Organisational culture and performance analysis

Essay add: 21-10-2016, 19:43   /   Views: 26

The concept of culture existing within an organisation is only possible if it can be regarded as something an organisation has (Ackroyd and Crowdy,1990). The concept of culture has been linked with the study of organisations, and it's relation to performance.

This essay will examine the concept of organisational culture within organisations and illustrate the correlation of organisational culture to performance. For simplicity culture will be considered as a single variable which can affect organisational performance. And performance will be regarded in terms of financial performance. Second it will discuss the six levers of culture which senior management can use to administer culture and influence performance, as suggested by Young (Young, 2000).

1a. Organisational Culture

There has been many attempts to define the meaning and concept of organisational culture. An organisation can been illustrated as a 'dysfunctional individual', 'is so because it exhibits markedly lower effectiveness, efficiency, and performance than its peers or in comparison to societal standard' (Blathazard et al, 2006). At the same time culture has been characterised as the glue that holds the organisation (Blathazard et al, 2006). Harris and Ogbonna (1998) point out the culture 'serves in helping organisational members make sense of their social world and cope with problems of adaptation, defined in terms 'of its utility as an organisational variable (Harris and Ogbonna 1998).

Thus it is an important variable for 'management' to manage to ensure a coherent, sustainable and successful organisation. In order for a firm's culture to provide sustained competitive advantage - to become a source of sustained successful organisation - specifically in terms of financial superiority, three conditions must be met as indicated by Barney (1986). He states the culture must be valuable, rare and imperfectly imitable.

1b. Culture and Success

In meeting the conditions of high value culture, Barney implies that it must be valuable in terms 'it must enable a firm to do things and behave in ways that lead to high sales, low costs, high margins, or in other ways add financial value to the firm' (Barney, 1986). British Airways (BA) went through a transformation process in the late 70's , from being a 'disastrous loss-making state enterprise - into the world's most largest and most profitable international airline' (Grugulis and Wilkinson, 2002). The change was inducted through cultural, and also structural changes, in the organisation. It was a result of the process and strategy that management had introduced, creating a vision which would encourage staff and gain commitment. BA radically changed its Human resource policies to 'fit its new culture'(Grugulis and Wilkinson, 2002), and ensuring that the emphasis continued since its introduction through the 80's and 90's. It developed autonomous team cooperation and multi-skilled teams in different areas. It had formed teams to propagate the vision. It also changed cabin crew roster and 'creating families of staff' (Grugulis and Wilkinson, 2002). This created a culture of efficient work, which could be spread amongst each team member.

BA also established a new role of 'Passenger Group Co-ordinator', where staff was appointed based entirely on personal qualities. It also introduced a new reward scheme which reflected quantitative goals, and qualitative goals, i.e. employees exhibiting desired behavioural qualities. Management had recognised the importance of work culture within BA. The introduction of new policies led to cost reduction as workers worked more efficiently. It also increased sales due to the employment of staff whose personality met the vision of BA. Also the focus of 'family' teams allowed for workers to be more flexible, as it created a need for workers to work in the hours given to the employees within that 'family' gorup. In this radical example, BA had set to condition it's employees with its vision and goal, which lead to its financial success.

Secondly Barney states that culture must be rare, acquiring 'attributes and characteristics that are not common to the cultures of a large number of firms' (Barney, 1986). In the case study of the English slaughterman Barney points out that the employees at the Casterton plant worked fast and hard. The work was generalised to be the same as production line work, in the sense that they each men are specialised, from the killing to the 'disassembly'. The piecework payment system had established a culture of hard workers. The workers had also established informal hierarchies. It was observed the 'Casterton slaughtermen had developed an inclusive occupational sub-culture with distinctive core values of realism and aggressive masculinity' (Ackroyd and Crowdy,1990). Such cultural behaviour allowed the men to work hard and fast, in what is considered a 'dirty job within society'(Ackroyd and Crowdy,1990).

It was also noted that the slaughtermen 'showed a positive self image in their bearing'(Ackroyd and Crowdy,1990). The Casterton slaughtermen created an image of themselves that their occupation could only be carried by 'people who are strong physically and emotionally'(Ackroyd and Crowdy,1990. This image was one of the characteristics of the culture established at the meat plant. Such culture created an invisible shield amongst its workers, which allowed them emotionally to continue with their role, and at the same time work efficiently. Such culture, especially in the non-meat industry, is very rare. Thus it has allowed the organisation to perform reasonably and meet its financial objectives.

Finally an organisation must possess a culture which is imperfectly imitable, so that if its competitors were to 'try to imitate these culture, there will be some disadvantage'(Barney, 1986). From the two example discussed, the style and nature of work in comparison to each industry negates each respective culture being adopted by the other. The culture adopted by BA would be difficult for its competitors to imitate perfectly. Firstly managements ideology, capability and access to resources would need to match. Secondly the timing for the decisions needs to be right. And third management does not always receive the same feedback from different employees.

For BA, placing importance in the concept of organisational culture, conjured a move to ''design' employees, to shape the way they feel about their work' through culture rather than 'simply control what they produce' added to its success (Gurgulis and Wilkinson, 2002). And in the English meat industry, slaughtermen, without any realisation or impediments, the organisational culture 'facilitates their capacity to work fast and hard, to ignore the very considerable demands and dangers of doing the job', and disregarding it's public image (Ackroyd and Crowdy,1990).

2. Managing Organisational Culture

Since organisational culture is a variable which can affect organisational performance, management is always attempting to better manage it. Firms with strong cultures are pointed out as examples of excellent management (Barney, 1986). Young suggests that 'to maintain or transform a culture' 'requires addressing some of the fundamental ways the firm operates - "cultural levers"' (Young, 2000). The six organisational cultural levers Young suggests that management can use to either maintain or modify existing culture are strategy formulation, authority and influence, motivation, management control, conflict management and customer management (Young, 2000), shown in Figure 1 below.

Figure 1

Source: The six levers for managing organisational culture, Young, 2000, p20

2a. Strategy Formulation

Strategy formulation focuses on the future of the organisation; where it is going to go and how it is going to get there. As discussed earlier, BA had established to become a profitable and a leading provider in airline services. The decision was made centrally by its senior management, and the various organisational units contributed to the chosen strategic direction. And in this case, employees were electively chosen, or assigned to programs and policies in order to ensure that all employees met the organisational strategy as a whole, which led to its success.

Firms can also choose to undertake a coalition approach, where strategic decision are made by all business unit as a whole, without significant input from senior management. Senior management also has the option to solicit input from middle managers to obtain industry knowledge about opportunities, strengths, threats and weaknesses. The approaches will lead to different type of culture. Young points out that 'in firms that solicit input, a basic assumption is that middle manager's view have value' (2000). If firms do not consult input from middle managers, they become involved in formulating their won strategy.

2b. Flow of Authority & Influence

'Authority and influence can flow in a variety of ways in an organisation' (Young, 2000). It can be hierarchal or on the other end, collegial. For a unified culture, the flow of authority and influence must reinforce senior management's decision concerning strategy formulation process, to ensure the objective is embedded with each decision. Although no cultural change happens quickly, a rapid method for changing culture can be to shift the firm's responsibility centre, to one involving cross-subsidisation. The network created creates a lever for senior management to have a relatively quick impact on the culture.

Another lever senior management can use is the recruitment process. They can also use training, promotion and severance. Using these levers can take a longer timeframe. But nevertheless it provides an important lever for senior management to make a change in the culture, or manage the existing one.

2c. Motivation Process

In considering the motivation process, senior management needs to 'focus on a fit among employee personalities, the five other cultural levers, and the firm's external environment, including customers, competitors, regulators' (Young, 2000) and other stake holders. For these reasons senior management needs to design a culture depending on the motivation process. As with other levers, it will affect employees' understanding of what is acceptable and unacceptable behaviour. Young suggests that one approach is to (a) develop a unified culture linking the strategy formulation process to authority and motivation process, (b) establish profit centres, give profit centre managers some latitude to do as they wish, and (c) develop a motivation process with a large, risk-sharing, incentive-compensation component' (Young, 2006). Senior management needs to ensure that each levers are consistent and mutually reinforcing to minimise negative cultural attributions.

2d. Management Control Process

This step consists of programming, budgeting, measuring and reporting. Decision making about new programs and large capital expenditure tires to ensure that programs are consistent with strategy. In order for consistency, program or product line managers must understand the linkages between their activities and the firm's overall strategic decision. Through budgeting for both financial and nonfinancial goals and objectives, senior management can relate each program or product line to the firm's overall strategic direction. As a result there is a need for activities that measure both financial and non-financial information to help facilitate the culture senior management wishes to establish.

Thus the management control process constitutes an important cultural lever. It includes the method used to establish, retain, or eliminate programs. And similarly to the design of responsibility centres, control processes is a lever that management can influence and manage relatively quickly.

2e. Conflict Management Process

Conflict can either be beneficial or detrimental to the firm's strategy. Young states that there are 'two related aspects to the conflict management process: the type, which must fit with the level of conflict, and the mode, which must fit with the firm's authority and influence process' (Young, 2000), both aspects of which can affect organisational culture. The different types of conflict management tools are listed in Figure 2. Senior management can use several conflict management tools, such as the ones listed to influence culture.

Figure 2

Source: The six levers for managing organisational culture, Young, 2000, p25

2f. Customer Management Process

As with other processes, this process can be influenced by senior management. Market segmentation decisions can be decentralised to responsibility centre manager, or they can be determined more hierarchically, as can product design, facility sitting, and a variety or other similar decisions. But it is the method in with management come up with decision through conflict in different views, and senior management approach to addressing these conflicts, plays an important role in maintain or modifying an organisations culture. Also the type of products it sells, it's marketing strategy, and it's approach to customers, are sending important signals about what is 'desirable and undesirable behaviour in the firm - the basic assumptions of its desired culture' (Young, 2000).

Conclusion

In reflection of what has been discussed, it is clear that organisational culture is an important variable for senior management to consider. Balthazard et al shows that 'understanding cultures in terms of behaviours and norms can explain why some organisational units exhibit dysfunctional behaviours that are counter to the organisation's expressed values or mission, which can hamper efficiency and effectiveness' (2006). This implicitly affects the organisation's success and financial performance.

So senior management readily try to better manage and/or change the organisations culture in its attempt to improve and sustain the company performance, and can be done through the six levers of culture to influence or manage culture as suggested by Young. Young also points out that senior management must 'recognise that there is no single correct culture'. But management can certainly use this tool to 'preserve a culture or modify it in accordance with senior management's preferences' (Young, 2006) to affect the organisations outcome.

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