ORGANISATIONAL CULTURE Reasons for changes in organisational culture

ORGANISATIONAL CULTURE Reasons for changes in organisational culture

Key definitions /concepts (1) • Static culture: a culture that does not change (evolve or deliberate change) in response to the changing external environment • Dynamic culture: a culture that evolves in response to changes in the external environment and/or a different business strategy / model.

Key definitions /concepts (2) • Bonus culture: a culture in which importance of financial rewards is emphasised and celebrated. • Toxic culture: when a workplace culture evolves on its own with little attention given to relationships and employees aren’t held accountable for rudeness or disrespect.

Why change culture? To improve business performance • Declining profits and sales • Inadequate returns on investment • Low quality or standards of customer service

Why change culture? To respond to significant change • Market changes (growth, competitors) • Political & legal environment • Change in societal views • Change of ownership (e. g. takeover / merger) • Change of management or leadership (e. g. a new CEO) • Economic conditions (e. g. downturn)

Classic symptoms that the organisational culture may need changing (1) • Internal fighting; management criticism ("us & them mentality") • High levels of voluntary staff turnover & hard to retain top talent • Greater absenteeism • Processes become more bureaucratic

Classic symptoms that the organisational culture may need changing (2) • Innovation is no longer valued • Evidence of declining customer service • Leadership show double standards or decision-making becomes inconsistent • Communication becomes more closed and restricted

Examples of a complacent culture that needed to change? • Kodak: too late to embrace the rapid shift from film to digital photography • Nokia: long-time dominant market leader in mobile phones failed to spot fast-moving challengers • Sony: silo mentality arising from market leadership reduced the incentive & energy to innovate

Examples of businesses going through organisational change • Royal Mail: regulatory change and potential privatisation force a substantial change programme • NHS: political pressure for “modernisation” & high profile care scandals (e. g. Staffordshire) • BBC: pressure from frozen licence-fee income, restricted commercial activities & fallout from Jimmy Savile scandal. A culture claimed to be driven by “silos” and “empires” & rigid hierarchy. • RBS: significant retrenchment following nationalisation • Santander UK: restructuring & rebranding to integrate three separate financial services takeovers

Depends on factors • Organisation culture evolves naturally, but the pace and nature of change will very much depend on the evolving circumstances of the organisation. • Managing that cultural evolution is one of the primary tasks of an organisation’s leadership. Do the leaders have the necessary expertise / experience?

Some possible evaluation points • Organisational culture is not an entity or a “thing” that is independent from business strategy; it can’t simply be changed by pulling different levers. • The culture of society (and work in particular) is changing all the time – regardless of whether a firm wants to change its culture. • A decision to make a planned change to organisational culture should derive from a clear shortfall in business performance or a decision to change business strategy.

Background Slides, Examples and Other Activities

Organisational Culture is Under Attack…

Many new CEOs state their intention of “changing the culture” Project Transform “My message to those people is simple: Barclays is not the place for you. The rules have changed. You won't feel comfortable at Barclays and, to be frank, we won't feel comfortable with you as colleagues. "

Another great case study in cultural change

Evaluation Points on Culture change Source: Booz & Co Perspective on Organizational Culture Change

Culture change & DNA “Understand the DNA of the company and what, culturally, led it to be in a failed position. Behind all financial failures is organisational failure” failure Source: Archie Norman, interviewed by Boston Consulting Group

Visit the tutor 2 u BUSS 4 Organisational Culture Blog for more resources