March 21, 2018

What words would you use to describe the Disney Parks web site? Does the cultural value of “making people happy” come across on the web site

THREE PARTS: Go to the Walt Disney Parks website: https://disneyparks.disney.go.com

1) What words would you use to describe the Disney Parks web site? Does the cultural value of “making people happy” come across on the web site? Explain.

2) Based on the information provided at Disney’s Parks web site, what do you think it would be like working at a Disney Park? Describe the characteristics of a person that you think would “fit” into the Disney culture.

3) Do you see any disadvantages to working at a company that has a strong organization culture such as Disney? Describe what, in your opinion, may be some disadvantages.

Type your answers, applying course concepts and terminology,

please use basic words

C H A P T E R 8 Organizational Culture

FIGURE 8.1 3M Corporation has been able to continue their innovative culture by allowing employees to use up to 15% of their workweek to develop new innovations such as their famous Post-it Notes.

C H A P T E R L E A R N I N G O B J E C T I V E S

Reading this chapter will help you accomplish the following:

1. Describe what organizational culture is and why it is important for an organization.

2. Understand the dimensions that make up a company’s culture. 3. Understand the creation and maintenance of organizational culture. 4. Understand the factors that create cultural change. 5. Develop personal culture management skills.

Organizations, like individuals, have their own personalities—often referred to as organizational cultures.

Understanding how culture is created, communicated, and changed will help individuals understand the cultures

that best suit their personalities as well as methods to become more effective managers.

212 PRINCIPLES OF MANAGEMENT VERSION 3.0

FIGURE 8.2 The P-O-L-C Framework

1. UNDERSTANDING ORGANIZATIONAL CULTURE

L E A R N I N G O B J E C T I V E S

1. Define organizational culture. 2. Understand why organizational culture is important. 3. Understand the different levels of organizational culture.

1.1 What Is Organizational Culture? Organizational culture refers to a system of shared assumptions, values, and beliefs that indicate appro- priate and inappropriate behavior within a given organization.[1] These values have a strong influence on employee behavior as well as organizational performance.[2] The concept of organizational culture was first made popular in the 1980s when Peters and Waterman’s best-selling book, In Search of Excel- lence, 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. Organizational culture is still a relatively new concept in contrast to a topic such as leadership, which has a history spanning several centuries.

Culture is largely invisible to individuals, since many elements of an organization’s culture are a function of intangible social cues rather than explicit written policies. Even though culture 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. Culture is related to the organizational facet of the P-O-L-C framework. The organizing function involves creat- ing and implementing organizational design decisions. The culture of the organization is closely linked to organizational design. For instance, a culture that empowers employees to make decisions could prove extremely resistant to a centralized organizational design, hampering the manager’s ability to im- plement such a design. However, a culture that supports the organizational structure can be very powerful.

1.2 Why Does Organizational Culture Matter? An organization’s culture may be one of its strongest assets or its biggest liability. In fact, it has been ar- gued that organizations that have a rare and hard-to-imitate culture enjoy a competitive advantage.[3] In a survey conducted by the management consulting firm Bain & Company, worldwide business lead- ers identified corporate culture to be as important as corporate strategy for business success.[4] This comes as no surprise to leaders of successful businesses, who are quick to attribute their company’s success to their organization’s culture.

Researchers find a relationship between organizational cultures and company performance with respect to success indicators such as revenue, sales volume, market share, and stock prices.[5] At the same time, it is important to have a culture that fits with the demands of the company’s environment. To the extent that shared values are proper for the company in question, company performance may benefit from culture.[6] For example, if a company is in the high-tech industry, having a culture that

CHAPTER 8 ORGANIZATIONAL CULTURE 213

FIGURE 8.3 Organizational Culture Levels

Source: Adapted from Schein, E. H. (1992). Organizational

Culture and Leadership. San Francisco: Jossey-Bass.

assumptions

Beliefs about human nature and reality that are taken for granted.

values

Shared principles, standards, and goals.

artifacts

The visible and tangible elements of culture.

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 prefer- ence for upholding rules and procedures, the company may suffer because 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, be responsible for organizational failure, and 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 dictating employee behavior. Culture is a more powerful way of controlling and managing employee behaviors than organizational rules and regulations. For example, when a company is trying to improve the quality of its customer service, rules may not be helpful, particularly when the problems customers present are unique. Instead, creating a culture of customer service may achieve better results 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. Therefore, the ability to understand and influence organizational culture is an important item for managers to have in their tool kit when they are carrying out the controlling and organizing functions of the P-O-L-C framework.

1.3 Levels of Organizational Culture Organizational culture consists of some aspects that are relatively visible, as well as as- pects that may lie below one’s conscious awareness. Organizational culture can be thought of as consisting of three interrelated levels.[7]

At the deepest level, below our awareness, lie basic assumptions. These assump- tions are taken for granted and 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, a basic assumption employees and managers share might be that happy employees benefit their organizations. This might be translated into val- ues such as egalitarianism, 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 com- pany happy hours or picnics.

Understanding the organization’s culture may start from observing its artifacts: its 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, since an important chunk of what makes up culture exists below one’s degree of awareness. The values and, deeper, 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. Some companies such as online eyeglass maker Warby Parker institute spe- cific culture teams that plan activities and luncheons to ensure culture is maintained and on the fore- front of employee’s minds on a weekly basis.[8]

K E Y T A K E A W A Y

Organizational culture is a system of shared assumptions, values, and beliefs that help individuals 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. Finally, organizational culture consists of three levels: assumptions that are be- low the surface, values, and artifacts.

214 PRINCIPLES OF MANAGEMENT VERSION 3.0

innovative cultures

Cultures that are flexible, adaptable, and experiment with new ideas.

aggressive cultures

Cultures that value competitiveness and outperforming competitors.

outcome-oriented cultures

Cultures that emphasize achievement, results, and action.

D I S C U S S I O N Q U E S T I O N S

1. Why do companies need culture?

2. Give an example of a company culture being a strength as well as 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.

2. MEASURING ORGANIZATIONAL CULTURE

L E A R N I N G O B J E C T I V E S

1. Understand different dimensions of organizational culture. 2. Understand the role of culture strength. 3. Explore subcultures within organizations.

2.1 Dimensions of Culture Which values characterize an organization’s culture? Even though all aspects of culture may not be im- mediately observable, identifying a set of values that might be used to describe an organization’s cul- ture helps us identify, measure, and manage culture more effectively. For this purpose, several re- searchers have proposed various culture typologies. One popular typology is the Organizational Cul- ture Profile (OCP), where culture is represented by seven distinct values.[9]

Innovative Cultures

According to the OCP framework, companies that have innovative cultures are flexible and adapt- able, and experiment with new ideas. These companies are characterized by a flat hierarchy and titles and other status distinctions tend to be downplayed. For example, Apple has been named by Fast Com- pany magazine as one of the most innovative companies in the world.[10] While they do not invent new technology, the innovations they introduced to personal computers, mobile phones, and tablets, with products such as the iPhone and iPad, changed the daily life of consumers and created entire industries working on Apple platforms. This is a culture that values accountability and agility. With a simple or- ganizational chart and clearly defined responsibilities, they are able to achieve clear focus on a small number of products and engage in quick course corrections. In order to maintain agility, the company uses small teams—for example, putting two engineers in charge of writing the code for adapting the Sa- fari browser for iPad.[11]

Aggressive Cultures

Companies with aggressive cultures value competitiveness and outperforming competitors. For ex- ample, Microsoft 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 made statements such as “we are going to cut off Netscape’s air supply… Everything they are selling, we are going to give away,” and its aggressive culture is cited as a reason for getting into new legal troubles be- fore old ones are resolved.[12] An overly aggressive and cutthroat culture has been cited by some as leading to the emissions-cheating scandal at Volkswagon.[13]

Outcome-Oriented Cultures

The OCP framework describes outcome-oriented cultures as emphasizing achievement, results, and action as important values. A good example of an outcome-oriented culture may be the electronics re- tailer Best Buy. 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.[14] In 2005, the com- pany implemented a Results Oriented Work Environment (ROWE) program that allows employees to

CHAPTER 8 ORGANIZATIONAL CULTURE 215

work anywhere and anytime; they are evaluated based on results and fulfillment of clearly outlined ob- jectives.[15] Outcome-oriented cultures hold employees as well as managers accountable for success and use systems that reward employee and group output. In these companies, it is more common to see re- wards tied to performance indicators as opposed to seniority or loyalty. Research indicates that organ- izations that have a performance-oriented culture tend to outperform companies that are lacking such a culture.[16] At the same time, 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 result- ing unhealthy work environment serves as a liability.[17] Perhaps due to such potential problems, as a pioneer in the ROWE practice, Best Buy abandoned this philosophy in 2013.[18]

216 PRINCIPLES OF MANAGEMENT VERSION 3.0

FIGURE 8.4 Dimensions of the Organizational Culture Profile

Source: Retrieved October 8, 2012 from (second from top) Vincent van der Heĳden, http://www.flickr.com/photos/flo_and_me/3836753819/; (third

from bottom) Cherrysweetdeal, http://www.flickr.com/photos/cherrysweetdeal/4322582205/; all other images © Thinkstock.

CHAPTER 8 ORGANIZATIONAL CULTURE 217

Stable cultures

Cultures that are predictable, rule-oriented, and bureaucratic.

FIGURE 8.5

From their social initiatives to extensive support of their own employees, Starbucks is the epitome of a people- oriented culture.

Source: http://www.flickr.com/

photos/montagecomms/2328936178

People-oriented cultures

Cultures that value fairness, supportiveness, and respecting individual rights.

team-oriented cultures

Cultures that are collaborative and emphasize cooperation among employees.

detail-oriented culture

Cultures that emphasize precision and paying attention to details.

Stable Cultures

Stable cultures are predictable, rule-oriented, and bureaucratic. When the environment is stable and certain, these cultures may help the organization to be effective by providing stable and constant levels of direction and output.[19] 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, GM is cited as having a bureaucractic culture, something the automaker has been strug- gling to change while recovering from its bankruptcy in 2009. The company is characterized by slow decision making, with several meetings and premeetings for key decisions, resulting in slow adoption of new technology and decision-making failures, such as allowing engineers to continue working on a Hummer sports utility vehicle long after they realized the project would fail.[20]

People-Oriented Cultures

People-oriented cultures value fairness, supportiveness, and respect for individual rights. In these organizations, there is a greater emphasis on and expectation of treating people with respect and dig- nity.[21] One study of new employees in accounting companies found that employees, on average, stayed 14 months longer in companies with people-oriented cultures.[22] Starbucks 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 and the opportunity to earn a degree online. As a result of these policies, the company benefits from a turnover rate much lower than the industry average.[23]

Team-Oriented Cultures

Companies with a team-oriented culture are collaborative and emphasize cooperation among em- ployees. For example, Southwest Airlines facilitates a team-oriented culture by cross-training its em- ployees so that they are capable of helping one another when needed. The company also emphasizes training intact work teams.[24] In Southwest’s selection process, applicants who are not viewed as team players are not hired as employees.[25] In team-oriented organizations, members tend to have more positive relationships with their coworkers and particularly with their managers.[26]

FIGURE 8.6

The growth in the number of passengers flying with Southwest Airlines from 1973 to 2012 shows Southwest as one of the most-flown U.S. airlines. While price has played a role in this, their emphasis on service has been a key piece of their culture and competitive advantage and has helped Southwest remain profitable for more than 39 consecutive years.

Source: Adapted from http://upload.wikimedia.org/wikipedia/commons/6/69/Southwest-airlines-passengers.jpg

Detail-Oriented Cultures

Organizations with a detail-oriented culture are characterized in the OCP framework as emphasiz- ing precision and 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 and Ritz Carlton 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

218 PRINCIPLES OF MANAGEMENT VERSION 3.0

strong culture

A culture that is shared by organizational members.

FIGURE 8.7

Walt Disney created a strong culture at his company that has evolved since its founding in 1923.

Source: http://en.wikipedia.org/wiki/

Image:Walt_disney_portrait.jpg

system and used to provide better service to returning customers. Any requests hotel employees re- ceive, as well as overhear, might be entered into the database to serve customers better.

2.2 Strength of Culture A strong culture is one that is shared by organizational members[27] —that is, a culture in which most employees in the organization show consensus regarding the values of the company. The stronger a company’s culture, the more likely it is to affect the way employees think and behave. For example, cul- tural values emphasizing customer service will lead to higher-quality customer service if there is wide- spread agreement among employees on the importance of customer-service-related values.[28]

It is important to realize that a strong culture may act as an asset or a 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 com- pany may perform well and outperform its competitors. This is an asset as long as members are behav- ing ethically. However, a strong outcome-oriented culture coupled with unethical behaviors and an ob- session with quantitative performance indicators may be detrimental to an organization’s effectiveness. Movies such as Wall Street, Glengarry Glen Ross, Boiler Room, and The Wolf of Wall Street illustrate the dangers associated with strong organizational cultures, where the need to “always be closing” a deal overshadows ethical concerns of other stakeholders. Enron is an extreme example of this dysfunctional type of strong culture.

One limitation of a strong culture is the difficulty of changing established organizational behaviors. In an organization where certain values are widely shared, if the organization decides to adopt a differ- ent set of values, unlearning the old values and learning the new ones will be a challenge because em- ployees will need to adopt new ways of thinking, behaving, and responding to critical events. For ex- ample, Home Depot had a decentralized, autonomous culture where many business decisions were made using “gut feelings” 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 Nardelli’s 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.[29]

A strong culture may also be a liability during a merger. During mergers and acquisitions, com- panies 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 2010 merger of United Airlines and Continental, one of the key issues was the integration of corporate cultures. United Airlines had consumer satisfaction ratings below industry average, whereas Continental had above-average ratings and a quality focus. United employees had contentious relations with management and unionization rates exceeding 80%, while Continental employees enjoyed more positive relations with management and were 40% unionized. The creation of a unique, unified com- pany culture is key to the success of such a merger.[30]

Music Rap-Up: Where Do I Belong

Twinprov perform a rap discussing different organizational cultures.

Youtube

View the video online at: http://www.youtube.com/embed/4YK23j6VnQU?rel=0

CHAPTER 8 ORGANIZATIONAL CULTURE 219

subcultures

A set of values unique to a limited cross section of the organization.

counterculture

Shared values and beliefs that are in direct opposition to the values of the broader organizational culture.

2.3 Do Organizations Have a Single Culture? The examples and profiles discussed as part of the Organizational Culture Profile may suggest that a company has a single culture that is shared throughout the organization. In reality there might be mul- tiple cultures within the organization. For example, people working on the sales floor may experience a different culture from that experienced by people working in the warehouse. Cultures that emerge within different departments, branches, or geographic locations are called subcultures. Subcultures may arise from the personal characteristics of employees and managers, as well as the different condi- tions under which work is performed. In addition to understanding the broader organization’s values, managers will need to make an effort to understand subculture values to see their effect on workforce behavior and attitudes.

Sometimes, a subculture may take the form of a counterculture. Defined as shared values and be- liefs that are in direct opposition to the values of the broader organizational culture,[31] 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.

K E Y T A K E A W A Y

Culture can be understood in terms of seven different culture dimensions, depending on what is most em- phasized within the organization. For example, innovative cultures are flexible, adaptable, and experiment with new ideas, while stable cultures are predictable, rule-oriented, and bureaucratic. Strong cultures can be an asset or liability for an organization but can be challenging to change. Multiple cultures may coexist in a single organization in the form of subcultures and countercultures.

D I S C U S S I O N Q U E S T I O N S

1. Think about an organization you are familiar with. On the basis of 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 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?

3. CREATING AND MAINTAINING ORGANIZATIONAL CULTURE

L E A R N I N G O B J E C T I V E S

1. Understand how cultures are created. 2. Learn how to maintain a culture. 3. Recognize organizational culture signs.

3.1 How Are Cultures Created? Where do cultures originate? Understanding this question is important in understanding how they can be changed. An organization’s culture is shaped as the organization faces and deals with external and

220 PRINCIPLES OF MANAGEMENT VERSION 3.0

internal challenges. 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 do- ing business are taught to new members as the way to do business.[32]

The factors that are most important in the creation of an organization’s culture include founders’ values, preferences, and industry demands.

FIGURE 8.8 Model Describing How Cultures Are Created and Maintained

Founder Values

A company’s culture, particularly during its early years, is inevitably tied to the personality, back- ground, and values of its founder or founders, as well as their vision for the future of the organization. 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. For example, some of the existing corporate values of the ice cream company Ben & Jerry’s can easily be traced to the personalities of its founders, Ben Cohen and Jerry Greenfield. In 1978, the two 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 per- centage 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, continuous contributions to charities, use of environmentally friendly materials, and dedication to creating jobs in low-income areas. Their culture even extends to general charity to the local community with their annual “Free Cone Day” from numerous participating outlets and franchisees.[33] Even though Unilever acquired the company in 2000, the social activism component remains unchanged, and Unilever has expressed its commitment to traditional Ben & Jerry’s values.[34]

Founder values become part of the corporate culture to the degree to which they help the company be successful. For example, the social activism of Ben & Jerry’s was instilled in the company because the founders strongly believed in these issues. However, these values probably would not endure three dec- ades later if they had not helped the company fuel its early success. In the case of Ben & Jerry’s, these 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.

CHAPTER 8 ORGANIZATIONAL CULTURE 221

FIGURE 8.9

Ben & Jerry’s managed to preserve the most unique aspects of its organizational culture despite being acquired by Unilever. The success of a merger often depends on successful harmonizing of the cultures of two distinct organizations.

Source:

http://commons.wikimedia.org/wiki/

Image:BenJerry-UnitedSquare.jpg

Industry Demands

While founders undoubtedly exert a powerful influence over corporate cultures, the industry charac- teristics also play a role. Companies within the same industry can sometimes have widely differing cul- tures. At the same time, the industry characteristics and demands often act as a powerful 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 in- dustry have innovative cultures, and those in the nonprofit sector may be people-oriented. If the in- dustry is one with a large number of regulatory requirements—for example, aviation, banking, health care, and high-reliability (such as nuclear power) industries—then we might expect the presence of a large number of rules and regulations, a bureaucratic company structure, and a stable culture. The in- dustry influence over culture is also important to acknowledge 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.

3.2 How Are Cultures Maintained? As a company matures, its cultural values are refined and strengthened. The early values of a com- pany’s culture exert influence over its future values. Organizational culture determines what types of people are hired by an organization and what types of people are left out. Moreover, once new employ- ees 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.

Attraction-Selection-Attrition

Organizational culture is maintained through a process known as attraction-selection-attrition (ASA). First, applicants are attracted to organizations they perceive they will fit in as successful employees. Someone who has a competitive nature may feel comfortable in and may 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.[35]

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. The second component of the ASA framework prevents applicants who may not be a strong fit with the or- ganization 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 compan- ies are hiring people for fit with their culture, as opposed to fit with a certain job. For example, Southw- est Airlines prides itself for hiring employees based on personality and attitude rather than specific job- related skills, which they learn after they are hired. 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 cowork- ers think of the candidate, it becomes easier to assess the level of fit.

222 PRINCIPLES OF MANAGEMENT VERSION 3.0

onboarding

The process through which new employees learn the attitudes, knowledge, skills, and behaviors required to function effectively within an organization.

FIGURE 8.10 The ASA Framework

Source: http://en.wikipedia.org/wiki/File:OU_Great_Reading_Room.jpg

Even after a company selects individuals for person-organization fit, there may be new employees who do not fit in long-term. 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. In such cases, the organ- ization is likely to gradually eliminate candidates who do not fit in through attrition. Attrition refers to the natural process where candidates with poor organizational fit will leave the company. Research in- dicates that person-organization misfit is one of the key reasons for employee turnover.[36]

Because of the ASA process, the company attracts, selects, and retains people who share its core values, whereas 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 ex- istence of such self-protective mechanisms, research shows that organizations demonstrate a certain level of homogeneity regarding personalities and values of organizational members.[37]

New Employee Onboarding

Another way in which an organization’s values, norms, and behavioral patterns are transmitted to em- ployees is through onboarding (also referred to as the organizational socialization process).[38] On- boarding 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 will feel accepted by their peers and confident regarding their ability to perform; they will also understand and share the as- sumptions, norms, and values that are part of the organization’s culture. This understanding and con- fidence in turn translate into more effective new employees who perform better and have higher job

CHAPTER 8 ORGANIZATIONAL CULTURE 223

formal orientation program

A program used to indoctrinate new employees to the company culture, as well as introducing them to their new jobs and colleagues.

mentor

A trusted person who provides an employee with advice and support regarding career-related matters.

satisfaction, stronger organizational commitment, and longer tenure within the company.[39] Organiza- tions engage in different activities to facilitate onboarding, such as implementing orientation programs or matching new employees with mentors.

What Can Employees Do during Onboarding? New employees who are proactive, seek feedback, and build strong relationships tend to be more suc- cessful than those who do not.[40] 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. 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.

Relationship building or networking (a facet of the organizing function) is another important be- havior new employees may demonstrate. Particularly when a company does not have a systematic ap- proach to onboarding, it becomes more important for new employees to facilitate their own onboard- ing by actively building relationships. According to one estimate, 35% of managers who start a new job fail and either voluntarily leave or are fired within 18 months. Of these, over 60% report being unable to form effective relationships with colleagues as the primary reason for this failure.[41]

What Can Organizations Do during Onboarding? Many organizations, including Microsoft, UPS, and Bank of America, take a more structured and sys- tematic approach to new employee onboarding, while others follow a “sink or swim” approach where new employees struggle to figure out what is expected of them and what the norms are in their organization.

A formal orientation program indoctrinates new employees to the company culture, and intro- duces them to their new jobs and colleagues. An orientation program has a role in making new em- ployees feel welcome in addition to imparting information that may help them be successful in their new jobs. Many large organizations have formal orientation programs consisting of lectures, video- tapes, and written material, while some may follow more informal approaches. According to one es- timate, most orientations last anywhere from one to five days, and some companies are currently switching to a computer-based orientation. Ritz Carlton Hotel Company uses a very systematic ap- proach 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. 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.[42] Research shows that formal ori- entation 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 em- ployee’s integration to 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 orienta- tion, those 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 oth- er.[43]

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. Lead- ers have a key influence over onboarding and the information and support they provide determine how quickly employees learn about the company politics and culture, while 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 ropes 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 em- ployee, mentors tend to be relatively more experienced than their protégés. Mentoring can occur nat- urally 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 out- comes of the program tend to be more positive.[44] Because mentors may help new employees interpret and understand the company’s culture, organizations may benefit from selecting mentors who

224 PRINCIPLES OF MANAGEMENT VERSION 3.0

FIGURE 8.11

One of the most famous mentor-protégé relationships in history is that of Socrates and his equally famous student, Plato.

Source: http://en.wikipedia.org/wiki/

File:Socrates_and_Plato.jpg

personify the company’s values. Thus, organizations may need to design these programs carefully to in- crease their chance of success.

Leadership

Leaders are instrumental in creating and changing an organization’s culture. There is a direct correspondence between the leader’s style and an organization’s culture. For ex- ample, 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 tended to be more performance-ori- ented and competitive.[45] In these and many other ways, what leaders do directly in- fluences the cultures of their organizations. This is a key point for managers to consider as they carry out their leading P-O-L-C function.

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 organiza- tion’s culture emphasizes ethics.[46] The leader’s own behaviors will signal to individu- als 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 ex- pected to guide the actions of its 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 re- gardless of what was accomplished? How do they react when someone admits to mak- ing 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 preven- ted, or do they seem more concerned about how much money was lost because 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 the behaviors they encourage and actions they tolerate, 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.[47] However, in companies in which goal achieve- ment is the sole criterion for reward, there is a focus on measuring only the results without much re- gard to the process. In these companies, we might observe outcome-oriented and competitive cultures. 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 orienta- tion. Finally, the types of behaviors that are rewarded or ignored set the tone for the culture. Which be- haviors are rewarded, which ones are punished, and which are ignored will determine how a com- pany’s culture evolves. A reward system is one tool managers can wield when undertaking the con- trolling function.

3.3 Signs of Organizational Culture How do individuals learn about a company’s culture? One way of finding out about a company’s cul- ture 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.

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FIGURE 8.12 Visual Elements of Culture

Source: (From top to bottom) © Thinkstock; http://www.flickr.com/photos/revjim5000/2349161623/; http://www.flickr.com/photos/ell-r-brown/

4374203580/; http://www.flickr.com/photos/lilivanili/6990868344/; http://www.flickr.com/photos/37796451@N00/4857349094/.

Mission Statement

A mission statement that is taken seriously and widely communicated may provide insights into an or- ganization’s corporate culture. For example, the Mayo Clinic’s mission statement is, “To inspire hope and contribute to health and well-being by providing the best care to every patient through integrated clinical practice, education, and research.” This statement ties to their primary value, “The needs of the patient come first.” This value evolved from the founders, who are quoted as saying, “The best interest of the patient is the only interest to be considered.” The Mayo Clinic has 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.[48]

226 PRINCIPLES OF MANAGEMENT VERSION 3.0

FIGURE 8.13

Rituals are important at Mary Kay Cosmetics, where pink Cadillacs are given to top performers at large annual events.

Source: Retrieved October 8, 2012

from http://en.wikipedia.org/wiki/

Image:MK_Cadillacs.jpg

Rituals

Repetitive activities within an organization that have symbolic meaning.

Rituals

Rituals refer to repetitive activities within an organization that have symbolic meaning.[49] 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 identifica- tion with the organization. For example, at the cosmetics firm Mary Kay Inc., employees attend cere- monies 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 emotions and excitement. During this ritual, employees feel a con- nection to the company culture and its values such as self-determination, willpower, and enthusi- asm.[50] Another example of rituals is the Saturday-morning meetings of Walmart. 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 Walmart stores before the start of the week, which gave him a competitive advantage over rival stores that made their adjustments based on weekly sales figures during the middle of the follow- ing week. Today, hundreds of Walmart associates attend the Saturday-morning meetings in the Bentonville, Arkansas, headquarters. The meetings traditionally start and end with the Walmart 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 accountabil- ity, communicate a performance orientation, and demonstrate taking quick action.[51]

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 mak- ing, human resources, and employee privacy reveal what the company values and emphasizes. For ex- ample, a company that has a policy such as “all pricing decisions of merchandise will be made at cor- porate headquarters” is likely to have a centralized culture that is hierarchical, as opposed to decentral- ized and empowering. Swiss Bank UBS once issued a 43-page dress code that advised employees on how long their skirts should be, how to “enhance personality” using makeup, and what not to eat to have fresh breath, which could be taken as signs of its customer-oriented, detail-oriented, and rule-ori- ented corporate culture.[52] The presence or absence of policies on sensitive issues such as English-only rules, bullying and unfair treatment of others, workplace surveillance, open-door policies, sexual har- assment, workplace romances, and corporate social responsibility all provide pieces of the puzzle that make up a company’s culture. This highlights how interrelated the P-O-L-C functions are in practice. Through rules and policies, the controlling function affects the organization’s culture, a facet of organizing.

Physical Layout

A company’s building, layout of employee offices, common areas, and other workspaces communicate important messages about a company’s culture. For example, visitors walking into the Nike 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 using 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 spirit are manifested in campus buildings named after famous athletes, photos of athletes hanging on the walls, and their statues dotting the campus.[53]

CHAPTER 8 ORGANIZATIONAL CULTURE 227

FIGURE 8.14

Google promotes a creative and fun atmosphere by enhancing their buildings with a vast array of visual stimuli, such as this dinosaur sculpture of “Stan” and his pink friends who reside at the Googleplex.

Source:

http://commons.wikimedia.org/wiki/

File:Don%27t_be_evil_-_Googleplex

_-_IMG_2445.JPG

The layout of the office space is also 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 orienta- tion and egalitarianism, whereas a company where most 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 be- cause the culture emphasizes solitude, concentration, and privacy. In contrast, Intel is famous for its standard cubicles, which reflect its egalitarian culture. The same value can also be observed in its avoid- ance of private and reserved parking spots.[54] The degree to which playfulness, humor, and fun are part of a company’s culture may be indicated in the office environment. For example, entertainment website The Chive boasts headquarters in Austin, Texas, that includes an indoor slide, hot tub, and second-story bar.[55]

Stories and Language

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 organization’s response to it, or a heroic effort of a single employee illustrating the company’s values. The stories usually engage employees emotionally and gen- erate 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 by energizing them toward a certain goal.[56] Moreover, stories shared with new employees communicate the company’s history, its values and priorities, and create a bond between the new employee and the organization. For example, Arthur Fry, a scientist at 3M, was using slips of paper to mark the pages of hymns in his church choir, but they kept falling off. He remembered a superweak adhesive that had been invented in 3M’s labs, and he coated the markers with this adhesive. Thus, Post-it Notes were born. However, marketing surveys showed that interest in such a product was weak and the distribut- ors 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. This story effect- ively describes the core values of a 3M employee: being innovative by finding unexpected uses for ob- jects, persevering, and being proactive in the face of negative feedback.[57]

Language is another way to identify an organization’s culture. Companies often have their own ac- ronyms and buzzwords that are clear to them and help set apart organizational insiders from outsiders. Such code is known as jargon. Jargon is the language of specialized terms used by a group or profes- sion. Every profession, trade, and organization has its own specialized terms.

K E Y T A K E A W A Y

Organizational 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-attri- tion, 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.

D I S C U S S I O N Q U E S T I O N S

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? Can you think of an example 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 you would fit in best? 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 in? 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?

228 PRINCIPLES OF MANAGEMENT VERSION 3.0

4. CREATING CULTURE CHANGE

L E A R N I N G O B J E C T I V E

1. Understand the process of culture change.

4.1 How Do Cultures Change? Culture is a product of its founder’s values, its history, and collective experiences. Hence culture is part of a company’s DNA and is resistant to change efforts. Many organizations realize that their current culture constitutes a barrier against organizational productivity and performance. Particularly when there is a mismatch between an organization’s values and the demands of its environment, changing the culture becomes the key to the company turnaround.

Achieving culture change is challenging, and there are many companies that ultimately fail in this mission. Research surrounding companies that successfully changed their culture indicates that the fol- lowing six steps increase the chances of success.[58]

FIGURE 8.15 Process of Culture Change

Creating a Sense of Urgency

For the change effort to be successful, it is important to communicate the need for change to employ- ees. One way of doing this is to create a sense of urgency on the part of employees, explaining 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 essen- tial element that will lead the company to eventual success. As an example, consider the situation at IBM 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

CHAPTER 8 ORGANIZATIONAL CULTURE 229

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 em- ployees.[59] While IBM sold its personal computer business in 2005, the company continues to be known for exceptional innovation and leadership.

Changing Leaders and Other Key Players

A leader’s vision is an important factor that influences how things get done in an organization. Thus, culture change often follows changes at the highest levels of the organization. Moreover, 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.[60] Because of political reasons, self-interest, or habits, managers may create powerful resistance to change efforts. In such cases, replacing these pos- itions with employees and managers giving visible support to the change effort may increase the likeli- hood that the change effort succeeds.

Role Modeling

Role modeling is the process by which employees modify their own beliefs and behaviors to reflect those of the leader.[61] CEOs must model the behaviors that are expected of employees to change the culture because these behaviors will trickle down to lower-level employees. One negative example of this type of role modeling is the scandal involving Hewlett-Packard board members. In 2006, when board members were suspected of leaking confidential company information to the press, the com- pany’s top-level executives hired a team of security experts to find the source of the leak. The investig- ators sought the phone records of board members, looking for links to journalists. For this purpose, they posed as board members and called phone companies to obtain 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 effect on the company culture.[62]

Training

Well-crafted training programs may be instrumental in bringing about culture change by teaching em- ployees the new norms and behavioral styles. For example, when auto repairer Midas felt the need to change its culture to be more committed to customers, they developed a program to train employees to be more familiar with customer emotions and connect better with them. Customer reports have been overwhelmingly positive in stores that underwent this training.[63]

Changing the Reward System

The criteria with which employees are rewarded and punished have a powerful role in determining the cultural values of an organization. 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 and promoting employees who embrace the company’s new values and pro- moting these employees, organizations can make sure that changes in culture have a lasting effect. If the company wants to develop a team-oriented culture where employees collaborate with one another, then 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. Prior to its merger with United Airlines, Continental Airlines was a company that success- fully 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 company’s detailed procedures 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 up- coming changes in the culture and served as a powerful story that circulated among employees. Anoth- er early action was redecorating waiting areas and repainting all their planes, again symbolizing the new order of things.[64] 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.

230 PRINCIPLES OF MANAGEMENT VERSION 3.0

K E Y T A K E A W A Y

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 mod- els 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. Successful culture change requires managers that are proficient at all of the P-O-L-C functions. Creating and communicating a vision is part of planning; leadership and role modeling are part of leading; designing effective reward systems is part of controlling; all of which combine to influence culture, a facet of organizing.

D I S C U S S I O N Q U E S T I O N S

1. Can new employees change a company’s culture? If so, how?

2. Are there any 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 actions worked well and what actions failed?

4. What recommendations would you have for someone considering a major change of culture within their own organization?

5. DEVELOPING YOUR PERSONAL SKILLS: LEARNING TO FIT IN

L E A R N I N G O B J E C T I V E S

1. Understand what individuals can proactively do to understand a new organizational environment.

2. Learn effective guidelines for proactive onboarding.

5.1 Before You Join How do you find out about a company’s culture before you join? Several tips will allow you to more ac- curately gauge the culture of a company you are interviewing with.

First, 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 its mission statement would be a good start.

Second, 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.

Third, read between the lines. For example, the absence of a lengthy employee handbook or de- tailed procedures might mean that the company is more flexible and less bureaucratic.

Fourth, reflect on how you are treated. The recruitment process is your first connection to the com- pany. Were you treated with respect? Do they maintain contact with you or are you being ignored for long stretches at a time?

Fifth, 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.

Finally, 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.[65]

CHAPTER 8 ORGANIZATIONAL CULTURE 231

FIGURE 8.16 Managing Workplace Impressions

232 PRINCIPLES OF MANAGEMENT VERSION 3.0

K E Y T A K E A W A Y

There are a number of ways to learn about an organization’s culture before you formally accept a job. Take the time to consider whether the culture you are observing truly seems like the right fit for you. Once you join a new organization, several strategies exist to maximize onboarding success.

D I S C U S S I O N Q U E S T I O N S

1. What clues does your college or school give about its culture?

2. What are four things you could do today to learn more about an organization you are interested in?

3. Imagine that your good friend is starting a new job next week. What recommendations would you give your friend to help him or her do a great job onboarding into the organization?

6. CASE IN POINT: GOOGLE CREATES UNIQUE CULTURE

FIGURE 8.17

Source: Used with permission from Google, Inc.

Google is one of the best-known and most admired companies around the world, so much so that “googling” is the term many use to refer to searching information on the Web. Started out as a student project by two Stanford University graduates—Larry Page and Sergey Brin—in 1996, Google became the most frequently used Web search engine on the Internet with 5.9 billion searches per day in 2013, as well as other innovative applications such as Gmail, Google Earth, Google Maps, Google Chrome, and YouTube. Google grew from 10 employees working in a garage in Palo Alto to over 52,000 employees operating around the world by 2014. What is the formula behind this success? Google strives to operate based on solid principles that may be traced back to its founders. Their mission statement summarizes their commitment to end-user needs: “To or- ganize 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 users with a blank page consisting only of a company logo and a search box.

CHAPTER 8 ORGANIZATIONAL CULTURE 233

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.” This emphasis on improving user experience and always putting it before making more money in the short term seems to have been critical to their success.

Keeping their 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 “Best Place to Work For” by Fortune magazine in 2014, and held this position several times in its history. This is not surprising if one looks closer to how Google treats employees. On their Mountain View, California, campus called the “Googleplex,” employees are treated to free gourmet food options in the company’s 25 cafes, with one employee noting that they are never more than 150 feet away from a stocked pantry. In fact, many em- ployees complain that once they started working for Google, they tend to gain 10 to 15 pounds! Employees have access to gyms, a bowling alley, video games, on-site childcare, sleep pods, massages, and doctors. Google provides four months of parental leave with 75% of full pay and offers $500 for take-out meals for fam- ilies with a newborn. These perks create a place where employees feel that they are treated well and their needs are met. Moreover, they contribute to the feeling that they are working at a unique and cool place that is different from everywhere else they may have worked.

In addition, Google encourages employee risk taking and innovation. In fact, one of the key reasons Google is an attractive employer is that individuals have the opportunity to work on potentially industry changing and life-altering projects that are interesting and meaningful. How is the risk-taking orientation maintained? When a vice president in charge of the company’s advertising system made a mistake costing the company millions of dollars and apologized for the mistake, she was commended by Larry Page, who congratulated her for mak- ing the mistake and noting that he would rather run a company where they 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 working on the cutting edge may explain why the company is performing much ahead of competitors such as Microsoft and Yahoo! One of the current chal- lenges for Google is to expand to new fields outside of their Web search engine business. To promote new ideas, Google encourages all engineers to spend 20% of their time working on their own ideas.

Google’s culture is reflected in their decision making as well. Decisions at Google are made in teams. It is com- mon for several small teams to attack each problem and for employees to try to influence each other using ra- tional 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 …” but instead must say “the data suggest ….” To facilitate teamwork, employees work in open office environments where private offices are assigned only to a select few.

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 may be difficult to work with. Google realizes that its strength comes from its “small company” values that emphasize risk taking, agility, and cooperation. Therefore, they take their hiring process very seriously. Hiring is extremely competitive and getting to work at Google is not unlike ap- plying to a college. As they get bigger, they relaxed their admission standards a little bit, but this means in- stead of conducting twelve screening interviews with the same job candidate, they may now conduct four or five. Candidates may be asked to write essays about how they will perform their future jobs. Recently, they tar- geted potential new employees using billboards featuring brainteasers directing potential candidates to a website where they were subjected to more brainteasers. Each candidate may be interviewed by as many as eight people on several occasions. Through this scrutiny, they are trying to select “Googley” employees who will share the company’s values, perform at high levels, and be liked by others within the company.

Will this culture survive in the long run? It may be too early to tell, given that the company was only founded in 1998. The founders emphasized that their initial public offering (IPO) would not change their culture and they would not introduce more rules or change the way things are done in Google to please Wall Street, and so far, they seem to be right. 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.”

Case written by Berrin Erdogan and Talya Bauer to accompany Bauer, T. & Erdogan, B. (2015). Organizational Be- havior (2nd ed.). Washington, DC: Flat World Knowledge. Partially based on information from Elgin, B., Hof, R. D., & Greene, J. (2005, August 8). Revenge of the nerds—again. BusinessWeek. Retrieved July 29, 2014, from ht- tp://www.businessweek.com/technology/content/jul2005/tc20050728_5127_tc024.htm; Hardy, Q. (2005, November 14). Google thinks small. Forbes, 176(10); Lashinky, A. (2006, October 2). Chaos by design. Fortune, 154(7); Mangalindan, M. (2004, March 29). The grownup at Google: How Eric Schmidt imposed better manage- ment 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. Retrieved July 29, 2014, from http://www.nytimes.com/2005/12/

234 PRINCIPLES OF MANAGEMENT VERSION 3.0

http://catalog.flatworldknowledge.com/bookhub/reader/27495?e=fwk-122425-ch02#ftn.fn-1

05/technology/05google.html; Schoeneman, D. (2006, December 31). Can Google come out to play? New York Times. Retrieved July 20, 2013 from http://www.nytimes.com/2006/12/31/fashion/31google.html; Tkaczyk, C., Keating, C., Konrad, A.,, Vandermey, A. & Kapelke, C. (2/6/2012). The 100 best companies to work for. Fortune, 165(2); Warner, M. (2004, June). What your company can learn from Google. Business 2.0, 5(5).

C A S E D I S C U S S I O N Q U E S T I O N S

1. Culture is an essential element of organizing in the P-O-L-C framework. Do you think Google has a strong culture? What would it take to make changes in that culture for better or for worse?

2. Do you think Google’s unique culture will help or hurt Google in the long run?

3. What factors are responsible for the specific culture that exists at Google?

4. What type of decision-making approach has Google taken? Do you think this will remain the same over time? Why or why not?

5. Do you see any challenges Google may face in the future because of its emphasis on having a risk-taking culture?

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What words would you use to describe the Disney Parks web site? Does the cultural value of “making people happy” come across on the web site

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