Sometimes an organization determines that its culture has to be changed. For example, the current environmental context has undergone drastic change and either the organization must adapt to these new conditions or it may not survive. In fact, it is no longer sufficient just to react to change. Today, as was pointed out in this chapter about organizational learning, organizations must have a culture that learns and anticipates change. New product development, advanced information technology and the economy are changing so rapidly that any examples would be soon out-ofdate. However, if the appropriate organization culture is in place, then such rapid change can be welcomed and accommodated with as little disruption and as few problems as possible. One example of an organization culture literally built around change is Steelcase’s corporate development center, shaped like a pyramid with an open atrium containing a huge swinging pendulum to remind employees that the world is always changing. Another example of keeping up with the changing workplace is Zenith, who uses its intranet as a kind of virtual water cooler. As the head of the marketing group notes, “Every day we say who is having a birthday, a service anniversary, or if we’ve had an incredible sales day.”
Even though some firms have had a culture in place to anticipate change, moving to a new culture or changing old cultures can be quite difficult: a case can even be made that it really can’t be done successfully. Predictable obstacles include entrenched skills, staffs, relationships, roles, and structures that work together to reinforce traditional cultural patterns. For example, the head of Bell Canada, which is trying to undergo a significant cultural change (from its 122-year-old monopolist mentality to a highly competitive environment), started with implementing formal quality and cost cutting programs, but realized very quickly that “We needed to get to the front lines of the organization, and my view is that it’s very hard to do that through formal programs.” Another example would be the traditional tough, macho culture found on offshore oil rigs. It was very difficult to change the traditional cultural values of displaying masculine strength and daring to a caring, helping environment. This shift was difficult but over a long period of time these “rough necks” came to “appreciate that to improve safety and performance in a potentially deadly environment, they had to be open to new information that challenged their assumptions, and they had to acknowledge when they were wrong.” The result of this cultural change on the oil rigs dramatically decreased the accident rate by 84 percent and productivity, efficiency, and Reliability all increased beyond the industry benchmarks. In addition to the importance of frontline workers in cultural change, powerful stakeholders such as unions, management, or even customers may support the existing culture and impede the change. The problems are compounded by the cultural clash that is the rule rather than the exception in mergers and acquisitions (M&As), emerging relationship enterprises, and the recent economic crisis.
The Case of Mergers and Acquisitions
Although M&As were thought to have peaked over a decade ago, they have again become very common because the wide divergence in stock-market values between firms, globalization, and the recent financial/economic crisis have left a climate for both friendly buyouts and hostile takeovers. Besides the financial implications of M&As, the often slighted or even ignored organizational culture implications can be dramatic. As one veteran of a number of M&As concluded about the cultural side of mergers: (1) you can’t do too much, and (2) too little will be done. In the heat of the deal, he says, “people issues, as real as they are, become obscured.” The clash between the two cultures in a merger or acquisition can be focused into three major areas:
1. Structure. These factors from the two cultures include the size, age, and history of the two firms; the industry in which the partners come from and now reside; the geographic locations; and whether products and/or services are involved.
2. Politics. Where does the power and managerial decision making really reside? Corporate cultures range from autocratic extremes to total employee empowerment, and how this plays out among the partners will be important to cultural compatibility.
3. Emotions. The personal feelings, the “cultural contract” that individuals have bought into to guide their day-to-day thoughts, habits, attitudes, commitment, and patterns of daily behavior. These emotions will be a major input into the clash or compatibility of the two cultures.
The potential (high probability) cultural clash from M&As will be greatly compounded when the partners are from different countries. With globalization now a reality, cross-border alliances are commonplace. Announcements of megamergers such as DaimlerChrysler, British Petroleum-Amoco, and Deutsche Bank-Bankers Trust reach the headlines, but the cultural clash aftermath seldom, if at all, is discussed. The highly visible DaimlerChrysler merger problems with advertising and U.S.-governmentsponsored research aimed at fuel efficiency and cleaner cars is given attention, but the cultural issues are not given as much attention. Yet, the day-to-day cultural clashes at all levels are the reality. As auto industry analysts have pointed out, Daimler-Benz had a conservative, slow-moving corporate culture while Chrysler at the time of the merger had a fast, lean, informal, and daring corporate culture. For example, the Mercedes-Benz plant in Vance, Alabama, represents the merger in microcosm. The German “wunderkind” plant manager deliberately selected German, U.S., and Canadian managers (some with Japanese auto firm experience) for his team. They clashed not just over the operations system, but also on more subtle but explosive cultural issues such as image and decorum. This type of cultural conflict is greatly trying to be worked out, but guidelines and help are still needed for meeting the challenge of managing the cultural change on both sides.
The Case of Emerging Relationship Enterprises
Today’s networked global environment is going beyond formal M&As with what are being called “relationship enterprises.” Somewhat like network and virtual organization designs, these relationship enterprises consist of a global network of independent companies that act as a single company with a common mission. Examples include the following:
• The aerospace industry at the turn of the century is controlled by two networks— Boeing (based in the United States) and Airbus (France). Importantly, each of these relationship enterprises consists of more than 100 partners around the world.
• In the telecommunications industry, the Global One joint venture, led by Sprint, Deutsche Telekom, and France Telecom, serves 65 countries and functions as one relationship enterprise to serve the global telecom needs of many corporations.
• In the airline industry, United, Lufthansa, SAS, Varig, Thai Airways, and others have formed into a relationship enterprise called Star Alliance. They provide the international traveler with seamless service anywhere on the planet and share systems, marketing, in-country operations, schedules, and frequent flier miles—everything except crews.
In the near future such relationship enterprises will become common in more traditional industries such as chemicals, textiles, and food, as well as new frontier industries such as biotech and memory. The reason that this loose network of alliances is the trend over more formal M&As has to do with legal terms (by law some countries do not allow majority purchase of their firms by foreigners), but mainly with political nationalism and organizational cultural values. Pride and pragmatic needs are driving this new form of global alliance, but the perspective and management of the organizational cultures in this new relationship is a challenge. Issues such as trust, communication, and negotiation skills become very relevant and important to success. The organizations and managers in the global relations “must learn to communicate across the cultural divide; each must understand that the other perceives and interacts in a fundamentally different way.” Importantly, three-fourths of companies believe their alliances failed because of an incompatibility of country and corporate cultures.
Impact of Organizational Culture in an Economic Crisis
Besides M&As and the new organizational designs having an impact on organizational cultural change, the recent economic crisis has also stimulated both scholars and practitioners to reexamine the role that culture played and the lessons to be learned to effectively change the culture. For example, the mortgage companies (e.g., Countrywide Financial) and investment banks (e.g., Lehman Brothers) that collapsed at the end of 2008 were known to have very strong corporate cultures. However, as one analysis pointed out, “they were cultures characterized by rampant individualism, little attention or oversight from supervisors, and huge rewards for successful performance. Those values generated tremendous pressure to maximize individual performance and payouts, often by taking outsized risks and hiding failures. That same pressure often caused players to push the environment as to acceptable ethical behavior.”
By contrast, at least at this writing, Goldman Sachs was one of the few that escaped the purge in investment banking. They are known for having a team-oriented culture (as opposed to “rampant individualism”) and according to Steven Kerr, a former organizational behavior professor who then became chief learning officer at GE and then Goldman Sachs, the managers had several meetings a day and “making any decision required checks with many people, and before we made a decision to invest, many eyes had seen the proposal.” 88 In other words, lessons from the recent economic crisis are that first, the organizational culture can affect not only the ethical, “right thing to do,” but also survival in the long-term. Second, organizations need to continually challenge and change their cultural values. For example, Goldman managers regularly review their cultural values by asking questions such as: “Which are we most or least faithful to?” and “Which need refreshing or reaffirming?” Such a culture of continual questioning seems to be an effective starting point in cultural change, but there is also a need to go beyond such specific guidelines and focus on a more comprehensive approach that will be able to adapt to changing conditions.
Guidelines for Change
Despite the complexity, significant barriers, and Resistance to Change, organizational cultures can be managed and changed over time. This attempt to change culture can take many different forms. Simple guidelines such as the following can be helpful:
1. Assess the current culture.
2. Set realistic goals that impact the bottom line.
3. Recruit outside personnel with industry experience, so that they are able to interact well with the organizational personnel.
4. Make changes from the top down, so that a consistent message is delivered from all management team members.
5. Include employees in the culture change process, especially when making changes in rules and processes.
6. Take out all trappings that remind the personnel of the previous culture.
7. Expect to have some problems and find people who would rather move than change with the culture and, if possible, take these losses early.
8. Move quickly and decisively to build momentum and to defuse resistance to the new culture.
9. Stay the course by being persistent.
Also, organizations attempting to change their culture must be careful not to abandon their roots and blindly abandon their core, but distinctive, competencies and core values. For example, it is generally recognized that the reason “New Coke” failed was that it broke away from the tried-but-true Coca-Cola traditional culture; and the reason Google so far has remained at or near the top in all categories, from profits, to growth, to best places to work, is because it has remained true to its core cultural values and all Googlers buy into them. As was recently observed:
Talk to more than a dozen Googlers at various levels and departments, and one powerful theme emerges: Whether they’re designing search for the blind or preparing meals for their colleagues, these people feel that their work can change the world. That sense is nonexistent at most companies, or at best intermittent, inevitably becoming subsumed in the day-to-day quagmire of PowerPoints, org charts, and budgetary realities.
Where Coca-Cola is an example of a firm with a long history and strong corporate culture, and Google is a new age company with a very powerful corporate culture, IBM, discussed earlier under creating and maintaining a corporate culture, is a good example of a firm that has successfully undergone cultural changes.