Changing Organizational Culture

Changing Organizational Culture

In today’s dynamic business world, organizations that do not cope with rapid changes in the environment are left far behind in the race of becoming market leaders. There is no organization that can take pride in having a constant or status-quo corporate culture.

Stability today is now synonymous with stagnation rather than steadiness. In order to gain a competitive advantage, an organization needs to have a flexible culture that can adapt to changes in the environment readily.

For example, the major reason behind the competitiveness of Apple Inc. is its innovative culture that emphasizes the introduction of new products. Various products like iPhones, iPods, and iPads are the result of not only a skilled team of engineers but an innovative culture that is imbibed in the DNA of the company.

Another example of improved performance and efficiency through cultural change is GE under the leadership of Jack Welch. Towards the beginning of the 1990s, the performance of the company stagnated.

The major factors responsible for the high performance of a manufacturing organization are operational efficiency, cost efficiency, and quality.

However, GE lacked all these performance indicators. Jack Welch, the then CEO of GE, introduced 4Es (Energy, Energise, Edge, and Execution) and incorporated a company-wide Six Sigma program (a quality improvement initiative). This resulted in a process-oriented, operation-focused, and cost-conscious organizational culture that helped in the financial turnaround of the company (Harvard Business Review, ‘GE’S Culture Challenge After Welch and Immelt’).

From the discussion so far, it can be said that when it comes to culture, there is no point of dragging the organizational legacy and sticking to the culture that has been historically followed. As organizations are going global rapidly, cultural change has become of paramount importance for organizations in order to stay ahead of competitors in international markets.

These changes require organizations to make fast decisions, respond to strategies adopted by competitors quickly, and adapt to technological changes. For example, decision-making is faster in flatter organizations (for example, Google) as compared to hierarchical and bureaucratic organizations (for example, the State Bank of India).

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Need for Cultural Change

The need for cultural change can be summarised in the following points:

• Improving Business Performance
  
• Keeping Pace With the External Environment

Improving Business Performance

In most cases, cultural change becomes an immediate requirement when an organization goes through sluggish business performance for a prolonged period (as GE prior to Jack Welch).

Numerous types of research have suggested that in addition to external factors, the behavioral attributes of employees have a major impact on business performance.

For example, an organization can hardly address product quality issues when its employees are not ready to take personal accountability for their work. In such a case, the adoption of a learning culture in which each employee works towards improving the quality would be more effective.

Keeping Pace With the External Environment

The external environment of a business can change because of various factors, such as technological change (for example, e-retail), change in government policy (for example, strict regulations regarding energy conservation and adoption of green technology), change in the management of a business, or change in economic conditions.

For example, when the State Bank of India (SBI) was finding it difficult to compete with private banks, it brought revolutionary changes in the way banking processes were performed; transactions were executed; services were provided to customers; etc.

This was a major cultural reorganization in SBI, the trigger of which came from changes in the external environment, such as stiff competition in the banking sector and the introduction of new technology.

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Process of Changing Organisational Culture

The most challenging task for any organization is to change its corporate culture as it is difficult to modify commonly shared values and beliefs. According to Edward Schien, a renowned scholar in the field of Organisation Behaviour, the process of changing organizational culture is similar to a teaching process.

• Creating a Sense of Urgency
  
• Changing Leaders and Other Key Players:
  
• Creating Role Models
  
• Training Employees
  
• Making Changes in the Reward System
  
• Creating New Symbols and Stories

Employees are taught how to move from the current state to the preferred state of organizational culture. Cultural change is a systematic process that involves a number of steps.

Creating a Sense of Urgency

The first step to initiating cultural change is to identify its need in an organization. In order to be successful in implementing the desired changes, it is important for the organization to make employees aware of the need for change.

This can be done by explaining to employees about dysfunctional elements that hamper the organization’s productivity and performance. For instance, in 1993, when Lou Gerstner joined IBM as the CEO and Chairman, IBM lost its market share due to the presence of many cheaper clones of the original PC.

Consequently, consumers considered IBM’s technology to be obsolete. Gerstner took this situation as an opportunity and proposed cultural change in order to improve performance and increase productivity.

Changing Leaders and Other Key Players:

A leader plays a crucial role in changing organizational culture. Cultural change starts from changes at the top level of an organization. This is because the behavior of leaders towards cultural change trickles down to lower levels.

In order to implement changes quickly and efficiently, an organization may need to remove managers who act as barriers to change. Managers may resist due to a number of reasons, such as job insecurity, self-interest, or rigid values and beliefs.

Take the case of Walt Disney. When Michael Eisner was replaced by Robert Iger as the CEO, the first change he introduced was to ban the central planning unit as it had people who were close to ex-CEO Eisner. The planning unit was a major barrier to creative ideas and its removal ensured an innovative culture at Disney.

Creating Role Models

A role model is an individual who inspires other people to emulate his/her behavior, style, or success stories. Leaders need to act as role models in the cultural change process so that they encourage people at lower levels in the organization.

Taking the same example of Robert Iger, the CEO of Disney, when he took over, he ensured a culture of innovation by attending summits of game developers and giving them feedback for the same. Thus, he acted as a role model for all others in the idea-creation process.

On the contrary, inappropriate behavior of the top management will trickle down to lower levels. For example, a scandal was exposed in Hewlett Packard in 2006 in which several board members were under suspicion of leaking confidential information to the press.

Thus, the organization hired a team of security experts to find out the culprits. The investigation team checked their call records for finding links with journalists. After the investigation, the chairman and the other four board members faced criminal and civil charges. Such unethical behavior of the top management affected organizational culture adversely.

Training Employees

Organizations that train and encourage their employees are able to implement changes in culture efficiently. As mentioned above, according to Schein, cultural change is a teaching process. Employees need to be trained in bringing about a change in culture. This can be possible if the desired norms and expected behavior are well communicated to employees by leaders.

For example, NASA, after its space shuttle Columbia disintegrated on re-entry in its mission in February 2003, became sensitive towards safety and undertook cultural change. The changes were introduced through extensive training programs on safety and cognitive bias awareness.

Making Changes in the Reward System

Rewarding and promoting employees (who embrace the proposed cultural changes actively) on a periodical basis ensures that changes last long in an organization. Also, effective reward and recognition systems in an organization reflect cultural attributes prevailing in that organization.

Thus, an organization needs to be careful while establishing its reward system as it can backfire at times and may not prove helpful in bringing about cultural change. For instance, individual-based incentives may hamper the development of a collaborative and team-oriented culture.

Creating New Symbols and Stories

In an organization, cultural change can be successful if new rituals, symbols, and stories are developed. Take the case of Continental Airlines, which burnt its 800 pages company policy manual in front of all its employees in the parking lot. The main reason behind such acts of the organization was to assure its employees that the detailed and traditional policies have been changed and a new culture of empowerment would be introduced.

The new organizational policy manual had only 80 pages, and this story circulated among all the existing employees as well as new job seekers. This enabled the organization to bring about changes effectively. Not only this, but Continental Airlines also made efforts in renovating its waiting areas and repainting its planes with an aim to symbolize change.

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Implementation of Organisational Change at Cisco

Cisco is one of the world’s leading IT companies and operates in 300 locations in 90 countries. The company operates more than 45 data centers and server rooms supporting functions like production, customer support, and product development.

Like most IT organizations, Cisco used a traditional organizational structure wherein there was much duplication of effort and a lack of focus across the organization. Sometimes employees were not aware of duplication that existed across the organization.

The traditional structure included regional network teams and regional voice teams that were responsible for all aspects of implementing and operating their environments and services. The following figure shows the traditional structure of Cisco:

To prevent the duplication of work, Cisco engaged its Network Availability Improvement Services (NAIS) organization to find out the areas that require improvement and recommend how to proceed.

NAIS assessed people, processes, and tools needed to mitigate operational risk and network complexity by running an Operational Risk Management Analysis (ORMA), which is a roadmap for operational excellence and approach to network design, tools, processes, and expertise. NAIS bases the identification and ongoing improvement of best practices upon its ongoing support experience, industry guidance, and the accepted Cisco network design principles for all networks demanding high availability.

The ORMA report was published in 2006 according to which it was apparent to Cisco’s Vice President of IT John Manville that organizational changes were necessary to encourage employees to provide additional scalability and agility that Cisco’s business required. “The Network and Data Center (NDCS) organization could not accommodate the kind of growth and technology evolution that Cisco and Cisco IT was expecting,” says Manville.

“The existing resources were not structured to support this, and there was significant duplication of work and processes. These would likely be strained, possibly to the breaking point, with even a minimal amount of growth,” he adds.

Cisco restructured the lifecycle model

In 2008, Cisco restructured the lifecycle model, which consisted of six steps. These are:

• Prepare phase: In the prepare phase, the company identified a business case and financial rationale to support the adoption of new technology. In this phase, future needs were predicted and a technology strategy was developed.
  
  
• Plan phase: In the plan phase, the company ascertained whether it had adequate resources to implement the technology strategy. In this phase, potential difficulties, individual responsibilities and critical tasks necessary to deliver the final result were also determined.
  
  
• Design phase: This phase involved preparing a detailed design essential to reduce risk, delays, and the total cost of network deployment. The design phase accelerated successful implementation with a plan to stage, configure, test, and validate network operations.
  
  
• Implement phase: In this phase, the organization integrated devices and new capabilities in accordance with the design, without compromising network availability or performance.
  
  
• Operate phase: In the operating phase, the IT department of Cisco monitored the health of networks in order to improve service quality, reduce disruptions and maintain high availability, reliability, and security.
  
  
• Optimise phase: In this phase, the company identified whether the business goals or technical requirements changed or whether there is a new capability or enhanced performance recommended.

The restructuring, together with the NAIS ORMA report affected change in NDCS. Over the past two years, NDCS has deepened its relationship with Cisco IT’s advanced services for significant results.

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Attributes of Cultural Change

According to Peter and Waterman, there are some common cultural attributes that are associated with the cultural change process. These attributes are known to be the masters of change. These attributes are discussed as follows:

• Simple and Well-communicated Strategic Vision
  
• Noticeable Involvement by Top Management
  
• Competitive Edge Based on People
  
• Market Orientation
  
• Management Driven on Consensus
  
• Recognition of Social Responsibility

Simple and Well-communicated Strategic Vision

Employees within an organization must be aware of the strategic goals to be achieved. An organization that has a well-defined philosophy, purpose, and objective sends the right signal to its employees, customers, stakeholders, and suppliers.

The organization’s vision needs to be based on a clear understanding of the existing business environment. A clear strategic vision lays the foundation for an organization to attain and sustain a competitive edge in the market.

Noticeable Involvement by Top Management

The top management needs to be committed to the cultural change process. When leaders and managers from all departments become visibly involved in the process, an organization can achieve sustainable changes. The changes that are introduced the need to seep down from the top level to the bottom level in the organization.

Competitive Edge Based on People

In today’s business environment, it is extremely crucial for organizations to stay ahead of the competition. From marketing and promotion activities to packaging, everything can be easily adopted by competitors.

Therefore, organizations need to find a sustainable competitive edge. A participative, well-informed, dynamic, and empowered workforce can contribute to the highly competitive performance of an organization by exploiting opportunities and predicting potential threats.

Market Orientation

An organization needs to meet customers’ expectations by developing a customer-focused culture. In other words, the focus of an organization at all levels should be on improving the overall customer experience.

Management Driven on Consensus

To implement cultural changes successfully, it is important for an organisation to promote management practices that are driven by a commonly shared perception. Achieving a common perception can be challenging when people with authority tend to dictate rather than communicate.

Recognition of Social Responsibility

Society forms a significant part of an organization’s growth by providing resources and generating revenue by buying the organization’s products. In the long run, a successful business can be built on the foundation of a happy community.

For example, Tata Group made formal amendments in its Articles of Association in 1970 and included that the organization should be thoughtful towards its employees, shareholders, society and community.

There are many regulatory bodies that keep a tab on whether organizations perform their operations in accordance with the needs of society. Thus, it is important for organizations to incorporate a culture that exhibits their responsibility towards consumers, employees, natural environment, and society.

These responsibilities include:

• Providing high product quality.
  
  
• Addressing customers’ grievances.
  
  
• Maintaining and publishing financial records as per the accounting norms.
  
  
• Abiding by environmental norms.
  
  
• Performing operations that do not create a nuisance for local communities.

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Role of Communication in Cultural Change

Effective communication within an organisation is crucial for implementing cultural change. If there is transparency in communication, the employees of an organization would be motivated to adapt to the corporate culture.

• Customizing the Message
  
• Setting the Correct Tone
  
• Taking Feedback
  
• Selecting the Right Mode of Communication

This would ultimately lead to the smooth functioning of an organization and build positive relationships among people within and outside the organization.

However, it should be noted that communication is not a passive activity that only involves providing information on change initiatives to employees by an organisation. Instead, communication is a two way process that also involves taking feedback from employees on the information conveyed.

There are certain guidelines that help organizations to communicate change initiatives to employees effectively. Some of these guidelines are discussed as follows:

Customizing the Message

Before announcing any change, an organization needs to understand the audience and its expected reactions. The message should be encoded as per the skills and expertise of the audience.

Setting the Correct Tone

The interpretation of the message depends on the tone and content of the message. If the tone is inappropriate, the recipient may feel offended. Not only the content but also the body language, medium, and words set by the tone.

Taking Feedback

As discussed earlier, communication is a two-way process. In case of cultural change, the sender must be aware of responses from recipients. Thus, the sender should ensure that the recipient has received, accepted, and understood the change initiatives proposed in the message.

Selecting the Right Mode of Communication

In an organization, there are various modes of communication, such as email, Web chats, and one-to-one interactions. However, the selection of the mode depends on the urgency of the message to be floated, the targeted audience, etc. The sender should select the right mode of communication so that information is sent across without any delays

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Role of Leaders in Changing Organisational Culture

Organizational culture is developed by the people in an organisation. It is their values, beliefs, and shared assumptions that shape organizational culture. Thus, it is important to understand how the employees of an organisation perceive and embrace a change in culture.

Leaders in any organisation have a responsibility of encouraging employees to adapt to cultural changes by sharing their perspectives on the transformation. They have to set an example first in order to encourage others to accept cultural changes.

A leader needs to have a vision and commitment toward change. According to DeSimone, Warner, and Harris, cultural change involves a complex process of replacing an existing paradigm or way of thinking with another, which can only be accomplished through effective leadership.

Kotter and Heskett in many of their studies have asserted that without leadership, purposeful change of any magnitude is almost impossible.

According to Schien, to initiate cultural changes, leaders need to develop individual and organizational capacity, evaluate the internal and external environments, encourage participation, and maintain effective communication channels within an organization.

The following points summarise the role of leaders in cultural change:

• A leader needs to identify the need for an organization to adapt to changes.
  
  
• A leader is responsible for making people aware of the desired culture by sharing the long-term vision of the organization.
  
  
• It is the responsibility of a leader to identify barriers to change and overcome them.
  
  
• A leader needs to support the cultural change process not only verbally but through his/her actions and behavior.
  
• A leader should celebrate his/her short wins in changing culture to keep employees motivated.