What is culture?
Written in 1989 when there where several highly publicized “cultural turnaround” stories. The kick-off example is from GM’s NUMMI plant.
- GM plant was closed in 1982 because it was one of the worst in the GM system with an 18% daily absenteeism rate and a long history of labor/management conflict.
- The plant was reopened in 1983 as a joint venture with Toyota
- 85% of original employees were rehired and these workers were still represented by UAW.
- Productivity is double what GM gets in other facilities
- Quality is the highest in the GM system
- Absenteeism is at 2 percent
- Reason for the turnaround: “At the system’s core is a culture in which the assembly line workers maintain their machines, ensure the quality of their work, and improve the production process.”
Why is culture important?
- It can reinforce the corporate strategy
- It increases commitment by employees to the firm
These factors give companies with a strong culture a competitive edge.
Critical Success Factors
- Firms do not need to have very many strongly held values, but the values it has must be widely shared and strongly held.
- Strategy and culture must be aligned. If a firm decides to compete on innovation rather than price, an appropriate formal structure, and control system must be in place to reinforce this strategy and build innovation into the culture. Examples:
- National Semiconductor—competes largely as a low-cost manufacturer. It emphasizes strict cost control, a functional organizational structure, and culture emphasizing numbers.
- Intel—competes on product innovation. It has a looser formal organization. It’s culture values informal interaction and the development of new technologies and products.
- AMD—competes on quality. Culture reflects the value placed on selling, service, and quality.
How Culture is Developed
- Constructing Social Realities—The expectations of others often account for behavior, therefore culture should be based on building a common set of expectations regarding behavior. One experiment shows that in a public restroom, people wash their hands 90% of the time if there is someone else in the restroom and only 20% of the time if they are by themselves.
- Mechanisms for Developing Culture—The goal is to focus people’s attention, provide a clear guidance about what is important, and provide group reinforcement of appropriate attitudes and behavior.
- Participation—Build systems that encourage people to be involved and send signals to the individual that he or she is valued. (e.g. quality circles, advisory boards, suggestion systems)
- Management as Symbolic Action—Ensure actions of senior management are visible and in support of cultural values.
- Information from Others—Encourage consistent messages from coworkers, as we often take our cue from others when we are uncertain what to do.
- Comprehensive Reward Systems—reward systems should not solely focus on the monetary aspect, but should include recognition and approval.
Examples of ingrained culture at various firms
- Intel: constructive confrontation encourages employees to deal with disagreements in an immediate and direct manner.
- Pepsico: encourages competition and punishes failure to compete
- IBM: service is pivotal
- 3M: Innovation is key
Control systems to reinforce culture
- Control systems are key, but only work if people believe that people who care about the results are monitoring the system (that it’s not just an exercise in bureaucracy)
- Systems either measure behavior or outcomes depending on the situation. A nurse should not be measured on whether the patient gets well, but should be measured on how she treated that patient. Salespeople, however, should be measured on their productivity since it is difficult (and less relevant) to measure their behavior.
- Social control systems can be the most effective. If people agree on what constitutes appropriate attitudes and behavior, the social pressure of wanting to live up to those expectations can be much stronger than the formal control mechanisms.