There is an interesting relationship between organisational culture and
management of change. Organisations which were able to gear up cultural changes
within to changes in the environment, benefited while those which could not
overcome cultural inertia suffered. This article examines the relationship
between cultural inertia and the dynamics of change in organisations.
The
rapid economic, political and technological changes at the global level affect
the business environment by increasing competition manifold, reducing lead
times, customer demand for high quality and low prices. It is therefore
imperative for organisations to develop an appropriate customer
focused culture in order to achieve sustainable
competitive edge.
John
Frain defines culture as a “set of key values, beliefs,
understandings and norms of behaviour, which prevails within the organisation.”
(Introduction
to Marketing, Fourth Edition. International Thomson Business Press.
London. 1999. p. 93) Organisations have to cope with culture in three
different contexts. The first of these relates to the buying behaviour of
consumers whether individual or the decision-making units (DMU) in case of
business-to-business operations. The second is when they transact business with
or operate in different countries/geographical locations. The third and -
perhaps most important - cultural context organisations have to cope with is,
within the organisation itself. Culture influences organisational structure,
strategies, control systems and operations.
In
his book, Frain quotes the researches of two teams, Dale and Kennedy in 1982
and Baker and Hart in 1996, which proved that culture has a
major effect on the success of a business. The Baker and Hart team analysed a
sample of successful and less successful firms in a cross section of growing
and declining industries. They found that some of the critical attributes of
successful organisations (e.g. entrepreneurship, ‘lean and mean’
structures etc.) were found in less successful organisations also. This led
them to conclude that what makes some organisations more successful is
not what they do, but how well they do it - culture
and commitment are the key determinants for the success of an organisation.
Organisations will have to audit their culture as the first step to manage it.
The questions to be asked are: is it functional? or is it
dysfunctional? And if it is functional, will it support the
organisation’s projected goals?
To
illustrate his point, Frain cites the example of the acquisition of Goetze the
well-known German manufacturer of piston rings by T&N the
British components and specialist-engineering group. Goetze had
severe financial losses for three years when T&N took over
the company with the objective of acquiring a significant share of the German
market for piston rings. When T&N analysed the German
company, it found the company was steeped in the culture of the rich in
its arrogant behaviour towards customers. It had a bloated management
structure, with ten layers of management and seven tiers of secretaries. The
company was not able adopt new technologies because of a deeply
entrenched cultural inertia. T&N decided
that it needed to change Goetze’s culture of hierarchy.
The result of restructuring, rationalisation of work force and pruning
inefficient production lines resulted in a sharp lowering of costs and the
company returned to profits in 1994.
The Goetze case
is not an example of the imposition of an alien culture but a
release from inertia triggered from outside. What happens when there is no
external trigger? How does an organisation bring about changes that are
necessary for fostering long-term customer relationships? It is not easy to
bring about cultural changes because of an innate human resistance to change.
There is always a conflict between the driving forces that
seek to bring about change and resisting forces that seek to
preserve the status quo. Managers refuse to see that ‘change’
is real and continue to work as before. If they find that they are not able to
function as before because of their denial to see changes within
the organisation and the environment, their denial gives way to fear and
energies are diverted to politicking.
Organisational Impediments to Change
Nigel
F. Piercy (Market-Led Strategic Change. Third Edition. Butterworth
Heinmann. Oxford. 2002.) identified four kinds of managers who can block
change. The dangerous enthusiasts go about trying to
change everything without understanding the goals of change. The “Yes…But”s understand the
need for change but are not inclined to change. In fact their “Yes…But” is a
polite way of saying “No”. If pushed to implement change they turn to malicious
obedience only to wait for things to go wrong when they can point
out: “Look I have done what you asked me to
do, but see what happened!” The Dinosaurs simply do not
want and won’t change.
Piercy
gives some amusing examples form Royal Dutch/Shell the world’s second largest
oil company to illustrate his point - of resistance to cultural change.
Executives of Shell were encouraged to suggest three alternative courses of action for the implementation of strategies with the result that they always chose the middle path, as they felt, it was the safest.
Shell executives have buried expensive exploration equipment in Gabon, as they did not want to face the bureaucratic hurdles in relocating it to another country.
An MD noted that the company believed that fourteen signatures on an
official note made it look better!
The company driver who picked up an executive from a delayed African flight was
driving him for a meeting at a sedate thirty mph speed as the car had a speed
governor on it and could not be driven faster. When questioned by the
exasperated executive as to what he would do in an emergency, the driver
replied that he would take a taxi!
Piercy
noted that a conscious effort to bring about a culture change helped IBM to
turn back on the endemic losses of the late 1980s and return profits
beginning1993. Lou Gerstner who came in as CEO, created the ambience for
a “strong
customer-needs focus, leading to the development of integrated technology
solutions drawing on all of IBM’s R&D, product, service and software
skills.” Executives who tried to resist were
weeded out.
Philip
Kotler describes a study by the Stanford researchers Collins and Porras, which
they published under the title Built to Last.* The researchers
identified two companies each in eighteen industries and designated one as a ‘visionary
company’ and the other as a ‘comparison company’. Visionary
companies (e.g. General Electric, Hewlett-Packard and Boeing) were the
recognised industry leaders: they set ambitious goals, communicated the goals
clearly to their employees and most important they had a higher purpose other
than making money. They outperformed the comparison companies (e.g.
Westinghouse, Texas Instruments and McDonnell Douglas) by a wide margin.
The visionary
companies had three common features. First, they held a distinctive
set of values from which they did not deviate. IBM’s values included respect
for the individual, customer satisfaction and continuous quality improvement.
Johnson & Johnson’s believes that its first responsibility is to
its customers, its second to its employees, its third to its
community and its fourth to its stockholders.
The second common feature these companies had was they expressed their purpose in enlightened terms. Thus Xerox wants to improve office productivity, Monsanto wants to end hunger in the world. According to the researchers the core purpose of a company should not be confused with its business objectives or product list.
The
third common feature of the industry leaders is that they have developed a
vision for the future and worked to implement it. Thus IBM is now working to
establish leadership as a network-centric company and not
simply as a leading software manufacturer.
The
first step to induce change is to allay any unfounded fears that the change is
likely to cause in the minds of its employees, rather than pressuring for
change. The issue that organisations face in the specific context of developing
a customer-led culture is that customer interests are regarded as concerning
only the marketing function. In many organisations, the other
departments see marketing as alien to the larger
organisational interest of making profits. Therefore there is always a conflict
between marketing and other departments.
*An update since Philip Kotler referenced it in his “Marketing Management” (2003. Eleventh Edition). Pearson Education. Singapore:
“Ten
years on, almost half of the visionary companies on the list have slipped
dramatically in performance and reputation, and their vision currently seems
more blurred than clairvoyant. Consider the fates of Motorola, Ford, Sony, Walt
Disney, Boeing, Nordstrom, and Merck. Each has struggled in recent years, and
all have faced serious questions about their leadership and strategy. Odds are,
none of them today would meet BTL's criteria for visionary
companies, which required that they be the premier player in their industry and
be widely admired by people in the know." — Reingold, Jennifer and Underwood, Ryan. (2004). Was “Built To Last” Built To Last?
