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Organizational culture

Organizational culture can loosely be defined as the shared assumptions, beliefs, and "normal behaviors" (norms) of a group. These are powerful influences on the way people live and act, and they define what is "normal" and how to sanction those who are not "normal." To a large degree, what we do is determined by our culture.

Organizational culture is similar to, say, regional culture. The same person in different organizations (or parts of the same organization) would act in different ways.

Culture is very powerful. (One example is the cultural change effort at British Airways, which transformed an unprofitable airline with a poor reputation into a paragon of politeness and profit).

An example: Cultural change at Chrysler (1994)

Many companies have turned themselves around, converting imminent bankruptcy into prosperity. Some did it through financial gimmickry, but the ones who have become stars did it by changing their own culture.

Few remember that companies like British Air or Volvo once had a poor reputation. That's a credit to their drastic changes in customer (and employee) satisfaction, quality, and profits.

The underlying causes of many companies' problems are not in the structure, CEO, or staff; they are in the social structure and culture. Because people working in different cultures act and perform differently, changing the culture can allow everyone to perform more effectively and constructively. This applies to colleges and schools as much as it applies to businesses.

In the early 1990s, Chrysler had terrible customer service and press relations, with a history of innovation but a present of outdated products. Its market share was falling, and its fixed costs and losses were high. Bob Lutz, then the president, wanted Chrysler to become the technology and quality leader in cars and trucks -- a clear, globally applicable vision. A program of cultural change, Customer One, was built around it.

It is also worth noting that quite a bit of the change in culture came from AMC, a much smaller company acquired from Renault. AMC executives and engineers brought the "do more with less," cross-functional methods they had at the unfortunate smaller automaker. These ideas and values were to play a major role in Chrysler's revival; two vehicles designed largely by AMC people with AMC methods were the 1993 Dodge Ram and 1995 Dodge Neon, both runaway successes (though the Neon would be handicapped by executive-ordered "cost saving" moves).

The results were impressive: overhead was cut by $4.2 billion in under four years, the stock price has quadrupled, and the company reversed its slide into bankruptcy and became profitable. A completely new and competitive line of cars or trucks has appeared each year since. New engines produce more fuel economy and power as new cars provide more comfort, performance, and space. They did this with the same people, but working in different ways.

It is important to note now, with hindsight, that the problem with this cultural change program - which afflicts far too many cultural changes - is that it can easily be sabotaged by new management. Chrysler's many gains were lost when the company was acquired by Daimler-Benz, forming DaimlerChrysler and instigating years of poor morale and financial performance. Still, this proves the importance of culture even more - for that is the main thing that changed in 1998.

Involvement of People

When Chrysler was entering its final "golden age," in four years, 4,600 ideas were solicited from suppliers; 60% were used, saving over $235 million. Customers were also called in during "virtually every stage" of the development of new models, to provide suggestions (rather than just ratings of what they liked). One designer was sent to photograph the interiors of about 200 pickups, to see where cups, maps, etc. were being stored, so they could tailor the interior of the new trucks to the needs of the drivers. Chrysler has also been listening to customers who write to the company; the designers even respond to some letters by phone.

Rather than have a small number of people control new products, Jeep/Truck product manager Jeff Trimmer said planners were "speaking out for customer wants and needs in the initial stages...and working along with each of the various functional groups...The role becomes more advisory." Everyone who would be involved participated to "harness the best ideas and creativity."

Even the assembly line workers were included; with the new Ram trucks, they were working with engineers six months before production started. Mechanics were consulted early, to help prepare the cars and trucks for real-life maintenance.

Product teams followed vehicles through their development to identify systems and process issues. "Today, we feel we have a lot more facts, and more of a groundswell of information that comes from groups of people who know exactly what we're trying to do," reported Robert Johnson of Dodge Trucks.

Agreeing on Objectives

One change which helps to keep projects pure is setting down objectives clearly, at the beginning. Core objectives were agreed on at the beginning by all parties; because "Everybody agrees up front and we stick to the plan," (Bernard Robertson, Jeep/Truck team), there were no last-minute changes in focus, which can result in expensive disasters (such as the Corvair, Vega, and Fiero). Because everyone was involved in setting goals, they took responsibility for living up to them.

Learning

Changes in the way cars were made began with help from AMC, which had operated with a far smaller staff than most automakers. Bob Lutz and former AMC engineering chief Francois Castaing reorganized their departments into AMC-style teams.

Since then, Chrysler changed its teams by learning from its achievements and mistakes. "We do a 'what went right, what went wrong' analysis at various points, and we transmit this information to the other platforms," said James Sorenson of the Jeep/Truck Team.

Pilot vehicles in the new Ram program - which would triple Chrysler's market share despite a price premium - were ready 13 months ahead of time. The number of improvements made each year increased dramatically each year as learning spread.

Emphasis of Quality

Most people like building a quality product. It's natural to want one's labors to produce something of quality and beauty. That might be one reason why workers tend to support quality efforts, if they see them as being sincere.

Chrysler's steps to improve quality started with calling in customers, suppliers, mechanics, and assembly line workers early in the design process. They continued by surveying all customers and basing dealer incentives on quality and support. The dealership rating process was improved at various points. Complaints were followed through, and negative surveys were returned to dealers for resolution (however, many dealers do not follow through on this valuable feedback). In the end, the Five Star process was implemented because other dealer quality efforts had failed; cultural change is very challenging when you're dealing with a large number of geographically diversed, independently owned companies.

The strategy did not call for quality to be the number one objective from day one; first, the company had to overcome its reputation, newly gained, for lack of product innovation. The Viper, Intrepid, Ram, and Neon did this quite well. The first vehicle to have quality as its primary design goal was the 1996 Grand Cherokee. This theme has carried forward to the present; the clearest example is the 2000 Neon, where nearly every change was aimed at increasing reliability and perceived quality. It is still worth noting that even the original 1995 Neon was a far higher quality car than its predecessors, if you take away three poor decisions: using lower-cost exhaust couplings, lower-cost head gaskets, and in-house-designed frameless windows. The first two decisions were reportedly made directly by Bob Eaton, overruling quality-minded engineers. Without the head gasket and window problems, the Neon would probably have a far greater reputation for quality - and far greater sales. Even with them, and the warranty work they caused, they still were profitable.

The best examples of the quality emphasis are probably the Chrysler PT Cruiser and Jeep Liberty; both have consistently appeared at or near the top of the quality charts, beating many Japanese competitors.

Pitfalls

Cultural change is neither easy nor foolproof. It can take time - at least one year, more likely between three and six years - and it takes effort and vigilance. A great deal of patience and long-term support is needed.

Communication may be key, as small successes are used to support larger efforts. Sometimes, it is necessary to start changing small parts of an organization first, later expanding efforts. Chrysler did this by starting with their engineering teams and moving on to other areas.

The proponents of change must carefully model the behavior they want to see in others. If they do not send a consistent message and keep that message clear and dominant over time, cultural change may be seen as just another fad.

Frequently, change becomes harder when the organization starts to turn around. At Chrysler, the pace of change dropped off dramatically when profits started to appear regularly, and Bob Eaton began to fatten middle management again, adding layers between line workers and decision makers. Complacency is an ever-present danger when changes start to take effect.

The example of Chrysler also shows that cultural change, though powerful, is always subject to the whims of senior leaders. In the late 1990s, Chrysler CEO Robert Eaton chose to sell the company to Daimler-Benz (at an immense personal profit). Strong leaders dropped away or were asked to resign, and Chrysler reverted to "old-style" behavior: massive, simple cost-cutting, lack of clear and honest communication, and concentrating on short-term fixes rather than more constructive long-term investments.

There is a great deal of literature on cultural change, but successful efforts generally involve the services of an experienced consultant to provide some guidance and unbiased feedback. As the Chrysler example shows, vigilance by the senior leaders and process owners is also required over the long term.

Applying Cultural Changes To Your Organization

Cultural changes take time, and the process may be bumpy. Some people get used to it quickly, and other people take more time. Cultural changes may take a long time in a larger business. At Chrysler, they started with engineering, moved on to customer service, down to the dealers, and so on. This made for some strange experiences for those who dealt with the company during the transitional times. Certainly, many in the press wondered why Chrysler, in the midst of heavy losses, was spending billions on new buildings and research. Their answer did not come until years later, when Chrysler regained its billions and a few extra as well.

Rensis Likert suggested that major changes could take two or three years before the results showed. The lag time may be shorter if your commitment to the program is deep and shows clearly; if your vision of what your business should look like is clear; and if all of your actions are consistent with this vision. For example, at advertising giant Ogilvy & Mather, posters and cards are issued to each employee with clear, colloquial statements on "how we do business" (signed by David Ogilvy). At Chrysler, the pace of change was slowed by structural problems (e.g., dealerships are independently owned) and by the jaded viewpoints of many industry insiders. Another problem has been the onset of complacency, as winning products, record profits, and high sales erased the "emergency" atmosphere that contributed to the speed of change.

While simple cost-cutting may show faster results, the profits don't stay for long. The cost-cutting programs of Roger Smith and Richard Stempel resulted in the biggest losses in GM's history, while the cultural change programs of Chrysler stopped the company's losses and increased its market share for the first time in years. Chrysler's own cost-cutting after the takeover resulted in problems getting new products developed and produced, and do not appear to have helped profits, since sales also fell. You can't make a tree grow larger by cutting the roots.

Cultural changes must often be spearheaded by one or two people with strong ideas. This may be the head of the business, a consultant, or a designated executive or team. The best results seem to be achieved when there is a firm commitment from the top, which is communicated directly to each and every person in the business.

The accessibility of top people is a powerful incentive for workers to feel that they are part of the company. Often, if workers know they can walk into the president's or owner's office and be greeted with their attention and respect, they will work much harder to make that vision a reality. This one step may help to save a great deal of money, as workers may feel more free to bring in suggestions, and the executive may be more likely to try it out...sometimes with quite surprising results. (3M's successful Scotch tape and Post-It notes were the result of worker suggestions).

Before planning a cultural change, it may help to study companies with successful cultures, such as 3M, Ben & Jerry's, Wal-Mart, or Chrysler, to find out how they became and stay successful, deal with failures and successes, and keep their fingers on their customers' and employees' pulses. In Search of Excellence (Harper & Row) describes a number of companies with successful cultures (though some have declined, which, if nothing else, shows the need for vigilance). Many consultants, such as Rensis Likert, Warner Burke, David Nadler, and Chris Argyris, have also written about their experiences.

The power of cultural change is strong -- strong enough to turn an aging dinosaur into a state-of-the-art profit-maker. It may do wonders in your business or institution, as well.

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Bibliographic information: by David Zatz, Ph.D.; publication date, 1994 (revised 1999); source, http://www.toolpack.com/

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organizational culture