fit. Academy of Management Journal, 34, 487–516.
Click and Learn More
Texas Instruments Inc. includes a Workplace and Values Check on its Web page for potential applicants to see if they fit Texas Instrument’s culture.
To view this Web site, go to http://focus.ti.com/careers/docs/fitchecktool.tsp?sectionId=152&tabId=1678
As a result of the ASA process, the company attracts, selects, and retains people who share its core values. On the other hand, those people who are different in core values will be excluded from the organization either during the hiring process or later on through naturally occurring turnover. Thus, organizational culture will act as a self-defending organism where intrusive elements are kept out. Supporting the existence of such self-protective mechanisms, research shows that organizations demonstrate a certain level of homogeneity regarding personalities and values of organizational members.Giberson, T. R., Resick, C. J., & Dickson, M. W. (2005). Embedding leader characteristics: An examination of homogeneity of personality and values in organizations. Journal of Applied Psychology, 90, 1002–1010.
New Employee Onboarding
Another way in which an organization’s values, norms, and behavioral patterns are transmitted to employees is through onboarding (also referred to as the organizational socialization process). Onboarding refers to the process through which new employees learn the attitudes, knowledge, skills, and behaviors required to function effectively within an organization. If an organization can successfully socialize new employees into becoming organizational insiders, new employees feel confident regarding their ability to perform, sense that they will feel accepted by their peers, and understand and share the assumptions, norms, and values that are part of the organization’s culture. This understanding and confidence in turn translate into more effective new employees who perform better and have higher job satisfaction, stronger organizational commitment, and longer tenure within the company.Bauer, T. N., Bodner, T., Erdogan, B., Truxillo, D. M., & Tucker, J. S. (2007). Newcomer adjustment during organizational socialization: A meta-analytic review of antecedents, outcomes, and methods. Journal of Applied Psychology, 92, 707–721.
There are many factors that play a role in the successful adjustment of new employees. New employees can engage in several activities to help increase their own chances of success at a new organization. Organizations also engage in different activities, such as implementing orientation programs or matching new employees with mentors, which may facilitate onboarding.
What Can Employees Do During Onboarding?
New employees who are proactive, seek feedback, and build strong relationships tend to be more successful than those who do not.Bauer, T. N., & Green, S. G. (1998). Testing the combined effects of newcomer information seeking and manager behavior on socialization. Journal of Applied Psychology, 83, 72–83; Kammeyer-Mueller, J. D., & Wanberg, C. R. (2003). Unwrapping the organizational entry process: Disentangling multiple antecedents and their pathways to adjustment. Journal of Applied Psychology, 88, 779–794; Wanberg, C. R., & Kammeyer-Mueller, J. D. (2000). Predictors and outcomes of proactivity in the socialization process. Journal of Applied Psychology, 85, 373–385. for example, feedback seeking helps new employees. Especially on a first job, a new employee can make mistakes or gaffes and may find it hard to understand and interpret the ambiguous reactions of coworkers. New hires may not know whether they are performing up to standards, whether it was a good idea to mention a company mistake in front of a client, or why other employees are asking if they were sick over the weekend because of not responding to work-related e-mails. By actively seeking feedback, new employees may find out sooner rather than later any behaviors that need to be changed and gain a better understanding of whether their behavior fits with the company culture and expectations. Several studies show the benefits of feedback seeking for new employee adjustment.
Relationship building, or networking, is another important behavior new employees may demonstrate. Particularly when a company does not have a systematic approach to onboarding, it becomes more important for new employees to facilitate their own onboarding by actively building relationships. According to one estimate, 35% of managers who start a new job fail in the new job and either voluntarily leave or are fired within 1.5 years. Of these, over 60% report not being able to form effective relationships with colleagues as the primary reason for their failure.Fisher, A. (2005, March 7). Starting a new job? Don’t blow it. Fortune, 151, 48. New employees may take an active role in building relations by seeking opportunities to have a conversation with their new colleagues, arranging lunches or coffee with them, participating in company functions, and making the effort to build a relationship with their new supervisor.Kim, T., Cable, D. M., & Kim, S. (2005). Socialization tactics, employee proactivity, and person-organization fit. Journal of Applied Psychology, 90, 232–241.
OB Toolbox: You’ve Got a New Job! Now How Do You Get on Board?
· Gather information. Try to find as much about the company and the job as you can before your first day. After you start working, be a good observer, gather information, and read as much as you can to understand your job and the company. Examine how people are interacting, how they dress, and how they act to avoid behaviors that might indicate to others that you are a misfit.
· Manage your first impression. First impressions may endure, so make sure that you dress appropriately, are friendly, and communicate your excitement to be a part of the team. Be on your best behavior!
· Invest in relationship development. The relationships you develop with your manager and with coworkers will be essential for you to adjust to your new job. Take the time to strike up conversations with them. If there are work functions during your early days, make sure not to miss them!
· Seek feedback. Ask your manager or coworkers how well you are doing and whether you are meeting expectations. Listen to what they are telling you and also listen to what they are not saying. Then, make sure to act upon any suggestions for improvement. Be aware that after seeking feedback, you may create a negative impression if you consistently ignore the feedback you receive.
· Show success early on. In order to gain the trust of your new manager and colleagues, you may want to establish a history of success early. Volunteer for high-profile projects where you will be able to demonstrate your skills. Alternatively, volunteer for projects that may serve as learning opportunities or that may put you in touch with the key people in the company.
Sources: Adapted from ideas in Couzins, M., & Beagrie, S. (2005, March 1). How to…survive the first six months of a new job. Personnel Today, 27; Wahlgreen, E. (2002, December 5). Getting up to speed at a new job. Business Week Online. Retrieved January 29, 2009, from http://www.businessweek.com/careers/content/dec2002/ca2002123_2774.htm.
What Can Organizations Do During Onboarding?
Many organizations, including Microsoft, Kellogg Company, and Bank of America, take a more structured and systematic approach to new employee onboarding, while others follow a “sink or swim” approach in which new employees struggle to figure out what is expected of them and what the norms are.
A formal orientation program indoctrinates new employees to the company culture, as well as introduces them to their new jobs and colleagues. An orientation program is important, because it has a role in making new employees feel welcome in addition to imparting information that may help new employees be successful on their new jobs. Many large organizations have formal orientation programs consisting of lectures, videotapes, and written material, while some may follow more unusual approaches. According to one estimate, most orientations last anywhere from one to five days, and some companies are currently switching to a computer-based orientation. Ritz-Carlton, the company ranked number 1 in Training magazine’s 2007 top 125 list, uses a very systematic approach to employee orientation and views orientation as the key to retention. In the two-day classroom orientation, employees spend time with management, dine in the hotel’s finest restaurant, and witness the attention to customer service detail firsthand. For example, they receive hand-written welcome notes and their favorite snacks during the break. During these two days, they are introduced to the company’s intensive service standards, team orientation, and its own language. Later, on their 21st day, they are tested on the company’s service standards and are certified.Durett, J. (2006, March 1). Technology opens the door to success at Ritz-Carlton. Retrieved January 28, 2009, from http://www.managesmarter.com/msg/search/article_display.jsp?vnu_content_id=1002157749; Elswick, J. (2000, February). Puttin’ on the Ritz: Hotel chain touts training to benefit its recruiting and retention. Employee Benefit News, 14, 9; The Ritz-Carlton Company: How it became a “legend” in service. (2001, Jan–Feb). Corporate University Review, 9, 16. Research shows that formal orientation programs are helpful in teaching employees about the goals and history of the company, as well as communicating the power structure. Moreover, these programs may also help with a new employee’s integration into the team. However, these benefits may not be realized to the same extent in computer-based orientations. In fact, compared to those taking part in a regular, face-to-face orientation, individuals undergoing a computer-based orientation were shown to have lower understanding of their job and the company, indicating that different formats of orientations may not substitute for each other.Klein, H. J., & Weaver, N. A. (2000). The effectiveness of an organizational level orientation training program in the socialization of new employees. Personnel Psychology, 53, 47–66; Moscato, D. (2005, April). Using technology to get employees on board. HR Magazine, 50, 107–109; Wesson, M. J., & Gogus, C. I. (2005). Shaking hands with a computer: An examination of two methods of organizational newcomer orientation. Journal of Applied Psychology, 90, 1018–1026.
What Can Organizational Insiders Do During Onboarding?
One of the most important ways in which organizations can help new employees adjust to a company and a new job is through organizational insiders—namely supervisors, coworkers, and mentors. Research shows that leaders have a key influence over onboarding, and the information and support leaders provide determine how quickly employees learn about the company politics and culture. Coworker influence determines the degree to which employees adjust to their teams. Mentors can be crucial to helping new employees adjust by teaching them the ins and outs of their jobs and how the company really operates. A mentor is a trusted person who provides an employee with advice and support regarding career-related matters. Although a mentor can be any employee or manager who has insights that are valuable to the new employee, mentors tend to be relatively more experienced than their protégés. Mentoring can occur naturally between two interested individuals, or organizations can facilitate this process by having formal mentoring programs. These programs may successfully bring together mentors and protégés who would not come together otherwise. Research indicates that the existence of these programs does not guarantee their success, and there are certain program characteristics that may make these programs more effective. For example, when mentors and protégés feel that they had input in the mentor-protégé matching process, they tend to be more satisfied with the arrangement. Moreover, when mentors receive training beforehand, the outcomes of the program tend to be more positive.Allen, T. D., Eby, L. T., & Lentz, E. (2006). Mentorship behaviors and mentorship quality associated with formal mentoring programs: Closing the gap between research and practice. Journal of Applied Psychology, 91, 567–578. Because mentors may help new employees interpret and understand the company’s culture, organizations may benefit from selecting mentors who personify the company’s values. Thus, organizations may need to design these programs carefully to increase their chance of success.
Leadership
Leaders are instrumental in creating and changing an organization’s culture. There is a direct correspondence between a leader’s style and an organization’s culture. For example, when leaders motivate employees through inspiration, corporate culture tends to be more supportive and people oriented. When leaders motivate by making rewards contingent on performance, the corporate culture tends to be more performance oriented and competitive.Sarros, J. C., Gray, J., & Densten, I. L. (2002). Leadership and its impact on organizational culture. International Journal of Business Studies, 10, 1–26. In these and many other ways, what leaders do directly influences the cultures their organizations have.
Part of the leader’s influence over culture is through role modeling. Many studies have suggested that leader behavior, the consistency between organizational policy and leader actions, and leader role modeling determine the degree to which the organization’s culture emphasizes ethics.Driscoll, K., & McKee, M. (2007). Restorying a culture of ethical and spiritual values: A role for leader storytelling. Journal of Business Ethics, 73, 205–217. The leader’s own behaviors will signal to employees what is acceptable behavior and what is unacceptable. In an organization in which high-level managers make the effort to involve others in decision making and seek opinions of others, a team-oriented culture is more likely to evolve. By acting as role models, leaders send signals to the organization about the norms and values that are expected to guide the actions of organizational members.
Leaders also shape culture by their reactions to the actions of others around them. For example, do they praise a job well done, or do they praise a favored employee regardless of what was accomplished? How do they react when someone admits to making an honest mistake? What are their priorities? In meetings, what types of questions do they ask? Do they want to know what caused accidents so that they can be prevented, or do they seem more concerned about how much money was lost as a result of an accident? Do they seem outraged when an employee is disrespectful to a coworker, or does their reaction depend on whether they like the harasser? Through their day-to-day actions, leaders shape and maintain an organization’s culture.
Reward Systems
Finally, the company culture is shaped by the type of reward systems used in the organization, and the kinds of behaviors and outcomes it chooses to reward and punish. One relevant element of the reward system is whether the organization rewards behaviors or results. Some companies have reward systems that emphasize intangible elements of performance as well as more easily observable metrics. In these companies, supervisors and peers may evaluate an employee’s performance by assessing the person’s behaviors as well as the results. In such companies, we may expect a culture that is relatively people or team oriented, and employees act as part of a family.Kerr, J., & Slocum, J. W., Jr. (2005). Managing corporate culture through reward systems. Academy of Management Executive, 19, 130–138. On the other hand, in companies that purely reward goal achievement, there is a focus on measuring only the results without much regard to the process. In these companies, we might observe outcome-oriented and competitive cultures. Another categorization of reward systems might be whether the organization uses rankings or ratings. In a company where the reward system pits members against one another, where employees are ranked against each other and the lower performers receive long-term or short-term punishments, it would be hard to develop a culture of people orientation and may lead to a competitive culture. On the other hand, evaluation systems that reward employee behavior by comparing them to absolute standards as opposed to comparing employees to each other may pave the way to a team-oriented culture. Whether the organization rewards performance or seniority would also make a difference in culture. When promotions are based on seniority, it would be difficult to establish a culture of outcome orientation. Finally, the types of behaviors that are rewarded or ignored set the tone for the culture. Service-oriented cultures reward, recognize, and publicize exceptional service on the part of their employees. In safety cultures, safety metrics are emphasized and the organization is proud of its low accident ratings. What behaviors are rewarded, which ones are punished, and which are ignored will determine how a company’s culture evolves.
OB Toolbox: Best Practices
How to Maximize Onboarding Success
Onboarding plans should have the following characteristics:
· Written down. If your organization does not have a formal plan, write one yourself. It may not make sense to share it with others, but at least you will have a roadmap. If your organization does have one, refer to it on a monthly basis.
· Participatory. The power of onboarding programs is in the interaction. Try to get participation from others to the extent possible and engage in onboarding activities offered to you by the organization.
· Tracked over time. Keep in mind that research shows onboarding has a rhythm of 30-, 60-, 90-, and 180-day milestones. Be sure to track your progress.
· Clear on objectives, timeline, roles, and responsibilities. This will help ensure that role conflict and ambiguity doesn’t detour your onboarding process.
· Clear on scheduled key stakeholder meetings with managers and mentors. Include a plan for
1. going over strengths and development areas;
2. hearing about potential problems and critical advice to help you be successful.
· Be sure to include a list of your key questions and things you need to help you do your job better.
Source: Adapted from Bauer, T. N., & Elder, E. (2006). Onboarding newcomers into an organization. 58th Annual Society for Human Resource Management (SHRM) Conference & Exposition. Washington, DC.
Visual Elements of Organizational Culture
How do you find out about a company’s culture? We emphasized earlier that culture influences the way members of the organization think, behave, and interact with one another. Thus, one way of finding out about a company’s culture is by observing employees or interviewing them. At the same time, culture manifests itself in some visible aspects of the organization’s environment. In this section, we discuss five ways in which culture shows itself to observers and employees.
Mission Statement
A mission statement is a statement of purpose, describing who the company is and what it does. Many companies have mission statements, but they do not always reflect the company’s values and its purpose. An effective mission statement is well known by employees, is transmitted to all employees starting from their first day at work, and influences employee behavior.
Not all mission statements are effective, because some are written by public relations specialists and can be found in a company’s Web site, but it does not affect how employees act or behave. In fact, some mission statements reflect who the company wants to be as opposed to who they actually are. If the mission statement does not affect employee behavior on a day-to-day basis, it has little usefulness as a tool for understanding the company’s culture. An oft-cited example of a mission statement that had little impact on how a company operates belongs to Enron. Their missions and values statement began, “As a partner in the communities in which we operate, Enron believes it has a responsibility to conduct itself according to certain basic principles.” Their values statement included such ironic declarations as “We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don’t belong here.”Kunen, J. S. (2002, January 19). Enron’s vision (and values) thing. The New York Times, p. 19.
A mission statement that is taken seriously and widely communicated may provide insights into the corporate culture. For example, the Mayo Clinic’s mission statement is “The needs of the patient come first.” This mission statement evolved from the founders who are quoted as saying, “The best interest of the patient is the only interest to be considered.” Mayo Clinics have a corporate culture that puts patients first. For example, no incentives are given to physicians based on the number of patients they see. Because doctors are salaried, they have no interest in retaining a patient for themselves and they refer the patient to other doctors when needed.Jarnagin, C., & Slocum, J. W., Jr. (2007). Creating corporate cultures through mythopoetic leadership. Organizational Dynamics, 36, 288–302. Wal-Mart Stores Inc. may be another example of a company who lives its mission statement, and therefore its mission statement may give hints about its culture: “Saving people money so they can live better.”Wal-Mart Stores Inc. (2008). Investor frequently asked questions. Retrieved November 20, 2008, from http://walmartstores.com/Investors/7614.aspx. In fact, their culture emphasizes thrift and cost control in everything they do. For example, even though most CEOs of large companies in the United States have lavish salaries and showy offices, Wal-Mart’s CEO Michael Duke and other high-level corporate officers work out of modest offices in the company’s headquarters.
Figure 15.10 Visual Elements of Culture
Rituals
Figure 15.11
Tradition is important at Wal-Mart. Sam Walton’s original Walton’s Five and Dime is now the Wal-Mart Visitor’s Center in Bentonville, Arkansas.
Source: http://commons.wikimedia.org/wiki/Image:09-02-06-OriginalWaltons.jpg .
Rituals refer to repetitive activities within an organization that have symbolic meaning.Anand, N. (2005). Blackwell encyclopedic dictionary of organizational behavior. Cambridge: Wiley. Usually rituals have their roots in the history of a company’s culture. They create camaraderie and a sense of belonging among employees. They also serve to teach employees corporate values and create identification with the organization. For example, at the cosmetics firm Mary Kay Inc., employees attend award ceremonies recognizing their top salespeople with an award of a new car—traditionally a pink Cadillac. These ceremonies are conducted in large auditoriums where participants wear elaborate evening gowns and sing company songs that create emotional excitement. During this ritual, employees feel a connection to the company culture and its values, such as self-determination, will power, and enthusiasm.Jarnagin, C., & Slocum, J. W., Jr. (2007). Creating corporate cultures through mythopoetic leadership. Organizational Dynamics, 36, 288–302. Another example of rituals is the Saturday morning meetings of Wal-Mart. This ritual was first created by the company founder Sam Walton, who used these meetings to discuss which products and practices were doing well and which required adjustment. He was able to use this information to make changes in Wal-Mart’s stores before the start of the week, which gave him a competitive advantage over rival stores who would make their adjustments based on weekly sales figures during the middle of the following week. Today, hundreds of Wal-Mart associates attend the Saturday morning meetings in the Bentonville, Arkansas, headquarters. The meetings, which run from 7:00 to 9:30 a.m., start and end with the Wal-Mart cheer; the agenda includes a discussion of weekly sales figures and merchandising tactics. As a ritual, the meetings help maintain a small-company atmosphere, ensure employee involvement and accountability, communicate a performance orientation, and demonstrate taking quick action.Schlender, B. (2005, April 18). Wal-Mart’s $288 billion meeting. Fortune, 151, 90–106; Wal around the world. (2001, December 8). Economist, 361, 55–57.
Rules and Policies
Another way in which an observer may find out about a company’s culture is to examine its rules and policies. Companies create rules to determine acceptable and unacceptable behavior, and thus the rules that exist in a company will signal the type of values it has. Policies about issues such as decision making, human resources, and employee privacy reveal what the company values and emphasizes. For example, a company that has a policy such as “all pricing decisions of merchandise will be made at corporate headquarters” is likely to have a centralized culture that is hierarchical, as opposed to decentralized and empowering. Similarly, a company that extends benefits to both part-time and full-time employees, as well as to spouses and domestic partners, signals to employees and observers that it cares about its employees and shows concern for their well-being. By offering employees flexible work hours, sabbaticals, and telecommuting opportunities, a company may communicate its emphasis on work-life balance. The presence or absence of policies on sensitive issues such as English-only rules, bullying or unfair treatment of others, workplace surveillance, open-door policies, sexual harassment, workplace romances, and corporate social responsibility all provide pieces of the puzzle that make up a company’s culture.
Physical Layout
A company’s building, including the layout of employee offices and other work spaces, communicates important messages about a company’s culture. The building architecture may indicate the core values of an organization’s culture. For example, visitors walking into the Nike Inc. campus in Beaverton, Oregon, can witness firsthand some of the distinguishing characteristics of the company’s culture. The campus is set on 74 acres and boasts an artificial lake, walking trails, soccer fields, and cutting-edge fitness centers. The campus functions as a symbol of Nike’s values such as energy, physical fitness, an emphasis on quality, and a competitive orientation. In addition, at fitness centers on the Nike headquarters, only those wearing Nike shoes and apparel are allowed in. This sends a strong signal that loyalty is expected. The company’s devotion to athletes and their winning spirits is manifested in campus buildings named after famous athletes, photos of athletes hanging on the walls, and honorary statues dotting the campus.Capowski, G. S. (1993, June). Designing a corporate identity. Management Review, 82, 37–41; Collins, J., & Porras, J. I. (1996). Building your company’s vision. Harvard Business Review, 74, 65–77; Labich, K., & Carvell, T. (1995, September 18). Nike vs. Reebok. Fortune, 132, 90–114; Mitchell, C. (2002). Selling the brand inside. Harvard Business Review, 80, 99–105. A very different tone awaits visitors to Wal-Mart headquarters, where managers have gray and windowless offices.Berner, R. (2007, February 12). My Year at Wal-Mart. Business Week, 4021, 70–74. By putting its managers in small offices and avoiding outward signs of flashiness, Wal-Mart does a good job of highlighting its values of economy.
The layout of the office space also is a strong indicator of a company’s culture. A company that has an open layout where high-level managers interact with employees may have a culture of team orientation and egalitarianism, whereas a company where high-level managers have their own floor may indicate a higher level of hierarchy. Microsoft employees tend to have offices with walls and a door, because the culture emphasizes solitude, concentration, and privacy. In contrast, Intel Corporation is famous for its standard cubicles, which reflect its culture of equality. The same value can also be observed in its avoidance of private and reserved parking spots.Clark, D. (2007, October 15). Why Silicon Valley is rethinking the cubicle office. Wall Street Journal, 250, p. B9. The degree to which playfulness, humor, and fun is part of a company’s culture may be indicated in the office environment. For example, Jive Software boasts a colorful, modern, and comfortable office design. Their break room is equipped with a keg of beer, free snacks and sodas, an XBOX 360, and Nintendo Wii. A casual observation of their work environment sends the message that employees who work there see their work as fun.Jive Software. (2008). Careers. Retrieved November 20, 2008, from http://www.jivesoftware.com/company.
Stories
Perhaps the most colorful and effective way in which organizations communicate their culture to new employees and organizational members is through the skillful use of stories. A story can highlight a critical event an organization faced and the collective response to it, or can emphasize a heroic effort of a single employee illustrating the company’s values. The stories usually engage employee emotions and generate employee identification with the company or the heroes of the tale. A compelling story may be a key mechanism through which managers motivate employees by giving their behavior direction and energizing them toward a certain goal.Beslin, R. (2007). Story building: A new tool for engaging employees in setting direction. Ivey Business Journal, 71, 1–8. Moreover, stories shared with new employees communicate the company’s history, its values and priorities, and serve the purpose of creating a bond between the new employee and the organization. For example, you may already be familiar with the story of how a scientist at 3M invented Post-it notes. Arthur Fry, a 3M scientist, was using slips of paper to mark the pages of hymns in his church choir, but they kept falling off. He remembered a super-weak adhesive that had been invented in 3M’s labs, and he coated the markers with this adhesive. Thus, the Post-it notes were born. However, marketing surveys for the interest in such a product were weak, and the distributors were not convinced that it had a market. Instead of giving up, Fry distributed samples of the small yellow sticky notes to secretaries throughout his company. Once they tried them, people loved them and asked for more. Word spread, and this led to the ultimate success of the product. As you can see, this story does a great job of describing the core values of a 3M employee: Being innovative by finding unexpected uses for objects, persevering, and being proactive in the face of negative feedback.Higgins, J. M., & McAllester, C. (2002). Want innovation? Then use cultural artifacts that support it. Organizational Dynamics, 31, 74–84.
OB Toolbox: As a Job Candidate, How Would You Find Out If You Are a Good Fit?
· Do your research. Talking to friends and family members who are familiar with the company, doing an online search for news articles about the company, browsing the company’s Web site, and reading their mission statement would be a good start.
· Observe the physical environment. Do people work in cubicles or in offices? What is the dress code? What is the building structure? Do employees look happy, tired, or stressed? The answers to these questions are all pieces of the puzzle.
· Read between the lines. For example, the absence of a lengthy employee handbook or detailed procedures might mean that the company is more flexible and less bureaucratic.
· How are you treated? The recruitment process is your first connection to the company. Were you treated with respect? Do they maintain contact with you, or are you being ignored for long stretches at a time?
· Ask questions. What happened to the previous incumbent of this job? What does it take to be successful in this firm? What would their ideal candidate for the job look like? The answers to these questions will reveal a lot about the way they do business.
· Listen to your gut. Your feelings about the place in general, and your future manager and coworkers in particular, are important signs that you should not ignore.
Sources: Adapted from ideas in Daniel, L., & Brandon, C. (2006). Finding the right job fit. HR Magazine, 51, 62–67; Sacks, D. (2005). Cracking your next company’s culture. Fast Company, 99, 85–87.
KEY TAKEAWAY
Organization cultures are created by a variety of factors, including founders’ values and preferences, industry demands, and early values, goals, and assumptions. Culture is maintained through attraction-selection-attrition, new employee onboarding, leadership, and organizational reward systems. Signs of a company’s culture include the organization’s mission statement, stories, physical layout, rules and policies, and rituals.
EXERCISES
1. Do you think it is a good idea for companies to emphasize person-organization fit when hiring new employees? What advantages and disadvantages do you see when hiring people who fit with company values?
2. What is the influence of company founders on company culture? Give examples based on your personal knowledge.
3. What are the methods companies use to aid with employee onboarding? What is the importance of onboarding for organizations?
4. What type of a company do you feel would be a good fit for you? What type of a culture would be a misfit for you? In your past work experience, were there any moments when you felt that you did not fit with the organization? Why?
5. What is the role of physical layout as an indicator of company culture? What type of a physical layout would you expect from a company that is people oriented? Team oriented? Stable?
15.4 Creating Culture Change
LEARNING OBJECTIVES
1. Explain why culture change may be necessary.
2. Understand the process of culture change.
How Do Cultures Change?
Culture is part of a company’s DNA and is resistant to change efforts. Unfortunately, many organizations may not even realize that their current culture constitutes a barrier against organizational productivity and performance. Changing company culture may be the key to the company turnaround when there is a mismatch between an organization’s values and the demands of its environment.
Certain conditions may help with culture change. For example, if an organization is experiencing failure in the short run or is under threat of bankruptcy or an imminent loss of market share, it would be easier to convince managers and employees that culture change is necessary. A company can use such downturns to generate employee commitment to the change effort. However, if the organization has been successful in the past, and if employees do not perceive an urgency necessitating culture change, the change effort will be more challenging. Sometimes the external environment may force an organization to undergo culture change. Mergers and acquisitions are another example of an event that changes a company’s culture. In fact, the ability of the two merging companies to harmonize their corporate cultures is often what makes or breaks a merger effort. When Ben & Jerry’s was acquired by Unilever, Ben & Jerry’s had to change parts of its culture while attempting to retain some of its unique aspects. Corporate social responsibility, creativity, and fun remained as parts of the culture. In fact, when Unilever appointed a veteran French executive as the CEO of Ben & Jerry’s in 2000, he was greeted by an Eiffel tower made out of ice cream pints, Edith Piaf songs, and employees wearing berets and dark glasses. At the same time, the company had to become more performance oriented in response to the acquisition. All employees had to keep an eye on the bottom line. For this purpose, they took an accounting and finance course for which they had to operate a lemonade stand.Kiger, P. J. (2005, April). Corporate crunch. Workforce Management, 84, 32–38. Achieving culture change is challenging, and many companies ultimately fail in this mission. Research and case studies of companies that successfully changed their culture indicate that the following six steps increase the chances of success.Schein, E. H. (1990). Organizational culture. American Psychologist, 45, 109–119.
Figure 15.12 Six Steps to Culture Change
Creating a Sense of Urgency
In order for the change effort to be successful, it is important to communicate the need for change to employees. One way of doing this is to create a sense of urgency on the part of employees and explain to them why changing the fundamental way in which business is done is so important. In successful culture change efforts, leaders communicate with employees and present a case for culture change as the essential element that will lead the company to eventual success. As an example, consider the situation at IBM Corporation in 1993 when Lou Gerstner was brought in as CEO and chairman. After decades of dominating the market for mainframe computers, IBM was rapidly losing market share to competitors, and its efforts to sell personal computers—the original “PC”—were seriously undercut by cheaper “clones.” In the public’s estimation, the name IBM had become associated with obsolescence. Gerstner recalls that the crisis IBM was facing became his ally in changing the organization’s culture. Instead of spreading optimism about the company’s future, he used the crisis at every opportunity to get buy-in from employees.Gerstner, L. V. (2002). Who says elephants can’t dance? New York: Harper-Collins.
Changing Leaders and Other Key Players
A leader’s vision is an important factor that influences how things are done in an organization. Thus, culture change often follows changes at the highest levels of the organization. Moreover, in order to implement the change effort quickly and efficiently, a company may find it helpful to remove managers and other powerful employees who are acting as a barrier to change. Because of political reasons, self interest, or habits, managers may create powerful resistance to change efforts. In such cases, replacing these positions with employees and managers giving visible support to the change effort may increase the likelihood that the change effort succeeds. For example, when Robert Iger replaced Michael Eisner as CEO of the Walt Disney Company, one of the first things he did was to abolish the central planning unit, which was staffed by people close to ex-CEO Eisner. This department was viewed as a barrier to creativity at Disney, and its removal from the company was helpful in ensuring the innovativeness of the company culture.McGregor, J., McConnon, A., Weintraub, A., Holmes, S., & Grover, R. (2007, May 14). The 25 most innovative companies. Business Week, 4034, 52–60.
Role Modeling
Role modeling is the process by which employees modify their own beliefs and behaviors to reflect those of the leader.Kark, R., & Van Dijk, D. (2007). Motivation to lead, motivation to follow: The role of the self-regulatory focus in leadership processes. Academy of Management Review, 32, 500–528. CEOs can model the behaviors that are expected of employees to change the culture. The ultimate goal is that these behaviors will trickle down to lower level employees. For example, when Robert Iger took over Disney, in order to show his commitment to innovation, he personally became involved in the process of game creation, attended summits of developers, and gave feedback to programmers about the games. Thus, he modeled his engagement in the idea creation process. In contrast, modeling of inappropriate behavior from the top will lead to the same behavior trickling down to lower levels. A recent example of this type of role modeling is the scandal involving Hewlett-Packard Development Company LP board members. In 2006, when board members were suspected of leaking confidential company information to the press, the company’s top-level executives hired a team of security experts to find the source of the leak. The investigators sought the phone records of board members, linking them to journalists. For this purpose, they posed as board members and called phone companies to obtain the itemized home phone records of board members and journalists. When the investigators’ methods came to light, HP’s chairman and four other top executives faced criminal and civil charges. When such behavior is modeled at top levels, it is likely to have an adverse impact on the company culture.Barron, J. (2007, January). The HP Way: Fostering an ethical culture in the wake of scandal. Business Credit, 109, 8–10.
Training
Well-crafted training programs may be instrumental in bringing about culture change by teaching employees the new norms and behavioral styles. For example, after the space shuttle Columbia disintegrated upon reentry from a February 2003 mission, NASA decided to change its culture to become more safety sensitive and minimize decision-making errors leading to unsafe behaviors. The change effort included training programs in team processes and cognitive bias awareness. Similarly, when auto repairer Midas International Corporation felt the need to change its culture to be more committed to customers, they developed a training program making employees familiar with customer emotions and helping form better connections with them. Customer reports have been overwhelmingly positive in stores that underwent this training.BST to guide culture change effort at NASA. (June, 2004). Professional Safety, 49, 16; J. B. (June, 2001). The Midas touch. Training, 38, 26.
Changing the Reward System
The criteria with which employees are rewarded and punished have a powerful role in determining the cultural values in existence. Switching from a commission-based incentive structure to a straight salary system may be instrumental in bringing about customer focus among sales employees. Moreover, by rewarding employees who embrace the company’s new values and even promoting these employees, organizations can make sure that changes in culture have a lasting impact. If a company wants to develop a team-oriented culture where employees collaborate with each other, methods such as using individual-based incentives may backfire. Instead, distributing bonuses to intact teams might be more successful in bringing about culture change.
Creating New Symbols and Stories
Finally, the success of the culture change effort may be increased by developing new rituals, symbols, and stories. Continental Airlines Inc. is a company that successfully changed its culture to be less bureaucratic and more team oriented in the 1990s. One of the first things management did to show employees that they really meant to abolish many of the detailed procedures the company had and create a culture of empowerment was to burn the heavy 800-page company policy manual in their parking lot. The new manual was only 80 pages. This action symbolized the upcoming changes in the culture and served as a powerful story that circulated among employees. Another early action was the redecorating of waiting areas and repainting of all their planes, again symbolizing the new order of things.Higgins, J., & McAllester, C. (2004). If you want strategic change, don’t forget to change your cultural artifacts. Journal of Change Management, 4, 63–73. By replacing the old symbols and stories, the new symbols and stories will help enable the culture change and ensure that the new values are communicated.
KEY TAKEAWAY
Organizations need to change their culture to respond to changing conditions in the environment, to remain competitive, and to avoid complacency or stagnation. Culture change often begins by the creation of a sense of urgency. Next, a change of leaders and other key players may enact change and serve as effective role models of new behavior. Training can also be targeted toward fostering these new behaviors. Reward systems are changed within the organization. Finally, the organization creates new stories and symbols.
EXERCISES
1. Can new employees change a company’s culture? If so, how?
2. Are there conditions under which change is not possible? If so, what would such conditions be?
3. Have you ever observed a change process at an organization you were involved with? If so, what worked well and what didn’t?
4. What recommendations would you have for someone considering a major change of culture within their own organization?
15.5 The Role of Ethics and National Culture
LEARNING OBJECTIVES
1. Consider the role of culture in ethical behavior.
2. Consider the role of national culture on organizational culture.
Organizational Culture and Ethics
A recent study of 3,000 employees and managers in the United States confirms that the degree to which employees in an organization behave ethically depends on the culture of the organization.Gebler, D. (2006, May). Creating an ethical culture. Strategic Finance, 87, 28–34. Without a culture emphasizing the importance of integrity, honesty, and trust, mandatory ethics training programs are often doomed to fail. Thus, creating such a culture is essential to avoiding the failures of organizations such as WorldCom and Enron. How is such a culture created?
The factors we highlighted in this chapter will play a role in creating an ethical culture. Among all factors affecting ethical culture creation, leadership may be the most influential. Leaders, by demonstrating high levels of honesty and integrity in their actions, can model the behaviors that are demanded in an organization. If their actions contradict their words, establishing a culture of ethics will be extremely difficult. As an example, former chairman and CEO of Enron Kenneth Lay forced all his employees to use his sister’s travel agency, even though the agency did not provide high-quality service or better prices.Watkins, S. (2003, November). Former Enron vice president Sherron Watkins on the Enron collapse. Academy of Management Executive, 17, 119–125. Such behavior at the top is sure to trickle down. Leaders also have a role in creating a culture of ethics, because they establish the reward systems being used in a company. There is a relationship between setting very difficult goals for employees and unethical behavior.Schweitzer, M., Ordonez, L., & Douma, B. (2004). The role of goal setting in motivating unethical behavior. Academy of Management Journal, 47, 422–432. When leaders create an extremely performance-oriented culture where only results matter and there is no tolerance for missing one’s targets, the culture may start rewarding unethical behaviors. Instead, in organizations such as General Electric Company where managers are evaluated partly based on metrics assessing ethics, behaving in an ethical manner becomes part of the core company values.Heineman, B. W., Jr. (2007, April). Avoiding integrity land mines. Harvard Business Review, 85, 100–108.
Organizational Culture Around the Globe
The values, norms, and beliefs of a company may also be at least partially imposed by the national culture. When an entrepreneur establishes an organization, the values transmitted to the organization may be because of the cultural values of the founder and the overall society. If the national culture in general emphasizes competitiveness, a large number of the companies operating in this context may also be competitive. In countries emphasizing harmony and conflict resolution, a team-oriented culture may more easily take root. For example, one study comparing universities in Arab countries and Japan found that the Japanese universities were characterized by modesty and frugality, potentially reflecting elements of the Japanese culture. The study also found that the Arab universities had buildings that were designed to impress and had restricted access, which may be a reflection of the relatively high power distance of the Arab cultures. Similarly, another study found that elements of Brazilian culture such as relationships being more important than jobs, tendency toward hierarchy, and flexibility were reflected in organizational culture values such as being hierarchical and emphasizing relational networks.Dedoussis, E. (2004). A cross-cultural comparison of organizational culture: Evidence from universities in the Arab world and Japan. Cross Cultural Management, 11, 15–34; Garibaldi de Hilal, A. (2006). Brazilian national culture, organizational culture and cultural agreement: Findings from a multinational company. International Journal of Cross Cultural Management, 6, 139–167. It is important for managers to know the relationship between national culture and company culture, because the relationship explains why it would sometimes be challenging to create the same company culture globally.
KEY TAKEAWAY
Without a culture emphasizing the importance of integrity, honesty, and trust, the mandatory ethics training programs are often doomed to fail. The values, norms, and beliefs of a company may also be at least partially imposed by the national culture.
EXERCISES
1. Have you seen examples of ethical or unethical organizational cultures? Describe what you observed.
2. Have you seen examples of national culture affecting an organization’s culture?
3. What advice would you give to someone who was interested in starting a new division of a company in another culture?
15.6 Conclusion
To summarize, in this chapter we have reviewed what defines organizational culture, how it is created, and how it can be changed. Corporate culture may be the greatest strength or a serious limitation for a company, depending on whether the values held are in line with corporate strategy and environmental demands. Even though changing an organization’s culture is difficult, success of the organization may require the change. Leaders, through their actions, role modeling, rule making, and story creation, serve as instrumental change agents.
15.7 Exercises
ETHICAL DILEMMA
Your company is in the process of hiring a benefits specialist. As a future peer of the person to be hired, you will be one of the interviewers and will talk to all candidates. The company you are working for is a small organization that was acquired. The job advertisement for the position talks about the high level of autonomy that will be available to the job incumbent. Moreover, your manager wants you to sell the position by highlighting the opportunities that come from being a part of a Fortune 500, such as career growth and the opportunity to gain global expertise. The problem is that you do not believe being part of a larger company is such a benefit. In fact, since the company has been acquired by the Fortune 500, the way business is being conducted has changed dramatically. Now there are many rules and regulations that prevent employees from making important decisions autonomously. Moreover, no one from this branch was ever considered for a position in the headquarters or for any global openings. In other words, the picture being painted by the hiring managers and the company’s HR department in the job advertisements is inflated and not realistic. Your manager feels you should sell the job and the company because your competitors are doing the same thing, and being honest might mean losing great candidates. You know that you and your manager will interview several candidates together.
Is this unethical? Why or why not? What would you do before and during the interview to address this dilemma?
INDIVIDUAL EXERCISE
Impact of HR Practices on Organizational Culture
Below are scenarios of critical decisions you may need to make as a manager. Read each question and select one from each pair of statements. Then, think about the impact your choice would have on the company’s culture.
1. You need to lay off 10 people. Would you
a. lay off the newest 10 people?
a. lay off the 10 people who have the lowest performance evaluations?
1. You need to establish a dress code. Would you
b. ask employees to use their best judgment?
b. create a detailed dress code highlighting what is proper and improper?
1. You need to monitor employees during work hours. Would you
c. not monitor them because they are professionals and you trust them?
c. install a program monitoring their Web usage to ensure that they are spending work hours actually doing work?
1. You need to conduct performance appraisals. Would you
d. evaluate people on the basis of their behaviors?
d. evaluate people on the basis of their results (numerical sales figures and so on)?
1. You need to promote individuals. Would you promote individuals based on
e. seniority?
e. objective performance?
GROUP EXERCISE
Recruiting Employees Who Fit the Culture
You are an employee of a local bookstore. The store currently employs 50 employees and is growing. This is a family-owned business, and employees feel a sense of belonging to this company. Business is conducted in an informal manner, there are not many rules, and people feel like they are part of a family. There are many friendships at work, and employees feel that they have a lot of autonomy regarding how they perform their jobs. Customer service is also very important in this company. Employees on the sales floor often chat with their customers about books and recommend readings they might like. Because the company is growing, they will need to hire several employees over the next months. They want to establish recruitment and selection practices so that they can hire people who have a high degree of fit with the current culture.
Working within groups, discuss the effectiveness of the following recruitment tools. Evaluate each recruitment source. Which ones would yield candidates with a high degree of fit with the company’s current culture?
1. Newspaper advertisements
2. Magazine advertisements
3. Radio advertisements
4. Hiring customers
5. Hiring walk-ins
6. Employee referrals
7. Using the state unemployment agency
Next, create interview questions for a person who will work on the sales floor. What types of questions would you ask during the interview to assess person-organization fit? How would you conduct the interview (who would be involved in the interviewing process, where would you conduct the interview, and so on) to maximize the chances of someone with a high person-organization fit?
END OF CHAPTER CASE—GOOGLE
Google is one of the best-known and most admired companies around the world.Adapted from ideas in Elgin, B., Hof, R. D., & Greene, J. (2005, August 8). Revenge of the nerds—again. Business Week, 3946, 28–31; Hardy, Q. (2005, November 14). Google thinks small. Forbes, 176(10), 198–202; Lashinky, A. (2006, October 2). Chaos by design. Fortune, 154(7), 86–98; Mangalindan, M. (2004, March 29). The grownup at Google: How Eric Schmidt imposed better management tactics but didn’t stifle search giant. Wall Street Journal, p. B1; Lohr, S. (2005, December 5). At Google, cube culture has new rules. New York Times, Section C, Column 6, Business/Financial Desk, 8; Schoeneman, D. (2006, December 31). Can Google come out to play? New York Times, Section 9, Column 2, Style Desk, 1; Warner, M. (2004, June). What your company can learn from Google. Business 2.0, 5(5), 100–106. So much so that googling is the term many use to refer to searching information on the Web. Founded in 1998 by two Stanford university graduates, Larry Page and Sergey Brin, Google is responsible for creating the most frequently used Web search engine on the Internet, as well as other innovative applications such as Gmail, Google Earth, Google Maps, and Picasa. The envy of other Silicon Valley companies, Google grew from 10 employees working in a garage in Palo Alto to 10,000 employees operating around the world. What is the formula behind this success? Can it be traced to any single concept such as effective leadership, reward systems, or open communication?
It seems that Google has always operated based on solid principles that may be traced back to its founders. In a world crowded with search engines, they were probably the first company that put users first. Their mission statement summarizes their commitment to end user needs: “To organize the world’s information and to make it universally accessible and useful.” While other companies were focused on marketing their sites and increasing advertising revenues, Google stripped the search page of all distractions and presented Internet users with a blank page consisting only of a company logo and a search box. Google resisted pop-up advertising, because the company felt that it was annoying to end users. They insisted that all their advertisements would be clearly marked as “sponsored links.” Improving user experience and always putting it before making money in the short term seem to have been critical to Google’s success.
Keeping employees happy is also a value they take to heart. Google created a unique work environment that attracts, motivates, and retains the best players in the field. Google was ranked as the number 1 place to work for by Fortune magazine in 2008. This is no surprise if one looks closer at how Google treats employees. In its Mountain View, California, campus called the “Googleplex,” employees are treated to free gourmet food including sushi bars and espresso stations. In fact, many employees complain that once they started working for Google, they gained 10 to 15 pounds. Employees have access to gyms, shower facilities, video games, on-site child care, and doctors. A truly family friendly place, Google offers 12 weeks of maternity or paternity leave with 75% of full pay, and offers $500 for take-out meals for the entire family with a newborn. All these perks and more create a place where employees feel that they are treated well and their needs are taken care of. Moreover, these perks contribute to the feeling that employees are working at a unique, cool place that is different from everywhere else they have ever worked.
In addition to offering many perks to employees, thereby encouraging employees to actually want to spend time at work rather than someplace else, Google encourages employee risk taking and innovativeness. How is this done? When a vice president in charge of the company’s advertising system made a mistake that cost the company millions of dollars and apologized for the mistake, she was commended by Larry Page, who congratulated her for making the mistake and noting that he would rather run a company where people are moving quickly and doing too much, as opposed to being too cautious and doing too little. This attitude toward acting fast and accepting the cost of resulting mistakes as a natural consequence of moving fast may explain why the company is outperforming competitors such as Microsoft and Yahoo! Inc. One of the current challenges for Google is to expand into new fields outside their Web search engine business. To promote new ideas, Google encourages all engineers to spend 20% of their time working on individual projects.
Decisions at Google are made in teams. Even the company management is in the hands of a triad: Larry Page and Sergey Brin hired Eric Schmidt to act as the CEO of the company, and they are reportedly leading the company by consensus. In other words, this is not a company where decisions are made by the most senior person and then implemented top down. It is common for several small teams to attack each problem and for employees to try to influence each other using rational persuasion and data. Gut feeling has little impact on how decisions are made. In some meetings, people reportedly are not allowed to say, “I think…” and instead they must say, “The data suggests…” To facilitate teamwork, employees work in open office environments where private offices are assigned only to a select few. Even Kai-Fu Lee, the famous employee whose defection from Microsoft was the target of a lawsuit, did not get his own office and shared a cubicle with two other employees.
How do they maintain these unique values? In a company emphasizing hiring the smartest people, it is very likely that they will attract big egos that are difficult to work with. Google realizes that its strength comes from its small-company values emphasizing risk taking, agility, and cooperation. Therefore, Google employees take their hiring process very seriously. Hiring is extremely competitive and getting to work at Google is not unlike applying to a college. Candidates may be asked to write essays about how they will perform their future jobs. Recently, they targeted potential new employees using billboards featuring brain teasers directing potential candidates to a Web site where they were subjected to more brain teasers. Candidates who figure out the answers to the brain teasers would then be invited to submit resumes. Each candidate may be interviewed by as many as eight people on several occasions. Through this scrutiny, hiring personnel are trying to select “Googley” employees who will share the company’s values, perform their jobs well, and be liked by others within the company. By attracting kindred spirits, selecting those who will fit in, and keeping potential misfits out, the company perpetuates its own values that have made it successful.
Will this culture survive in the long run? It may be too early to tell, given that the company is only a little over a decade old. The founders emphasized that becoming a publicly traded company would not change their culture, and they would not introduce more rules or change the way things are done at Google to please Wall Street. But can a public corporation really act like a start-up? Can a global giant facing scrutiny on issues including privacy, copyright, and censorship maintain its culture rooted in its days in a Palo Alto garage? Larry Page is quoted as saying, “We have a mantra: don’t be evil, which is to do the best things we know how for our users, for our customers, for everyone. So I think if we were known for that, it would be a wonderful thing.” As long as this mantra continues to guide the company’s actions, we might expect the company to retain its distinctive personality, regardless of what the future holds.
Figure 15.13
Source: http://upload.wikimedia.org/wikipedia/en/e/ee/Googleplex_Welcome_Sign.jpg .
Discussion Questions
1. Describe Google’s culture using the OCP typology presented in this chapter.
2. What are the factors responsible for the specific culture that exists in Google?
3. Do you think Google’s culture is responsible for its performance? Or does Google have this particular culture because it is so successful?
4. How does Google protect its culture?
5. Do you see any challenges Google may face in the future because of its culture?
Resources
Check Your Knowledge
Question 1
What are the components of an organizational culture?
· shared assumptions
· shared values
· shared beliefs
Source: "Organizational culture," Ch. 15, p. 664.
Question 2
How does an organization's culture affect the behavior of employees?
It lets employees know what behaviors are appropriate and inappropriate, and often helps them be more aware of the organization's priorities.
Source: "Organizational culture," Ch. 15, pp. 665-666.
Question 3
What are some of the potential benefits and challenges associated with organizational culture?
An organizational culture can be a valuable and rare resource for an organization: one that becomes a competitive advantage. An organizational culture can also be related to increased organizational performance. Conversely, if an organization's culture conflicts with the company's environment, the culture can be a liability. For example, if an organization's culture is characterized by stability and a respect for tradition and the organization is in a high-tech industry where innovation and adaptability are needed, the culture may keep the organization from succeeding.
Source: "Organizational culture," Ch. 15, pp. 665-666.
Question 4
What are some of the methods you can use to determine an organization's culture?
· Observe the artifacts (i.e., the tangible aspects). For example, in an organization with a people-oriented culture, you might find a games room where employees can relax.
· Compare the organization with another similar organization.
Source: "Organizational culture," Ch. 15, pp. 664, 667.
Question 5
Two specific types of organizational culture are people-oriented and outcome-oriented. What are some of the characteristics of these two types?
An outcome-oriented culture is characterized in the following ways:
· achievement, results and action are highly valued
· rewards often tied to performance indicators
· potential risk: over-emphasis on performance can lead to unethical behavior
Source: "Organizational culture," Ch. 15, p. 671.
A people-oriented culture is characterized in the following ways:
· afairness, supportiveness, and respect for individual rights are highly valued
· employee retention can be positively affected
Source: "Organizational culture," Ch. 15, p. 673.
Resources
Culture as the 800lb Gorilla in Your Organization
Culture as the 800 lb Gorilla in Your Organization
by Dr. Christina Hannah
Culture as the 800 lb Gorilla or Fourth Factor in Your Organization
Culture as the 800 lb Gorilla or Fourth Factor in Your Organization
Don't ignore the 800 lb. gorilla
Gorilla by andybewer is licensed under CC BY 2.0. This image has been adapted from the original.
Organizational culture has been described as the 800-pound gorilla. It is huge, cannot be ignored, there is little you can do about it, and, if you are not careful, it can easily crush you. Of course, managers and leaders need to do more than watch and stay out of the way. They need to figure out how to influence and shape the culture so it supports rather than detracts from mission and goal accomplishment.
Sadly, many leaders and managers either do not understand the importance of organizational culture or do not know what to do about it. All too often it defeats them before they figure it out. One classic example is Carly Fiorina’s short tenure as CEO of Hewlett Packard (HP). Fiorina failed to recognize the strength of what was known as the “HP Way” (a set of shared and deeply held values, beliefs, and practices that longtime employees perceived as important sources of competitive advantage for the company). As a result, she managed to alienate many stakeholders in a short period of time.
What Is Organizational Culture?
Are there different types of culture? How do people learn about it? What can and should managers and leaders do about culture?
Organizational culture has recievedattention from scholars in several disciplines. Each discipline has a particular way of interpreting findings and thinking about implications. Of course, scholars in these disciplines have proposed different definitions of organizational culture, in an attempt to achieve mutual clarity. A common lay definition of organizational culture is "the way things are done around here."
Two important contributors to our understanding of societal cultural differences and their implications for business, Hofstede and Minkov (2010), use slightly different language to explain that organizational culture is “the collective programming of the mind that distinguishes the members of one organization from another” (p. 144). These scholars also refer to culture as “software of the mind.”
Another more descriptive and perhaps helpful definition is that corporate culture is “the shared social knowledge within an organization regarding the rules, norms, and values that shape the attitudes and behaviors of its employees” (Colquitt, Lepine, & Wesson, 2015, p. 534). This definition emphasizes the fact that organizational culture is a social phenomenon (involving how people relate to each other). Also important is that culture shapes attitudes and behavior. Some contend that it is important to recognize that people also shape the culture. In other words, while typically slow to change, organizational culture is a dynamic evolving force within organizations that depends on people for its existence and its future.
Culture is about shared values. An organization’s culture may influence what employees think should happen as well as what does happen.
Are there Different Types of Organizational Cultures?
Scholars have proposed various ways of classifying organizational cultures. One typology of cultures, suggested originally by Goffee and Jones (1998), differentiates cultures based on their degree of sociability and of solidarity with the highest in each category being labeled a communal culture. Such cultures may seem friendly, welcoming, and nurturing, and you may find relatively little conflict within them. Communal culture is more common in smaller companies. The three other cultural types Goffee and Jones propose in their typology are networked, fragmented, and mercenary. A networked culture is one where there is a high level of trust, empathy, an opendoor policy, and loyalty to the social group rather than the organization. In fragmented organizational cultures, employees do not identify strongly with the organization, tend to work independently (closed door), and may not agree with the organization’s objectives. In mercenary culture, there are not strong social ties, communication tends to focus on business rather than personal issues, competition among employees is fostered and encouraged, and employees stay as long as their needs are met.
Perhaps it will not surprise you that performance and productivity may be high in mercenary cultures and low in networked ones.
Another way of differentiating among cultural types is around their intended focus, goals, or priorities (service, safety, diversity, creativity, and so on).
Organizations vary in the extent to which their cultures are strong and liable to change. When the culture is strong, you will find greater consensus. However, this is not always a good thing, as some of you may know from personal experience. In such organizations, there may be little interest in or tolerance for new and different ideas and ways of doing things.
Is Culture a Potential Source of Competitive Advantage?
The simple answer to this question is yes. Numerous scholars who have studied organizational culture have established a relationship between an organization’s culture and performance (Fortado & Fadil, 2012).
References
Colquitt, J., LePine, J, & Wesson, M. (2015). Organizational behavior: Improving performance and commitment in the workplace. New York, NY: McGrawHill Education.
Fortado, B., & Fadil, P. (2012). The four faces of organizational culture. Competitiveness Review, 22(4), 283298. doi: http://dx.doi.org.ezproxy.umgc.edu/10.1108/10595421211247132
Goffee, R., & Jones, G. (1998). The character of a corporation: How your company’s culture can make or break your business. HarperCollins, New York, N.Y.
Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and organizations: Software of the mind (3rd ed.). McGrawHill, New York, N.Y.
Licenses and Attributions
Gorilla by andybewer from Flickr is available under a Creative Commons Attribution 2.0 Generic license.
Organizational Climate
· By: Marcus W. Dickson & Jacqueline K. Mitchelson
· In: Encyclopedia of Industrial and Organizational Psychology
· Edited by: Steven G. Rogelberg
· Subject:Organizational/Work/Occupational Psychology, Organizational Psychology
The term organizational climate has been used in many different ways to refer to a wide variety of constructs. In recent years some consensus about what precisely should be included in the construct—and what should not be included in the construct—has begun to emerge. Research interest in climate has remained high, despite the variety of conceptualizations of the construct, because climate is generally seen as related to a variety of important organizational outcomes, including productivity (both individual and organizational), satisfaction, and turnover. More recently, climate has come to be seen as predictive of specific organizational outcomes, depending on what aspect of climate is being assessed. Thus climate continues to be seen as organizationally important, but the specific outcomes of interest seen to be affected by climate have shifted over time.
Initially, researchers used climate to refer to individual employee perceptions of more immediate aspects of an employee's work environment (e.g., supervision, work group characteristics, and job or task characteristics), and the climate measures that were developed and widely used reflected this orientation. However, general measures of climate began to incorporate aspects of leadership, group interaction and cohesion, job satisfaction, and other constructs, leading to questions of the uniqueness and utility of the climate construct. To counteract this tendency, researchers strategically focused the climate construct on those particular types of climates that may emerge in each particular organization. Although a recent meta-analysis by J. Z. Carr and her colleagues highlights the more molar, or broad-brush, approach to organizational climate, a more targeted approach has become dominant in the last several years.
Benjamin Schneider has long been one of the primary researchers in the area of organizational climate, and variations of the operational definition he has used are the dominant in the literature today. Specifically, Schneider has argued that organizational climate should be defined as the policies, practices, and procedures that are rewarded, supported, and expected in an organization in regard to a specific organizational domain, such as safety, innovation, customer service, and ethics. This basic definition has come to be the most commonly used conceptualization of the climate construct in the last several years.
There are two critical implications of this definition. First, by focusing on policies, practices, and procedures that are rewarded, supported, and expected, the definition implies that organizational climate is a shared perspective among organization members, rather than an individual perception. This focus on within-unit agreement places organizational climate in the category of compositional models that David Chan (1998) would call direct consensus models, in that the meaning of the group-level construct is based on the agreement (or consensus) among the individual units (group members or employees). Second, by focusing on specific organizational domains, the definition implies that an organization may have multiple climates operating simultaneously and may have climates that are more active in one area of the organization than in another; for example, a climate for innovation may be most salient in an R&D (research and development) division, whereas a climate for customer service may be most salient in a sales division within a single organization.
This definition is also useful because it helps clarify what organizational climate is not. Organizational climate does not refer to the personal values that are held by members of an organization, or shared by organization members—in general, shared values are under the umbrella of organizational culture (see Organizational Culture). Organizational climate also does not refer to individual and idiosyncratic perceptions of life within the organization; in general, these perceptions fall under the umbrella of psychological climate.
In the remainder of this entry, we first focus briefly on three examples of specific types of climates: climate for service, climate for safety, and ethical climate. We then discuss the issue of degree of agreement about climate perceptions, which is known as climate strength; this leads to a discussion of when[Page 546]it is possible to say that a climate does or does not exist.
Climate for Service
Research on organizational climate for service has flourished and considers both employee and customer perceptions of an organization's policies, practices, and procedures that are rewarded, supported, and expected for quality service in the organization. For employees, climate for service represents their experiences of the organization's emphasis on service quality. For customers, climate for service is the perceived amount of excellent service received from the organization. Research on climate for service has found links between these dual perceptions of employees' climate for service and customers' satisfaction and evaluations of the quality of service. This research is an example of linkage research because customer service perceptions are linked with important organizational outcomes, such as customer retention.
Climate for service research builds from the theory that employees emphasize service behavior to the degree that it is rewarded, supported, and expected by their employing organization. Customers of organizations that have a positive or high climate for service come to have higher satisfaction with the service they receive from the organization because of their contact and interaction with various employees, who provide consistently high levels of service. Research on the boundary conditions of this effect has begun, and initial findings suggest that higher frequency of contact between employees and customers is related to a stronger relationship between service climate and customer satisfaction. Another moderator of the climate for service and customer satisfaction relationship is the proximity of the organizational target, such as bank branches versus bank as a whole, to customers.
Climate for Safety
Climate for safety has also received considerable research attention. This aspect of climate refers to employee perceptions of an organization's policies, practices, and procedures regarding safety that are rewarded, supported, and expected from employees. Several researchers have documented a consistent relationship between a positive safety climate and reduced injury rates. Dov Zohar (2003), a leading theorist in this area of research, has stressed the need to consider perceptions of actual safety practices as opposed to the safety policies and practices espoused by supervisors and top management, because the behaviors that are said to be expected and rewarded are often not the behaviors that are actually expected and rewarded. Interestingly, transformational or constructive leadership is shown to relate to lower injury rate; and this relationship is moderated by safety climate, conceptualized as perceptions of actual safety practices rather than more formalized safety policies.
Ethical Climate
Given the many well-publicized corporate scandals of the last several years, it is hardly surprising to see that there is a sizable stream of research examining organizational ethics and ethical behavior from within an organizational climate framework. From this perspective (to use Bart Victor and John Cullen's [1987] seminal definition), ethical climate can be thought of as shared perceptions among group members regarding what constitutes ethically correct behavior and how ethical issues should be handled within an organization. This definition highlights the fact that ethical climate is not focused on what is right or wrong but is instead focused on the things that organization members perceive the organization to see as ethical. Thus employees might agree that when confronted with an ethical issue at work, they would be rewarded and supported by the organization if they engaged in behavior that they personally believed to be unethical.
Although ethical climate is a relatively new research area, researchers have identified several antecedents of ethical climate. Among other things, ethical climate has been shown to be affected by gender, age, ethical education, personality traits, and stage of organizational career. Victor and Cullen (1987), who are largely responsible for starting the research focus in this area, hypothesized that social norms, organizational form, and various firm-specific factors would be the dominant antecedents. Marcus Dickson, D. Brent Smith, Michael Grojean, and Mark Ehrhart (2001) addressed the literature on each of these points rather extensively. To date, there is more theory than data about the degree to which a strong organizational ethical climate is associated with individual and organizational ethical behavior and decision making.
There are many other organizational climate facets that have been investigated in the literature, including climates for sexual harassment, innovation and creativity, justice, and well-being. Of course, the[Page 547]climate construct could be applied to an almost unlimited range of organizational topics for which shared perceptions by group members are important.
Climate Strength
Recently, researchers have begun to focus on the importance of climate strength, which has been operationally defined as the within-group variability in member perceptions of the climate. When agreement is high, climate is strong. (Climate strength can also be conceptualized as variability in within-group perceptions, with greater variability indicating lesser strength.) Although there is not a lot of research to date that explicitly addresses climate strength, much published research has found that climate strength moderates the effects of climate itself on various outcomes of interest. For example, Jason Colquitt and colleagues (2001) found that procedural justice climate in teams predicted team effectiveness, and that the effect was greater in teams with stronger climates. Dickson and colleagues recently found that strong climates were more likely to be found in organizations with clearly distinct climates (e.g., highly mechanistic or highly organic), and that strength was typically much lower in organizations where the climate was more ambiguous. We expect to see research in this area continue to grow, because the moderating effect of climate strength will be useful in better understanding the direct effects (or lack thereof) of climate itself. Additionally, Schneider and colleagues have pointed out that there are clear implications for leadership to be found here in terms of the importance of consistent behavior in a positive direction to create maximal benefit from organizational climate.
When Does Climate Exist?
One debate in the study of organizational climate is whether there are times when there is no climate or whether there is always a climate, even if it is weak. This is much the same argument as that occurring in the literature on organizational culture; but given the more quantitative orientation of the climate literature over time (compared with the culture literature), the issue can become especially critical here.
Some researchers argue that unless there is some predetermined level of agreement or variability among group members, there is no climate because there is little or no evidence of a shared perspective among organizational members. This argument can be couched in terms from Chan's (1998) framework of composition models, mentioned earlier, because climate has most typically been conceptualized as a direct consensus model. In such a model, climate is considered to be the typical, or most common, response from the members of a group, provided that there is some level of within-group agreement to justify treating the mean as a group-level variable. In other words, if there is insufficient agreement (assessed statistically), then there is no sharedness in the perceptions, and thus no climate. Researchers taking this approach have sometimes used a criterion of an rwg of .70 or greater (or some other statistical cutoff point), although as Harrison Trice and Janice Beyer (1993) note regarding culture strength, there is no clear answer on how to determine whether or not a climate exists. Because there is no clear point at which climate can be said to exist, other researchers have taken the perspective that climate is always present but may in many cases be weak.
This question is of practical importance when determining how to classify the units within a data set. For example, suppose that a researcher is investigating safety climate and has data from 100 organizations, including 10 organizations with rwg results on the climate measure of less than .70. From one perspective, the 10 organizations showing little agreement on the safety climate measure would be dropped from the sample as having no climate, and of the remaining 90 organizations, the ones with rwg results close to .70 would be considered to have a weak climate. From the alternative perspective, all 100 organizations would remain in the sample, and those with the lowest levels of agreement would be considered to have the weakest climates. At present, consensus on this issue has yet to clearly emerge. However, the approach of limiting the sample to only those organizations with a predetermined level of within-unit agreement is the more conservative approach, because that limitation serves to restrict the range on the strength variable.
Conclusion
Organizations tend to have as many specific climates as strategic directions, which makes organizational climate a relevant concept for organizations to consider. As Schneider (1990) notes, once a strategic direction or focus is identified for the organization, the organizational climate regarding that strategic focus can be assessed via employees. Employees' assessment of the organization's relevant policies, practices, and[Page 548]procedures that support the strategic focus in the organization may serve as a measure of alignment. The strategic focus of the organization needs to be clearly and consistently represented in the organization's policies, practices, and procedures. Should an assessment of the organizational climate reveal that a strategic direction of interest is not perceived in organizational practices, then policies, practices, and procedures in the organization may need to be redesigned to better align with the strategy of interest.
Marcus W. Dickson & and Jacqueline K. Mitchelson
See also
Further Reading
Ashkanasy, N. M., Wilderom, C. P. M., & Peterson, M. F. (Eds.). (2000). Handbook of organizational culture and climate. Thousand Oaks, CA: Sage.
Carr, J. Z., Schmidt, A. M., Ford, J. K., and DeShon, R. P.Climate perceptions matter: A meta-analytic path analysis relating molar climate, cognitive and affective states, and individual level work outcomes. Journal of Applied Psychology88605–619 (2003).
Chan, D.Functional relations among constructs in the same content domain at different levels of analysis: A typology of composition models. Journal of Applied Psychology83234–246 (1998).
Dickson, M. W., Smith, D. B., Grojean, M., and Ehrhart, M.An organizational climate regarding ethics: The outcome of leader values and the practices that reflect them. Leadership Quarterly12197–217 (2001).
Schneider, B. (Ed.). (1990). Organizational climate and culture. San Francisco: Jossey-Bass.
Victor, B., & Cullen, J. (1987). A theory and measure of ethical climate in organizations. In W. C.Frederick (Ed.), Research in corporate social performance and policy: Empirical studies of business ethics and values (pp. 51–71). Greenwich, CT: JAI Press.
Zohar, D. (2003). Safety climate: Conceptual and measurement issues. In J.Campbell Quick, & L. E.Tetrick (Eds.), Handbook of occupational health psychology. Washington, DC: American Psychological Association.
Check Your Knowledge
Question 1
How would you define organizational climate?
Organizational climate is "shared perceptions of organizational policies, practices, and procedures, both formal and informal."
Source: Reichers & Schneider, cited in Vardi, 2001.
Question 2
What is a simple way to differentiate between organizational culture and organizational climate?
Culture is about "the way things are done around here," [while] climate is simply about the way things are around here."
Source: Vardi, 2001, p.327.
Question 3
What are some specific types of organizational climate? Describe each one briefly.
· Climate for service: For employees, climate for service represents their experiences of the organization's emphasis on service quality. For customers, climate for service is the perceived amount of excellent service received from the organization. Source: Dickson & Mitchelson, 2007, para. 7.
· Climate for safety: This refers to employee perceptions of an organization's policies, practices, and procedures regarding safety that are rewarded, supported, and expected from employees. Source: Dickson & Mitchelson, 2007, para. 9.
· Ethical climate: Ethical climate can be thought of as shared perceptions among group members regarding what constitutes ethically correct behavior and how ethical issues should be handled within an organization. Source: Dickson & Mitchelson, 2007, para. 10.
· Socio-moral climate (SMC): In a socio-moral climate, emphasis is on the importance of creating a workplace environment where employees know and want to do the right thing.
Question 4
Why might an organization choose to do a climate survey?
If leaders perceive that there is a significant amount of conflict within the organization they can conduct a climate survey to determine the causes and then make the necessary changes. An alternative approach would be for an organization to proactively conduct climate surveys on a regular basis to collect information on the organization's areas of strength and weakness and then address any problems that are revealed.
Ethics
Ethics, also commonly referred to as morality, is the broad discipline that deals with determining what is right and what is wrong. There are various approaches to ethics and a wide variety of ethical rules and principles put forward by different ethicists. Making moral decisions is something
Page 274 | Top of Article
that people do on a regular basis. Ethics assists individuals in deciding what to do when faced with various situations.
Ethics is also a crucial component of social life, as individuals' actions usually have an impact on others. Ethical systems are necessary for ordered human existence, but there is and has always been deep disagreement about the proper rules and principles to put in place. Ethics can be grounded in natural law, religious tenets, parental and family influence, educational experiences, life experiences, and cultural and societal expectations.
BUSINESS ETHICS
Ethics in business, or business ethics as it is often called, is the application of the discipline, principles, and theories of ethics to the organizational context. Business ethics have been defined as “principles and standards that guide behavior in the world of business.” Business ethics is also a descriptive term for the field of academic study in which many scholars conduct research and in which undergraduate and graduate students are exposed to ethics theory and practice, usually through the case method of analysis.
Ethical behavior in business is critical. When business firms are charged with infractions, and when employees of those firms come under legal investigation, there is a concern raised about moral behavior in business. Hence, the level of mutual trust, which is the foundation of our free-market economy, is threatened.
Although ethics in business has been an issue for academics, practitioners, and governmental regulators for decades, some believe that unethical, immoral, and/or illegal behavior is widespread in the business world. Numerous scandals in the late 1990s and early 2000s seemed to add credence to the criticism of business ethics. Corporate executives of WorldCom, a giant in the telecommunications field, admitted fraud and misrepresentation in financial statements. A similar scandal engulfed Enron at around the same time. Other notable ethical lapses were publicized involving ImClone, a biotechnological firm; Arthur Andersen, one of the largest and oldest public accounting firms; and HealthSouth, a large healthcare firm located in the southeast United States. These companies eventually suffered public humiliation, huge financial losses, and in some cases, bankruptcy or dissolution. The ethical and legal problems resulted in some corporate officials going to prison, many employees losing their jobs, and thousands of stockholders losing some or all of their savings invested in the firms' stock.
Although the examples mentioned involved top management, huge sums of money, and thousands of stake-holders, business ethics is also concerned with the day-today ethical dilemmas faced by millions of workers at all levels of business enterprise. It is the awareness of and judgments made in ethical dilemmas by all that determines the overall level of ethics in business. Thus, the field of business ethics is concerned not only with financial and accounting irregularities involving billions of dollars, but all kinds of moral and ethical questions, large and small, faced by those who work in business organizations.
APPROACHES TO ETHICAL DECISION-MAKING
Philosophers have studied and written about ethics for thousands of years, and there continues to be vigorous investigation into and debate about the best ethical principles. Although many different ethical theories have been developed through the ages, there are several broad categories that are commonly used to group different theories by their major traits. These groupings are: teleology, deontology, and virtue. A fourth category, relativism, may be added, although relativism is less an ethical theory than it is a broad claim about the nature of ethics.
Each of the three major types of theories is prescriptive—that is, they purport to determine what conduct is right and wrong, or to prescribe what people should (and should not) do. The prescriptions put forward by the theories in each category stem from different fundamental principles. For teleological theories, the fundamental principles focus on the consequences caused by human actions, while deontological theories of ethics focus on (1) the rights of all individuals and (2) the intentions of the person(s) performing an action. Deontological theories differ substantially from teleological views because they do not allow, for instance, harming some individuals in order to help (a greater number of) others. To the deontologist, each person must be treated with the same level of respect, and no one should be treated as a means to an end. Virtue ethics, unlike both teleology and deontology, emphasizes the virtues, or moral character, behind a certain action or set of actions instead of looking at duties or rules, as deontology does, or the outcomes of actions, as teleology does. Thus, an action is evaluated in terms of whether or not a “good person” would perform that action.
Teleological, deontological, and virtue theories are all “universal” theories, in that they purport to advance principles of morality that are permanent and applicable to everyone. In contrast, relativism states that there are no universal principles of ethics and that right and wrong are by different individuals and groups. The relativist does not accept that some ethical standards or values are superior to others and believes that standards of right and wrong change over time and are different across cultures.
CONSEQUENTIALISM
Teleological theories of ethics, often referred to as “consequentalist” theories, focus, as the name indicates, on the consequences or outcomes of ethical decisions. For instance,
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when evaluating whether or not it is ethical to use company time to deal with personal business, the relevant question would center on whether any harm came from the action. The consequentialist would look at what happened as a result of that choice. If, say, there were no loss of productivity as a result of conducting a piece of personal business while at work, then consequentialism theories would likely make no adverse ethical judgment about that choice. A commonly heard phrase justifying such choices—“It's not hurting anyone”—is practically the consequentialist motto.
Consequentialist theories are very popular, largely because they are more concrete than deontological or virtue-based ones. It is much easier to determine the consequences of an action—they can be seen—than it is to determine a person's intentions or their moral character. Consequentialism is widely used in the field of business ethics, most likely because businesses are about results, not intentions or character. The most common consequentialist theories are egoism and utilitarianism. These two theories differ in their focus on where the consequences of actions are evaluated. For egoism, the relevant consequences concern one's self; for utilitarianism, the overall impact on society is considered.
Egoism. Egoism is defined by self-interest, and defines right and wrong in terms of the consequences to one's self. An egoist would weigh an ethical dilemma or issue in terms of how different courses of action would affect his or her physical, mental, or emotional well-being. Egoists, when faced with business decisions, will choose the course of action that they believe will best serve their own interests.
Although it seems likely that egoism would potentially lead to unethical and/or illegal behavior, this philosophy of ethics is, to some degree, at the heart of a free-market economy. Since the time of political economist Adam Smith, advocates of a free market unencumbered by governmental regulation have argued that individuals, each pursuing their own self-interest, would actually benefit society at large.
This point of view is notably espoused by the famous economist Milton Friedman, who suggested that the only moral obligation of business is to make a profit and obey the law. However, it should be noted that Smith, Friedman, and most others who advocate unregulated commerce, acknowledge that some restraints on individuals' selfish impulses are required.
Utilitarianism. In the utilitarian approach to ethical reasoning, one emphasizes the utility, or the overall amount of good, that might be produced by an action or a decision. For example, companies decide to move their production facilities from one country to another. How much good is
|
Table 1 Approaches to Ethics in Business |
|
|
Adapted from: Ferrell, Fraedrich, and Ferrell, 2002, p. 57. |
|
|
Teleological |
Actions are judged as ethical or unethical based on their results. |
|
Egoism |
Actions are judged as ethical or unethical based on the consequences to one's self. Actions that maximize self-interest are preferred. |
|
Utilitarianism |
Actions are judged as ethical or unethical based on the consequences to “others.” Actions that maximize the “good” (create the greatest good for the greatest number) are preferred. |
|
Deontological |
Actions are judged as ethical or unethical based on the inherent rights of the individual and the intentions of the actor. Individuals are to be treated as means and not ends. It is the action itself that must be judged and not its consequences. |
|
Justice |
Actions are judged as ethical or unethical based on the fairness shown to those affected. Fairness may be determined by distributive, procedural, and/or interactional means. |
|
Relativism |
Actions are judged as ethical or unethical based on subjective factors that may vary from individual to individual, group to group, and culture to culture. |
Table 1 Approaches to Ethics in Business
expected from the move? How much harm? If the good appears to outweigh the harm, the decision to move may be deemed an ethical one, by the utilitarian yardstick.
This approach also encompasses what has been referred to as cost-benefit analysis. In this, the costs and benefits of a decision, a policy, or an action are compared. Sometimes these can be measured in economic, social, human, or even emotional terms. When all the costs are added and compared with the results, if the benefits outweigh the costs, then the action may be considered ethical.
One fair criticism of this approach is that it is difficult to accurately measure costs and benefits. Another criticism is that the rights of those in the minority may be overlooked or even intentionally trampled if doing so provides an overall benefit to society as a whole.
Utilitarianism is like egoism in that it advocates judging actions by their consequences, but unlike egoism, utilitarianism focuses on determining the course of action that will produce the greatest good for the greatest number of people. Thus, it is the ends that determine the morality of an action and not the action itself (or the intent of the actor).
Utilitarianism is probably the dominant moral philosophy in business ethics. Utilitarianism is attractive to many business people, since the philosophy acknowledges that many actions result in good consequences for some, but bad consequences for others. This is certainly true of many decisions in business.
INDIVIDUAL ETHICAL DECISION-MAKING
In addition to ethical theories about right and wrong—prescriptive theories, sometimes also called “normative”—the field of business ethics consists of theories about how people make ethical decisions. This area of business ethics is more descriptive than prescriptive. There are many approaches to the individual ethical decision-making process in business. However, one of the more common was developed by James Rest and has been called the four-step or four-stage model of individual ethical decision-making. Numerous scholars have applied this theory in the business context. The four steps include: ethical issue recognition, ethical (moral) judgment, ethical (moral) intent, and ethical (moral) behavior.
Ethical Issue Recognition. Before a person can apply any standards of ethical philosophy to an issue, he or she must first comprehend that the issue has an ethical component. This means that the ethical decision-making process must be “triggered” or set in motion by the awareness of an ethical dilemma. Some individuals are likely to be more sensitive to potential ethical problems than others. Numerous factors can affect whether someone recognizes an ethical issue; some of these factors are discussed in the next section.
Ethical (Moral) Judgment. If an individual is confronted with a situation or issue that he or she recognizes as having an ethical component or posing an ethical dilemma, the individual will probably form some overall impression or judgment about the rightness or wrongness of the issue. The individual may reach this judgment in a variety of ways, following a particular ethical theory or a mixture of theories, as noted in the previous section on approaches to ethical decision-making.
Ethical (Moral) Intent. Once an individual reaches an ethical judgment about a situation or issue, the next stage in the decision-making process is to form a behavioral intent. That is, the individual decides what he or she will do (or not do) with regard to the perceived ethical dilemma.
According to research, ethical judgments are a strong predictor of behavioral intent. However, individuals do not always form intentions to behave that are in accord with their judgments, as various situational factors may act to influence the individual otherwise.
Ethical (Moral) Behavior. The final stage in the four-step model of ethical decision-making is to engage in some behavior with regard to the ethical dilemma. Research shows that behavioral intentions are the strongest predictor of actual behavior in general and ethical behavior in particular. However, individuals do not always behave consistent with either their judgments or intentions with regard to ethical issues. This is particularly a problem in the business context, as peer group members, supervisors, and organizational culture may influence individuals to act in ways that are inconsistent with their own moral judgments and behavioral intentions.
FACTORS AFFECTING ETHICAL DECISION-MAKING
In general, there are three types of influences on ethical decision-making in business: (1) individual difference factors, (2) situational (organizational) factors, and (3) issue-related factors.
Individual Difference Factors. Individual difference factors are personal factors about an individual that may influence their sensitivity to ethical issues, their judgment about such issues, and their related behavior. Research has identified many personal characteristics that impact ethical decision-making. The individual difference factor that has received the most research support is “cognitive moral development.”
This framework, developed by Lawrence Kohlberg in the 1960s and extended by Kohlberg and other researchers in the subsequent years, helps to explain why different people make different evaluations when confronted with the same ethical issue. It posits that an individual's level of “moral development” affects their ethical issue recognition, judgment, behavioral intentions, and behavior.
According to the theory, individuals' level of moral development passes through stages as they mature. Theoretically, there are three major levels of development. The lowest level of moral development is termed the “pre-conventional” level. At the two stages of this level, the individual typically will evaluate ethical issues in light of a desire to avoid punishment and/or seek personal reward. The pre-conventional level of moral development is usually associated with small children or adolescents.
The middle level of development is called the “conventional” level. At the stages of the conventional level, the individual assesses ethical issues on the basis of the fairness to others and a desire to conform to societal rules and expectations. Thus, the individual looks outside him or herself to determine right and wrong. According to Kohlberg, most adults operate at the conventional level of moral reasoning.
The highest stage of moral development is the “principled” level. The principled level, the individual is likely to apply principles (which may be utilitarian, deontological, or justice) to ethical issues in an attempt to resolve them. According to Kohlberg, a principled person looks inside him or herself and is less likely to be influenced by situational (organizational) expectations.
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The cognitive moral development framework is relevant to business ethics because it offers a powerful explanation of individual differences in ethical reasoning. Individuals at different levels of moral development are likely to think differently about ethical issues and resolve them differently.
Situational (Organizational) Factors. Individuals' ethical issue recognition, judgment, and behavior are affected by contextual factors. In the business ethics context, the organizational factors that affect ethical decision-making include the work group, the supervisor, organizational policies and procedures, organizational codes of conduct, and the overall organizational culture. Each of these factors, individually and collectively, can cause individuals to reach different conclusions about ethical issues than they would have on their own. This section looks at one of these organizational factors, codes of conduct, in more detail.
Codes of conduct are formal policies, procedures, and enforcement mechanisms that spell out the moral and ethical expectations of the organization. A key part of organizational codes of conduct are written ethics codes. Ethics codes are statements of the norms and beliefs of an organization. These norms and beliefs are generally proposed, discussed, and defined by the senior executives in the firm. Whatever process is used for their determination, the norms and beliefs are then disseminated throughout the firm.
An example of a code item would be, “Employees of this company will not accept personal gifts with a monetary value over $25 in total from any business friend or associate, and they are expected to pay their full share of the costs for meals or other entertainment (concerts, the theater, sporting events, etc.) that have a value above $25 per person.” Hosmer points out that the norms in an ethical code are generally expressed as a series of negative statements, for it is easier to list the things a person should not do than to be precise about the things a person should.
Almost all large companies and many small companies have ethics codes. However, in and of themselves ethics codes are unlikely to influence individuals to be more ethical in the conduct of business. To be effective, ethics codes must be part of a value system that permeates the culture of the organization. Executives must display genuine commitment to the ideals expressed in the written code—if their behavior is inconsistent with the formal code, the code's effectiveness will be reduced considerably.
At a minimum, the code of conduct must be specific to the ethical issues confronted in the particular industry or company. It should be the subject of ethics training that focuses on actual dilemmas likely to be faced by employees in the organization. The conduct code must contain communication mechanisms for the dissemination of the organizational ethical standards and for the reporting of perceived wrongdoing within the organization by employees.
Organizations must also ensure that perceived ethical violations are adequately investigated and that wrong-doing is punished. Research suggests that unless ethical behavior is rewarded and unethical behavior punished, that written codes of conduct are unlikely to be effective.
Issue-Related Factors. Conceptual research by Thomas Jones in the 1990s and subsequent empirical studies suggest that ethical issues in business must have a certain level of “moral intensity” before they will trigger ethical decision-making processes. Thus, individual and situational factors are unlikely to influence decision-making for issues considered by the individual to be minor.
Certain characteristics of issues determine their moral intensity. In general, the research suggests that issues with more serious consequences are more likely to reach the threshold level of intensity. Likewise, issues that are deemed by a societal consensus to be ethical or unethical are more likely to trigger ethical decision-making processes.
BUSINESS ETHICS TODAY
Ethics has been an important dimension of business and management practice for several decades, but in recent years, largely due to high-profile scandals, ethics has been placed on the center stage. Since the corporate scandals of the early-2000s, there has been vigorous debate about which ethical principles should prevail in the business world and about the proper role of government in enforcing morality in the marketplace. While there is no universal agreement on ethical principles or underlying theories, there has been wider agreement that the government has to take a more aggressive role in defining and enforcing ethical practice in the business world.
Congress passed the Sarbanes-Oxley Act of 2002 to reform American business practices in response to corporate scandals. This act establishes new or enhanced standards for publicly-traded companies (it does not apply to privately-held companies). Following passage of the Sarbanes-Oxley Act, the Federal Sentencing Guidelines for Organizations were updated in 2005 to strengthen the standards for corporate compliance and ethics programs.
Business ethics is an exceedingly complicated area, one that has contemporary significance for all business practitioners. There are, however, guidelines in place for effective ethical decision making, and there is continued attention paid to developing and maintaining these guidelines. These all have their positive and negative sides, but taken together, they may assist the businessperson to steer toward the most ethical decision possible under a particular set of circumstances.
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SEE ALSO Corporate Governance ; Corporate Social Responsibility ; Goals and Goal Setting ; Mission and Vision Statements
BIBLIOGRAPHY
Barnett, Tim, and Sean Valentine. “Issue Contingencies and Marketers' Recognition of Ethical Issues, Ethical Judgments, and Behavioral Intentions.” Journal of Business Research 57 (2004): 338–346.
Beauchamp, Tom L., and Norman E. Bowie. Ethical Theory and Business. Englewood Cliffs, NJ: Prentice Hall, 1993.
“Consequentialism.” Stanford Encyclopedia of Philosophy 9 February 2006. Available from: http://www.plato.stanford.edu/entries/consequentialism/ .
Ferrell, O.C., John Fraedrich, and Linda Ferrell. Business Ethics. 7th ed. Boston, MA: Houghton Mifflin Company, 2006.
“A Guide to the Sarbanes-Oxley Act.” Available from: http://www.soxlaw.com/ .
Hosmer, LaRue Tone. The Ethics of Management. 6th ed. Homewood, IL: Irwin, 2007.
Hyatt, James C. “Birth of the Ethics Industry.” Business Ethics Summer 2005.
Kuhn, James W., and Donald W. Shriver, Jr. Beyond Success. New York: Oxford University Press, 1991.
Lawrence, Anne T., James Weber, and James Post. Business and Society. 12th ed. New York: McGraw-Hill, 2008.
Paine, Lynn Sharp. “Managing for Organizational Integrity.” Harvard Business Review March-April 1994.
Trevino, Linda K., and Michael E. Brown. “Managing to Be Ethical: Debunking Five Business Ethics Myths.” Academy of Management Executive 18 (2004): 69–81.
Full Text: COPYRIGHT 2009 Gale, Cengage Learning
Source Citation
"Ethics." Encyclopedia of Management, 6th ed., Gale, 2009, pp. 273-278. Gale eBooks, link.gale.com/apps/doc/CX3273100095/GVRL?u=umd_umuc&sid=GVRL&xid=7063bbc1. Accessed 23 Jan. 2021.
Ethical Culture and Climate
· By: Linda K. Treviño
· In: Encyclopedia of Business Ethics and Society
· Edited by: Robert W. Kolb
· Subject:Business Ethics (general)
Interest in ethical culture has increased since the U.S. Sentencing Commission revised its guidelines for sentencing organizational defendants in 2004. Because of concerns that organizations were developing “window dressing” ethics and compliance programs, these revised guidelines call for more attention to the ethical “culture” of the organization and the need to align formal ethics programs with this broader ethical culture.
Ethical climate and culture represent somewhat different but related ways of thinking about the environment in organizations, which can influence organizational members' ethics-related attitudes and behaviors. Like the organizational climate and culture literatures more generally, these ways of thinking and some combine the aspects of different dimensions. Additional construct validity work will be required to confirm the dimensionality of the ethical climate construct and the relationships between those dimensions, the proposed theory, and outcomes.
Researchers have also explored the relationship between employees' perceptions of the ethical climate and employee attitudes (e.g., organizational commitment) and behaviors (e.g., ethical conduct). Multiple studies have found employees' organizational commitment to be positively related to benevolent climates and negatively related to egoistic climates. In addition, several ethical climate dimensions have been associated with ethical/unethical conduct on the part of organizational members.
Ethical climate was also found to vary between firms. But in refining thinking about ethical climates, researchers have asked whether ethical climates might also vary within organizations by work group or department. For example, a study in a large financial services firm found that different ethical subclimates exist in different departments, consistent with the departments' primary task and the external stakeholders served.
The ethical culture approach was originally introduced by Treviño as part of an interactionist model of individual and contextual influences on ethical decisionmaking behavior in organizations. This work was later expanded to develop an understanding of ethical culture as a combination of organizational structures, systems, and practices that can influence employees' ethicsrelated attitudes and direct their ethical conduct. Ethical culture was defined as a subset of the overall organizational culture that represents the interplay of multiple formal and informal cultural systems that either work together or at cross-purposes to support ethical or unethical conduct. For example, formal systems include policies such as codes of conduct, explicit leader communications, formal decisionmaking processes, reward and performance management systems, reporting systems, authority structures, and training programs. Informal systems include informal norms of daily behavior and leader role modeling as well as organizational rituals, heroes, and stories. Member behavior is expected to be more ethical to the extent that these systems are aligned and supportive of ethical conduct.
Because ethical climate and ethical culture were both proposed to represent the ethical context of an organization, which could influence attitudes and behaviors, it became important to attempt to understand the relationship between ethical climate and ethical culture. Treviño and colleagues incorporated measures of both ethical climate and culture and investigated the relationships of these constructs to each other and to employees'attitudes and behaviors. That 1998 study found 10 ethical context factors representing three ethical culture dimensions and seven ethical climate dimensions that were found to be separate from each other. However, at the same time, many of the culture and climate dimensions were statistically related to each other, making it difficult to tease apart their separate effects on outcomes.
The study found that ethical climate and culture measures were about equally able to predict an employee attitude, organizational commitment. Employees who believed that their organizations supported employees and cared about the community (ethical climate dimensions) were most likely to identify with the organization and share its values. The overall ethical environment (focused on the culture dimensions of leadership, reward systems, and organizational norms) and obedience to authority were the most influential culture dimensions. An obedience-to-authority culture is one that demands unquestioning obedience (e.g., “Do as I say and don't ask questions”). Employees whose organizations' overall ethical environment supported ethics and did not have a strong obedience-to-authority culture were more committed to their organizations.
When studying ethical/unethical behavior, the researchers found somewhat different results for those working in organizations with and without an ethics code. For those working in organizations with an ethics code, the overall ethical environment and obedience-to-authority dimensions of culture were again the best predictors. To the extent that leadership, reward systems, norms, and authority structures supported ethics, employees said that there was less misconduct in the organization. Two climate dimensions (law and professional code and self-interest climate) were also influential. However, for those working in organizations without an ethics code, a single climate dimension, self-interest climate, explained much of the variance in ethical/unethical behavior. This is a climate in which people are simply out for themselves. So, to the extent that employees perceive such an environment, more unethical conduct is also reported.
In addition, research has found that the existence of formal ethics programs that included codes, training programs, and reporting systems has less influence on important ethics-related outcomes (misconduct, willingness to report problems to management, etc.) than more informal ethical culture factors such as leadership, reward systems, and employees' perceptions of fair treatment. These aspects of the ethical culture appear to combine to create an organizational message to employees about whether the organization cares about ethics as much as other important outcomes (e.g., bottom-line success) and whether its formal programs are to be taken seriously.
Leaders have been expected to play a particularly important role in creating a supportive ethical environment in the work organizations they lead, creating the tone at the top. But we are just beginning to learn more about how they do so. Among other things, leaders can influence followers by role modeling ethical behavior, communicating a set of ethical values, and holding employees accountable. In fact, research has found that executive leaders can influence perceptions of the ethical climate of the organizations they lead if they have high levels of cognitive moral development and their actions are consistent with these levels, meaning that the leaders are behaving to their moral development capacity and thus are more likely to role model ethical behavior. This appears to be especially true in younger firms.
Although questions remain about the best way to conceptualize and measure the ethical context of work organizations, and much more research will be needed to understand which aspects of ethical climate and culture are the most important, the research conducted to date suggests that the organizational context clearly does influence employees' ethics-related attitudes and behaviors. It also suggests that organizations must go beyond the establishment of formal ethics and legal compliance programs if they wish to create a context that truly supports employee ethical behavior.
Linda K. Treviño
See also
· Corporate Ethics and Compliance Programs
· Federal Sentencing Guidelines
Further Readings
Schminke, M.Ambrose, M. L.Neubaum, D. O.(2005).The effect of leader moral development on ethical climate and employee attitudes. Organizational Behavior and Human Decision Processes97135–151.
Treviño, L. K.(1986).Ethical decisionmaking in organizations: A person-situation interactionist model. Academy of Management Review11601–617.
Treviño, L. K.(1990).A cultural perspective on changing and developing organizational ethics. Research in Organizational Change and Development4195–230.
Treviño, L. K.Butterfield, K.McCabe, D.(1998).The ethical context in organizations: Influences on employee attitudes and behaviors. Business Ethics Quarterly8447–476.
Treviño, L. K., & Weaver, G. R.(2003).Managing ethics in business organizations: Social scientific perspectives. Stanford, CA: Stanford University Press.
Vardi, Y.(2001).The effects of organizational and ethical climates on misconduct at work. Journal of Business Ethics29325–338.
Victor, B.Cullen, J. B.(1988).The organizational bases of ethical work climates. Administrative Science Quarterly33101–125.
Weber, J.(1995).Influences upon organizational ethical subclimates: A multi-departmental analysis of a single firm. Organization Science6509–523.
Weber, J.Seger, J. E.(2002).Influences upon organizational ethical subclimates: A replication study of a single firm at two points in time. Journal of Business Ethics4169–85.
Wimbush, J. C.Shepard, J. M.(1994).Toward an understanding of ethical climate: Its relationship to ethical behavior and supervisory influence. Journal of Business Ethics13637–647.
Ethical Decision Making
· By: James Weber
· In: Encyclopedia of Business Ethics and Society
· Edited by: Robert W. Kolb
· Subject:Business Ethics (general)
Ethical decision making is a cognitive process that considers various ethical principles, rules, and virtues or the maintenance of relationships to guide or judge individual or group decisions or intended actions. It helps one determine the right course of action or the right thing to do and also enables one to analyze whether another's decisions or actions are right or good. It seeks to answer questions about how one is supposed to act or live.
Ethical Decisionmaking Process
Many ethics scholars have developed models of ethical decision making or provided us with specific procedural steps enabling one to reach an ethically supported decision or course of action. In the abstract, this process is a fairly rational and logical course. In reality, ethical decision making is filled with abstractness, illogic, and even whim. Nonetheless, the following is a synthesis of these models and procedures.
Step 1: Identify the Ethical Dimensions Embedded in the Problem
In the first step of the ethical decisionmaking process, the decision maker must be able to determine if an ethical analysis is required. The decision maker must determine if there is a possible violation of an important ethical principle, societal law, or organizational standard or policy or if there are potential consequences that should be sought or avoided that emanate from an action being considered to resolve the problem.
Step 2: Collect Relevant Information
The decision maker must collect the relevant facts to continue in the ethical decisionmaking process. Related to Step 1, if an ethical principle, such as an individual's right, is in jeopardy of being violated, the decision maker should seek to gather as much information as possible about which rights are being forsaken and to what degree. A consequential focus would prompt the decision maker to attempt to measure the type, degree, and amount of harm being inflicted or that will be inflicted on others.
Step 3: Evaluate the Information According to Ethical Guidelines
Once the information has been collected, the decision maker must apply some type of standard or assessment criterion to evaluate the situation. As described below, the decision maker might use one of the predominant ethics theories—utilitarianism, rights, or justice. Adherence to a societal law or organizational policy may be an appropriate evaluation criterion. Others may consider assessing the relevant information based on a value system where various ethical principles or beliefs are held in varying degrees of importance.
Step 4: Consider Possible Action Alternatives
The decision maker needs to generate a set of possible action alternatives, such as confronting another person's actions, seeking a higher authority, or stepping in and changing the direction of what is happening. This step is important since it is helpful to limit the number of actions that it may realistically be possible to respond to or that may be required to resolve the ethical situation.
Step 5: Make a Decision
In Step 5, the decision maker should seek the action alternative that is supported by the evaluation criteria used in Step 3. Sometimes there may be a conflict between the right courses of action indicated by different ethics theories, as shown later in the illustration provided. It might not be possible in all cases for a decision maker to select a course of action that is supported by all the ethics theories or other evaluation criteria used in the decisionmaking process.
Step 6: Act or Implement
Ethical decision making is not purely an intellectual exercise. The decision maker, if truly seeking to resolve the problem being considered, must take action. Therefore, once the action alternatives have been identified in Step 4 and the optimal response is selected in Step 5, the action is taken in Step 6.
Step 7: Review the Action, Modify if Necessary
Finally, once the action has been taken and the results are known, the decision maker should review the consequences of the action and whether the action upheld the ethical principles sought by the decision maker. If the optimal resolution to the problem is not achieved, the decision maker may need to modify the actions being taken or return to the beginning of the decisionmaking process to reevaluate the analysis of the facts leading to the action alternative selected.
Applying Ethics Theories
The following is an illustration of Step 3 of the ethical decisionmaking process that applies three predominant ethics theories—utilitarianism, rights, and justice—to a common business problem: Should a company close an operating plant and lay off its workers?
When using a utilitarian perspective—where the decision maker considers the consequences or outcomes of an action and seeks to maximize the greatest good for the greatest number of those affected by the decision—it is critical for the decision maker to determine to the greatest extent possible who will be affected by the decision. In the example used here, those affected may include the company itself (since closing the plant may improve its bottom line by dramatically reducing plant overhead and employee payroll expenses); the company's investors, if a publicly held business (who may receive a greater return on their investment if the plant closes and employees are laid off); the company's employees (who will suffer if the plant closes and they are laid off from their jobs); and the local community where the plant is located (who will suffer a reduction in the municipal tax base as well as a loss of economic activity for businesses that relied on the plant and its employees).
One might argue that the greater good is served if some workers are immediately laid off and the plant is closed, ensuring the immediate financial viability of the company. Yet others might reason to an ethical solution that requests all employees to take a slight pay cut so that no workers are laid off and the plant remains open, thus achieving the greatest good for the greatest number of people affected.
A decision maker who considers a rights perspective would consider the entitlements of those affected by the decision. There are economic rights affecting the displaced employees and the community surrounding the plant in question, as well as the rights of the laid-off employees to be informed of the potential plant closing. These rights may be in opposition to the managers' right to act freely in a way that could be understood as acting responsibly, by closing the plant and thus benefiting the remaining employees of the company and the company's investors.
A rights reasoner might provide ample notice to the workers of the layoffs so that they could seek other employment. Or the rights reasoner might consider the economic rights of the community and actively seek a buyer for the plant in the hope that it would remain open and continue to employ the workers. Finally, the rights of the company and its investors could persuade the decision maker to conclude that closing the plant and firing the workers is the right thing to do.
Finally, one who considers a justice perspective may focus on either the equitable distribution of the benefits and costs resulting from the plant closing and employee layoffs (distributive justice) or the maintenance of rules and standards (procedural justice). For the distributive justice reasoner, the ethical decision process would focus not only on the benefits incurred by the company and its investors through the plant closure and layoffs but also on the significant harms or costs imposed on those employees laid off from work and the local community and businesses negatively affected by the plant closing.
The procedural justice reasoner would focus on the preservation of the social contract that exists between the employer and employees or would seek to minimize the harm imposed on the powerless (the employees and the local community) by the powerful (the employer and investors). The procedural justice reasoner would argue that the employees, community officials, and local business leaders should have a voice in this decision since they are significantly affected by the decision.
The decision maker may decide that a more just action would require the company to assume greater financial responsibility by providing job training and outplacement services for the displaced employees. The company could consider making some type of economic contribution to the local community to soften the blow of a reduction in the tax base or economic activity in the area. Or the company could involve the employees and local community leaders in developing a system that results in the plant closure occurring over a longer period of time to spread out the eventual costs endured by the community.
Conclusion
People during their daily routine at work or in society are called on to make ethical decisions. Therefore, their ethical decisionmaking process may be a frequent, yet subconscious, cognitive process. Do you drive the speed limit or come to a complete stop at the intersection where a stop sign is posted? An individual can decide to act in the right way almost without thinking about it, but the decision maker is implicitly considering and processing the steps delineated above to reach the ethically supported decision to obey the speed limit or stop at the intersection in the road.
James Weber
See also
Further Readings
Beauchamp, T. L., & Bowie, N. E. (Eds.). (2004).Ethical theory and business (7th ed.). Upper Saddle River, NJ: Prentice Hall.
Darwall, S. (Ed.). (2003).Virtue ethics. Malden, MA: Blackwell.
Hartman, L. P.(1998).Perspectives in business ethics. Chicago: Irwin/McGraw-Hill.
Held, V. (Ed.). (1995).Justice and care: Essential readings in feminist ethics. Boulder, CO: Westview Press.
Velasquez, M. G.(2002).Business ethics: Concepts and cases (5th ed.). Upper Saddle River, NJ: Prentice Hall.
