Strategic Management: Organisational Culture - Essay Example

Strategic Management: Organisational Culture Answer Notions of Organisational Culture In their attempts to unravel the complexity of organisational life, management thinkers, business educators and management researchers have developed various ways of describing it. One of these ways applies sociological perspectives and conceives an organisation to be a unique living entity in itself; an entity that has got an own history, traditions, character and patterns of internal dynamics; one that has a culture of its own. Culture is a dynamic phenomenon and a coercive background that has a multiplicity of ways of influencing organisations. Culture is a creation of human interactions with each other, and it serves to shape their behaviours. Culture supplies individuals with language, and language provides meaning in their day-to-day lives. It forms the social order on which individuals live in and the rules they abide by. The cultures of macro systems such as organisations are more stable and ordered because of the length of time they have existed. Organisational cultures usually vary in length and stability as a function of emotional intensity and length of their real history from the moment they were founded. The notion of organisational culture helps to explain difficult phenomena and to normalise them (Schein 2010, p. 16). A deep understanding of dynamics of organisational culture helps individuals to eliminate anxiety when they encounter unfamiliar and irrational behaviour of people in organisations. Human beings are the main actors in organisations. When human beings understand culture better, they are likely to understand themselves better and recognise some of the forces that act within them that define who they are. The most intriguing aspect of organisational culture as a concept is that it directs organisation actors to phenomena that are hidden below the surface, that have a powerful impact but invisible and are to a considerable degree unconscious. Organisational culture as a concept is an abstraction. Where an abstract concept is expected to be useful to human thinking, it should be observable yet increase human understanding of a set of events that seem mysterious. The notion of organisational culture implies structural stability, breadth, depth, and integration or patterning (Schein 2010, p. 16). These notions are explained under: Structural stability Culture implies some level of stability in the structure of the group. If something is said to be ‘cultural’, it is not only shared but also stable because it defines the group. When individuals in a group achieve a sense of group identity, the group identity becomes the major stabilising force, and this will not be given up easily (Schein 2010, p. 16). Culture survives even when some members of the organisation leave. Culture is not easily changed because organisation members value stability in that it provides predictability and meaning. Depth Culture is the deepest and the most unconscious part of the group. Therefore, it is less visible and less tangible. When something is more deeply embedded, it tends to be more stable. Breadth A third concept of culture is that after it has developed, it covers all aspects of how a group functions. The pervasiveness of culture is influential of how an organisation deals with its primary tasks, its internal operations, and its various environments. The concept is – in referring to the culture of a group, one refers to all the operations of the group. Integration/Patterning Te fourth characteristics that the notion of culture implies and that leads to further stability is integration of the group elements into a larger paradigm, and this lies at a deeper level. Culture implies that values and behaviours are tied together into a coherent whole, and this integration is the essence of what culture means. This integration derives from the human need to make their environment as orderly and sensible as they can. Schein (2010, p. 17) states that disorders bring anxieties, and human beings will work hard to reduce that anxiety by developing a more consistent way of patterning things. Like other cultures, organisational culture also develops as groups of individuals struggle to make sense of their worlds. Importance of organisational culture Organisational culture is important because it influences how people think and behave. It offers a shared system of meanings which forms the basis of communication and mutual understanding. Failure by the organisational culture to fulfil these functions will significantly reduce an organisation’s efficiency. Johnson (2008, p. 197) presented culture as a web at the centre of which is the organisational paradigm. In this web, culture is surrounded by elements that combine to deliver culture. This cultural web is an organisation’s recipe for success. For an organisation to achieve success, its organisational paradigm must fit the operating environment for the organisation. Alvesson and Sveningsson (2008, p. 24) suggests that Lewin’s cultural web should be employed in a process of five steps. These steps are: Situational analysis: should answer the question – “where are we now?” The role of cultural web in this step is to facilitate understanding of the basic beliefs and assumptions of core business. Policy and strategy-making: answers the question – “where do we want to go?” In this step, the cultural web provides a clarification of beliefs and assumptions govern the existing strategy. Organisational implications: answers the question of how can we change the values in accordance with the new strategy? Which values do we need not to change? Change management: the cultural web helps to focus the organisation on the dimensions that should be changed in order to accomplish strategic change. Monitoring and evaluation: In this step, the cultural web helps to track the progression of ongoing organisational change (Alvesson and Sveningsson 2008, p. 24). Rituals and routines Symbols Stories and myths The paradigm Power structure Control systems Organisational structures Figure 1 A Cultural Web. Source: Johnson et al. (2008) Drawing from Johnson et al. (2008) paradigm, the organisational ingredients that make up recipes include; The way the organisation is organized The type of power used in the organisation How the organisation develops and plans its strategies The way the organisation exercises control, what is controlled and how it is controlled The way the organisation recruits, develops, appraises, and rewards its staff Day-to-day operations of the organisation The stories organisational members tell each other that help explain what is important Events, objects, and acts that have a particular meaning (Holroyd and Field 2012, p. 61). Answer 2 Organisational Culture and Competitive Advantage An organisation’s culture is vital for its competitive advantage because other organisations find it difficult to imitate. An organisation’s ability and competence to manage people are not easily imitated by competitor organisations. Porter’s three-generic strategy allows an organisation to overview all competitors in an industry. According to Porter (1985), the key drivers of competitive advantage in an organisation are differentiation of products, focus, and cost leadership. STRATEGIC ADVANTAGE Uniqueness Perceived by the Customer Low Cost Position Industrywide DIFFERENTIATION OVERALL STRATEGIC COST LEADERSHIP TARGET Particular FOCUS segment only Figure 2 Porter’s Three Generic Strategies One of the strategies that an organisation uses to remain competitive in the market is cost leadership. An organisational culture should be designed in such a way that it will achieve superior profits through lower costs. Secondly, an organisational culture should be designed in such a way that it will enable that particular organisation to create products or services that are perceived as unique throughout the industry. Finally, the organisational culture should be designed in a way that it will enable the organisation to focus on a specific part. Examples of organisational cultures that have brought competitive advantage include Walmart and Tesco organisational culture in cost leadership; Mcdonald’s organisational culture through product differentiation and; PepsiCo’s organisational culture through its focus. Wal-Mart has established a set of systems that enable it achieve its low price strategy. The company has designed skills that ensure efficient manufacturing and a high level of expertise in manufacturing process engineering. Organisational culture is an organisation’s symbol of shared mental software of the people in that particular organisation. If the national culture is not creating a competitive advantage for the organisation, that organisation should deviate from it. In relation to giving an organisation a competitive advantage, the role of organisational culture can be summarised as follows; A strong culture provides shared values Culture enhances organisational commitment (focus) Culture affects the performance of an organisation Culture compliments management strategies by influencing behaviour indirectly According to the above summary, organisational culture can be said to give organisations a competitive advantage. Cost leadership may not be feasible in an organisation that is bureaucratic and that prides itself on providing individual, tailored service to customers. An organisation can only manage to be a leader through cost by having a soft, flexible culture that can be able to adapt to changing circumstances (Analoui and Karami 2003). Differentiation can also be practised in personnel management systems. Different personnel in an organisation have different skills; therefore, an organisational culture can help an organisation to focus on the nature of jobs and the expectation of members. Different people have different specialist orientations; thus, a good organisational culture enables employees to cultivate deep interest areas such as personnel management, advertising, production, and marketing among others. On the other hand, differentiated products and services satisfy the needs of the customers through a sustainable competitive advantage. An organisation that focuses on differentiation as its competitive advantage has to establish the differentiation strategy in its organisational culture. To pursue a differentiation strategy, an organisation must partly align its organisational culture with the culture of its target market. All the above moves are geared towards giving the organisation a competitive advantage. Porter (1985) stated that competition is at the heart of the success or failure of an organisation. As he continued to argue, competition determines the appropriateness of an organisation’s activities that can contribute to its overall performance, for example, a cohesive culture (Analoui and Karami 2003, p. 131). Porter developed the three generic strategies to help organisations understand how they can achieve competitive advantage. The focus strategy comprises two variants namely cost focus and differentiation focus. According to Porter (1985), these generic strategies involve fundamentally different route to competitive advantage. The greatest competitive advantage can be achieved through the right combination. Answer 3 Organisational change management Organisational change and culture change are both potential vehicles to enhance organisational performance and effectivity. The organisation’s need is best satisfied when it is properly designed. In addition, the management style must be appropriate to the nature and tasks of the work group. Alvesson and Sveningsson (2008, p. 6) observe that most research or organisational change is mainly management-centric. They further outline the external triggers of change as: Political such as deregulations and globalisation Technological such as sophisticated information and communication facilities Cultural such as the establishing what is politically and morally appropriate Demographic such as forces that impact organisation’s competence profile on labour force Economic such as the causes and effects of business cycles, change in GDP among others Market such as existing and potential customers The internal triggers include: Internal adjustments to accommodate new technology Revision of new tasks following introduction of new products and services New people in key positions Pressure to modify administrative structures Several factors affect how a manager approaches the management of strategic change. Lewin (1999) proposed a three-step model to managing strategic change. Lewin’s model consists of unfreezing, change, and refreezing. Kurt Lewin presents a planned approach to change. ‘Unfreezing’ means the destabilisation of the present balance of forces that give the organisation its stability. ‘Unfreezing’ creates a disequilibrium, and this facilitates the implementation of change. According to Lewin (1999), it is important to destabilise in order to help managers to overcome resistance to change. The ways of destabilising might depend on the circumstances but include: Identification and exploitation of existing dissatisfaction or stress Creation and introduction of additional forces of change Reduction of resistance to change, for example, initiating training about the need for change The second level of Lewin model is ‘change or movement’ and it involves moving the unbalanced system in the desired direction. In order to effect a change, the managers have to continuously undermine the stabilising forces. However, the managers have to effect this change starting at the higher hierarchical levels and then progress to the lower levels. Change is not a short-term process. Change takes time to be effected. Managers can effect change using methods such as; Establishing new patterns of behaviour Creating new reward systems Setting up new reporting relationships Introducing a different style of management Lewin (1999) introduced the third level (refreezing) with an aim of establishing a balance at a higher level of performance. This level of balance ensures that the parties involved do not slip back into old ways. In order to ‘refreezing’ to achieve its goal, the managers have to support mechanisms that positively reinforce the new ways of working. The Planned Approach The basic assumption of many change models is that it is possible to manage the change process (Alvesson and Sveningsson 2008, p. 26). The planned approach to managing change draws inspiration from Lewin’s model of unfreeze-change-refreeze. An understanding of planning approach to organisational change begins with Lewin’s model, although it uses various literatures on strategic planning. Managers lead the change effort in the planning approach. Therefore, this approach is a ‘top-down’ approach. In this approach, managers harness the cooperation and motivation of employees. According to Lewin (1999), planned change can be effected by first understanding the group dynamics within a wider environment and taking action to shift the group’s practices and norms. The four related components that planned approach is based on are: Field theory Action research Group dynamics and; The three-step model (unfreeze-change-refreeze) of change. A planning approach focuses mainly on the group rather than an individual. Lewin argued that the behaviour of an individual is bound by the norms and rules of group dynamics. There is need to conduct action research in order to facilitate change (Hughes and Wearing 1998, p. 63). The planning approach to managing change has been on of the widely used and has proved to be extremely popular. One of the advantages of using this approach is that it helps focus attention on a particular change process at a particular point in time. The Strategic Approach To design and effectively implement a change, managers must balance many contradictory dimensions. The organisation sets strategic goals and these influence the actions, the organisational operations, structure and the managerial tools. Therefore, in order to reach a specific position in an environment, the managers have to work around all the internal functions which influence the design and the provision of services, the selection of clients, and the financial returns. Strategic approach to change management deals with complex strategic issues. Kotter (1996) eight-step strategic approach is one of the commonly used approaches to change management. A lot of importance is attached to Kotter’s strategic approach because it captures all the details of managing change. Through the strategic approach to change management, managers cultivate a broad range of competencies that range from managing an organisational culture to engaging in business and strategic planning. Together, these competencies enable managers to take a strategic approach to change. The competencies that are related to the strategic approach of change management include culture management where change managers influence shared ways of thinking and behaving across the organisation. In this approach, change managers also accelerate change throughout the organisation. Strategic decision-making is also another change-management competency. In taking a strategic approach to change management, managers develop a deep understanding of the organisation’s market as well as enable others within the organisation to acquire this understanding. Factors affecting how managers approach the management of strategic change There are several factors that affect how managers approach the management of strategic change. Managers often encounter resistance when they are implementing change within the organisation. This resistance originates from the people within the organisation. People within the organisation such as employees resist change because they are more concerned about the uncertain future. Unsatisfactory vision of the change makes them stay in a state of uncertainty, and this pushes them to resist the change process. According to Kotter (1996, p. 13), most change initiatives do not materialise and they can be detrimental if the management of change is not properly done because the employees usually resist change. This resistance can cripple the organisation. Managers should avoid blaming resistors because this can lead to destructive managerial behaviours. Resistance occurs in forms such as go-slow strikes, chronic quarrels, and frequent requests for transfers to other sections and rapid reduction in production. Good change managers must have the ability to deal with these mind-sets commonly referred to as management of resistance to change. Mostly, change is planned. Lewin proposed a Force Field Analysis to help in the management of change (Lewin 1999). The model is presented in figure 3. Driving Forces Restraining Forces (Positive Forces for Change) (Resisting Forces to Change) Present state or Desired state Figure 3 Force Field Analysis – Source Lewin (1999) The managers should continuously seek to disturb the equilibrium of external and internal forces in the organisation. Managers should disturb this equilibrium by adding activities to the favourable forces or dropping activities from the resistance forces. Lewin argued that managers stand a better chance of managing change effectively if the driving forces are powerful than resisting forces. To achieve ultimate success Kotter (1996) suggested eight success factors for managers who manage change effectively. These factors are presented in figure 4. Step 1: Establishing a sense of urgency Step 2: Forming a powerful guiding coalition Step 3: Creating a vision Step 4: Communicating the vision Step 5: Empowering others to act on the vision Step 6: Planning for and creating short-term wins Step 7: Consolidating improvements and producing still more changes Step 8; Institutionalising new approaches Figure 4 Eight Critical Success Factors. Source: Kotter (1996) Kotter (1996, p. 15) stated that the managers who desire to change their organisations do eight things right and in the right order. He further added that these factors have the ability to change the organisation with minimum resistance because the decrease the fear factor in the resistors. References Alvesson, M. and Sveningsson, S. 2008. Changing Organisational Culture: Cultural Change Work in Progress. Oxon: Routledge. Available http://www.untag-smd.ac.id/files/Perpustakaan_Digital_2/ORGANIZATIONAL%20CULTURE%20Changing%20Organizational.pdf Analoui, F. and Karami, A. 2003. Strategic Management in Small and Medium Enterprises. London: Cengage Learning. Cameron, K. and Quinn, R. 2006. Diagnosing and changing organizational culture: Based on the Competing Values Framework. Boston: Addison-Wesley Publishing Company, Inc. Holroyd, J. and Field, R. 2012. Performance Coaching Skills for Social Work. London: SAGE. Johnson, G., Scholes, K, and Whittington, R. 2008. Fundamentals of Strategy. Harlow: Pearson Education. Kotter, J. 1996. Leading Change: Why transformation efforts fail. Harvard Business Review, p. 1-18. 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