ORGANISATIONAL CULTURE The impact of organisational culture on business strategies and performance Key definitions Intangible asset: non-monetary asset without physical substance which generates economic benefits; culture as an organisational asset
Strong culture: a consistent culture; understood and felt by people inside & outside the organisation, consistent with organisational goals. Toxic culture: questionable morals and unethical behaviour Key concepts Employee engagement: employees' drive & commitment to use their energy, skills
and resources which benefit the firm Competitive advantage: sustainable differences compared with the main competitors Cultural glue: organisational culture is what keeps an organisation together it binds people Features of a positive culture
A source of competitive advantage Clear set of values, mission & goals
Performance-orientated Encourages suitable risk-taking & innovation Strong internal communication Engaged employees: higher motivation & loyalty Better connection between depts. & divisions Not easily copied Features of a weak culture Little alignment with business values
Inconsistent behaviour A need for extensive bureaucracy & procedures Examples of when culture goes wrong! News of the World / News International: phonehacking & bribery allegations RBS & Fred Goodwin: Reckless external growth & lending hastened banking crisis of 2008/9 GlaxoSmithKline: record $3bn fine for misselling of drugs and bribery
Enron / Jeff Skilling: US's 7th largest firm turned out to be an elaborate scam Barclays: role in LIBOR rigging & PPI misselling leads to departure of CEO Bob Diamond Examples of culture as a competitive advantage (1) Zappos: defines its culture in terms of 10 core values made part of everyday working life. For Zappos, the "culture is the brand
IKEA: clear link between strong corporate culture, the business model and financial success ("to visit IKEA is to visit Sweden"). IKEA's vision and values ("to create a better everyday life for the many people") drives the way the culture operates. Examples of culture as a competitive advantage (2) Southwest Airlines: A strong
culture based on employee engagement has helped make it the most profitable, low-cost airline in the world. Herb Kelleher (CEO): "The business of business is people German mittelstand: family-owned businesses with a strong long-term perspective have driven German economic success; invest in quality.
Key depends on factors Research emphasises the complexity of corporate culture & the risks of oversimplifying what it is and how to change it. Larger, longer-established firms have more complex cultures, consisting of sub-cultures, individuals and groups. Having a clear, well-communicated and accepted set of core values helps to establish a common, positive culture. A flawed business model or strategy is unlikely to result in business success, even if the culture is strong and healthy.
A culture that fails to adapt to the changing external environment may hasten the failure of an organisation. Some possible evaluation points There are many potential links between organisational culture and business success but difficult to prove. Successful businesses often recognise that the business model/strategy and culture are interdependent - the whole system is aligned. Better-performing firms pay attention to nurturing culture they are disciplined (e.g. have reward, communication
systems) and invest time in it. Leadership plays a key role in nurturing culture: Schein: "the only thing of real importance that leaders do it to create and manage culture" Background Slides, Examples and Other Activities When Culture Goes Wrong
The Behaviour of a Firms Managers One possible chain of events Success generates strong sales growth Bureaucracy builds to cope with growth Firm hires & promotes managers, not leaders
Managers become increasingly arrogant A strong but arrogant culture develops Alternative hypothesis: culture as a cult Apple Disney Goldman
Sachs Marriott Hotels Employment at businesses founded or led by these has been likened to being cult-like. Shadow of the Leader? A phenomenon where
the organisational culture is the reflection of the founder or senior team Shadow of the Leader? A fish rots from
the head first Another great source of examples & evidence The UK Bonus Culture A possible essay title To what extent to do agree that an
organisational culture based on high employee rewards will inevitably damage business performance in the long-run? Can you make the links between culture > high rewards > business damage? July 2012 Corporate Culture as a Competitive Advantage
Culture as an essential intangible asset Human capital 3 categories of intangible assets essential for implementing any strategy Information capital
Organisation capital Source: Kaplan & Norton, The Balanced Scorecard Culture: an intangible asset with big potential Distinctive & individual to the firm Hard to copy Enables a business to differentiate
itself Can help add value A source of competitive advantage? Built to Last A clear, sustained culture is stronger than any one individual as a
factor in continued to success Built to Last Cult-like Cultures IBM attained its greatest success during the same era that it displayed its strongest cult-like
culture Signs of a cult-like ideology Orientation & induction training with ideological content (values, history) Internal universities Hire young & promote from within Unique language &
terminology Source: Built to Last: Collins & Porras Corporate songs Tight screening processes for hire & fire Celebrations that reinforce success & belonging
Constant reminder of values & heritage Culture quotes - IBM Until I came to IBM, I probably would have told you that culture was just one among several important elements in any organisations make-up and success. I came to see, in my time at IBM,
that culture isnt just one aspect of the game; it is the game Lou Gerstner (Chairman & CEO IBM 1993-2002) Whose corporate culture is this? Customers are guests A job is a part A uniform is a costume Being on duty is onstage Being off duty is backstage
Whose corporate culture is this? 2 Classic Case Studies in Positive Culture Zappos Southwest Airlines (Online Shoe Retailer)
Worlds Largest Low-Cost Airline Zappos your culture is your brand Southwest Airlines
the business of business is people Where to find other examples of successful corporate culture Best place to work for The survey methodology identifies workplace performance and best practice according to eight key factors. These factors are particularly significant as they are defined through the results from the
survey process, and therefore by employees themselves, as critical factors in workplace engagement. Leadership: How employees feel about the head of the organisation, senior managers, and the organisations values and principles My Manager: How employees feel about and communicate with their direct manager Personal Growth: What employees feel about training and their future prospects Wellbeing: How employees feel about stress, pressure at work, and work life balance My Team: Employees feelings towards their immediate colleagues and how well they work together
Giving Something Back: The extent to which employees feel their organisation has a positive impact on society My Company: The level of engagement employees have for their job and organisation Fair Deal: How happy employees are with their pay and benefits Visit the tutor2u BUSS4 Organisational Culture Blog for more resources
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