The Organization Culture:Adjustment to Cultural Norms, Psychological Contracts

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Organization Development MGMT 628

Lesson 06

The Organization Culture

Basically, organizational culture is the personality of the organization. Culture is comprised of the

assumptions, values, norms and tangible signs (artifacts) of organization members and their behaviors.

Culture is one of those terms that are difficult to express distinctly, but everyone knows it when they sense

it. For example, the culture of a large, for-profit corporation is quite different than that of a hospital which

is quite different that that of a university. You can tell the culture of an organization by looking at the

arrangement of furniture, what they brag about, what members wear, etc. -- similar to what you can use to

get a feeling about someone's personality.

Definition:

"The culture of an organization is its customary and traditional way of thinking and doing things, which is

shared to a greater or lesser degree by all its members, and which new members must learn and at least

partially accept, in order to be accepted into service in the firm. Culture covers a wide range of behavior:

the methods of production; job skills and technical knowledge; attitudes towards discipline and

punishment; the custom and habit of managerial behavior; its way of doing business; the methods of

payment; the values placed on different types of work; beliefs in democratic living and joint consultation".

Culture shows up in both visible and invisible ways. Some manifestations of this energy field called

"culture" are easy to observe. You can see the dress code, work environment, perks, and titles in a

company. This is the surface layer of culture. These are only some of the visible manifestations of a culture.

The far more powerful aspects of culture are invisible. The cultural core is composed of the beliefs, values,

standards, paradigms, worldviews, moods, internal conversations, and private conversations of the people

that are part of the group. This is the foundation for all actions and decisions within a team, department, or

organization.

Visible Manifestations of Culture:

· Dress Code

· Work Environment

· Benefits

· Perks

· Conversations

· Work/Life Balance

· Titles & Job Description

· Organizational Structure

Invisible Manifestations of Culture:

· Values

· Private Conversations (with self or confidants)

· Invisible Rules

· Attitudes

· Beliefs

· Worldviews

· Moods and Emotions

· Unconscious Interpretations

· Standards of Behavior

· Paradigms

· Assumptions

Business leaders often assume that their company's vision, values, and strategic priorities are synonymous

with their company's culture. Unfortunately, too often, the vision, values, and strategic priorities may only

be words hanging on a plaque on the wall. In a thriving profitable company, employees will embody the

values, vision, and strategic priorities of their company. What creates this embodiment (or lack of

embodiment) is the culture that permeates the employees' psyches, bodies, conversations, and actions.

The energy fields that make up a group's culture are dynamic and change continuously. Culture is created

and constantly reinforced on a daily basis through conversations, symbols, rituals, written materials, and

body language. It is the small, mundane actions and behaviors that create a culture and can shift a culture.

Creating and sustaining a healthy, vibrant culture requires reinforcement of the culture through daily and

proactive conversations and communications. The failure to discuss the values, purpose, and rules within a

group often leads to a culture that is at cross purposes with the stated intention of the group. Poor

communication creates a lot of confusion and often a crisis of meaninglessness.

Organization Development MGMT 628

Since a culture is created every time a group of people come together to form a team, a company will have

many sub-cultures that exist within its main culture. Within the company, there may be sub-cultures in

departments, divisions, regions or operating units. For example, the marketing and technology teams may

have different worldviews, jargon, work hours, and ways to do things. A big challenge for today's company

is to create a strong, cohesive corporate culture that pulls all of the sub-cultures together and ensures that

they can work as a unified team.

Corporate culture starts when the organization begins and develops as it grows. Corporate culture controls

the way the people in an organization interact with each other and the stakeholders outside the

organization. Over time, the culture changes as people come and go. Culture reflects the values, ethics,

beliefs, personality and traits of the company's founders, management and employees. In a well-established

company, the culture is so strong that even new top management may not be able to change it. Or, if they

try, it may take 5, 10 or 20 years to change. Employees who feel comfortable and compatible with the

company culture will stay; those who don't will leave or will not perform as well as they can.

Culture is extremely powerful. The rules of the game, what behavior is ethical and accepted, the mood of

the organization, and the enthusiasm of employees are all contained in the culture. So, culture can be a

powerful, hidden asset or it can be a liability - a time-bomb waiting to go off. If your leadership team has

not pro-actively created a corporate culture to support the company's purpose, then chances are that the

culture is a hidden liability.

Every time people come together with a shared purpose, culture is created. This group of people could be a

family, neighborhood, project team, or company. Culture is automatically created out of the combined

thoughts, energies, and attitudes of the people in the group.

Have you ever noticed how people react to foreign visitors; whether an exchange student or a visiting

professional? The stranger may be welcomed, but may never be accepted unless that person can adapt to

the norms of their new environment. If they do not, the members will shun the stranger and reject the alien

from their culture. The same is true in business. If the new employee, consultant or visitor cannot adapt to

the corporate culture, their chances for success are slight. The members of the culture will reject the person

outright and will work against them.

The reason for this phenomenon is because people tend to prefer conformity in their culture. Conformity

represents a harmonious environment where the behavior and actions are predictable. Most people have a

deeply rooted desire for a sense of order and stability in their lives, which is what conformity provides. A

stable environment promotes self-confidence in the members of the culture and allows them to concentrate

on their work.

Culture is an energy force that becomes woven through the thinking, behavior, and identity of those within

the group. Culture is powerful and invisible and its manifestations are far reaching. Culture determines a

company's dress code, work environment, work hours, rules for getting ahead and getting promoted, how

the business world is viewed, what is valued, who is valued, and much more.

The term organization culture refers to a system of shared meanings, including the language, dress, patterns

of behavior, value system, feelings, attitudes, interactions, and group norms of the members. Examine the

patterns of behavior on your campus or in your company. How do people dress? What jargon or unique

terms do they use?

Norms:

Norms are organized and shared ideas regarding what members should do and feel, how this behavior

should be regulated, and what sanctions should be applied when behavior does not coincide with social

expectations. The values and behaviors of every organization are unique. Some patterns of behavior may be

functional and may facilitate the accomplishment of organizational goals. Other patterns of behavior or

cultural norms may actually inhibit or restrict the accomplishment of organization goals.

A look at the types of norms that exist in an organization will help in gaining a better understanding of the

organization's culture. Norms are generally enforced only for the behaviors viewed as most important by

most group members. Norms essential to accomplishing the organization's objectives are called pivotal

norms. Norms that support and contribute to the pivotal norms but are not essential to the organization's

objectives are called peripheral norms. For example, dress codes that are enforced Monday through

Thursday are probably peripheral in light of Friday's being a casual dress day. Pivotal and peripheral norms

constantly confront individuals in an organization, and they must decide whether or not to conform. The

pressure to conform to norms varies, allowing individuals some degree of freedom in responding to these

organizational pressures depending on how they perceive the rewards or punishments. The organization

also has latitude in the degree of conformity it requires of its members.

Organization Development MGMT 628

The Socialization Process:

Even if an organization does an effective job of recruiting, new employees must still adjust to the

organizational culture. Because they are not aware of the culture, new employees are likely to disagree with

or question the customs and values that exist. Socialization may be defined as the process that adapts

employees to the organization's culture. The socialization of employees at Procter and Gamble Co. starts at

an early age because employees often begin their careers there and grow up together. The culture is one of

being resistant to new ideas and even being insular. P&G is, by many measures, a family company and only

promotes from within. It is located in a relatively small city, Cincinnati, where employees live near one

another, go to the same social functions, and eat at the same restaurants. CEO Alan Lafley admits, "I am

worried that I will ask the organization to change ahead of its understanding, capability, and commitment."

New Employee Expectations:

To function effectively, managers and members must be aware of the organization's norms. They must

recognize how sharply norms are defined and how strongly they are enforced. Entry into a new situation

often results in some degree of anxiety or stress. The less an individual can relate the new situation to

previous situations, the greater the feelings of anxiety and discomfort. The more the individual can meet

expectations, the less the feelings of anxiety and discomfort.

Some organizations assign current employees to act as mentors to new employees. W. L. Gore &

Associates assigns each person hired by the company a sponsor who acts as a mentor. Twenty percent of

Gore's associates (employees) are sponsors, and the sponsor is typically the person who has the most at

stake in making the new associate successful. The Gore philosophy is that if you sponsor someone, you

want them to be successful, and therefore will offer them opportunities, such as sitting in on meetings. If

the new associate is successful, the team will be successful, and Gore will be successful.

Encounter Organization's Culture:

The organizational culture provides a way for organization members to meet and get along. Three

important aspects of socialization when joining an organization are:

1. Deciding who is a member and who is not.

2. Developing an informal understanding of behavioral norms

3. Separating friends from enemies.

To work together effectively, individuals need to understand things like power, status, rewards, and

sanctions for specific types of behaviors. For instance, what behavior gets one a good grade, and so on.

While the individual employees are experiencing a new situation, the organization may be attempting to

influence them. If new members come to an organization expecting to find a certain set of norms, they are

looking for their expectations to be affirmed. If their expectations reflect the actual norms of the

organization, the integration process for both the new members and the organization is relatively painless.

Adjustment to Cultural Norms:

New members often find that the norms are unclear, confusing, and restrictive. As a result, they may react

in different ways when entering an organization. At one extreme, a new member may choose to conform to

all the norms of the organization, resulting in uniformity of behavior and complete acceptance of

organizational values. This conformity may result in stagnation, non-responsiveness, and a loss of

creativeness. At the other extreme, a new member may choose to rebel, to reject all the values, or to leave

the organization altogether.

Figure: 06

A less obvious alternative is for new members to accept the pivotal norms and seriously question the

peripheral norms, which can be termed creative individualism. This is the ideal behavior for a healthy and

effective organization, but it is often difficult for a newcomer to correctly determine which norms are

peripheral and which are pivotal. What may be a pivotal norm in one department may be a peripheral norm

Organization Development MGMT 628

or not a norm at all in another department of the same organization. Since norms are changing and dy-

namic, the organization member must have the awareness to discern the differences between pivotal and

peripheral norms.

Results:

Only the more healthy organizations allow their members to challenge their norms. The aim of OD is to

develop an organizational climate that is appropriate to the organization's mission and members. In a sense,

OD involves changing the culture of organizations and work groups so that a more effective means of

interacting, relating, and problem solving will result. OD seeks to develop the organization to the point that

it feels comfortable about allowing its members to openly examine the norms, both pivotal and peripheral,

with the ultimate goal of building a more effective organization. The reaction of the individual to the norms

results in the formation of an unwritten agreement with the organization.

For example, at one organization employees believe that it is their responsibility to innovate and be

creative. They develop new and improved products, processes, and ways to serve their customers. They

believe that team discussion, challenging ideas, and taking risks are appropriate behaviors for achieving

goals. However, at another organization employee believe that following procedures, reaching numerical

outcome targets, doing no more or less than what is required, and not saying anything that the boss does

not want to hear are the appropriate behaviors. These two organizations have very different types of

cultures. In both of these organizations, each person tends to do the following:

Separate more important from less important goals.

Develop ways to measure their accomplishments.

Create explanations for why goals may not always be met.

Psychological Contracts:

A psychological contract may be defined as an unwritten agreement between individuals and the

organization of which they are members. It describes certain expectations that the organization has of the

individual and the individual's expectations of the organization. Because the two parties are growing and

changing, the contract must be open-ended, so that old issues and new issues can be renegotiated.

An organization has certain expectations of its members. If it is a business organization, its expectations of

member behavior will probably be spelled out very clearly. It undoubtedly expects its members to be on the

job during certain hours of the day. It is probably concerned with the quality and quantity of the work they

do, their loyalty, their appearance, and various other things unique to the organization. For the organization

to be satisfied, the individual will need to comply to some degree with its expectations. In other words, the

organization has certain requirements, and the individual must do certain things to meet those requirements

if there is to be a lasting and healthy relationship. In many instances, unfulfilled expectations result in high

turnover, absenteeism, sabotage, and worker alienation.

Similarly, the individual has certain expectations of the organization. An individual may expect to gain work

experience, security, and advancement. The individual probably expects to have an opportunity to meet

people, make friends, and form social relationships; and undoubtedly expects remuneration from the

organization. For the individual to be satisfied and stay, the organization will have to meet the individual's

expectations.

When either the organization's or the individual's expectations are not being satisfied adequately by the

other party, friction and difficulties may develop. If these problems cannot be solved, they may culminate

in the individual's leaving the organization, either voluntarily or by the organization's choice. All too often,

the problem is solved by not solving it: it takes too much effort to reach a real solution, so both parties

must continue with a tenuous and unharmonious relationship.

Sometimes the psychological contract between the organization and the individual does not even address

certain key expectations. One or both parties may assume that the other party agrees to some unstated

expectations. The phrase "it is intuitively obvious to the most casual observer" may be the underlying

assumption of one or both parties. Unstated or assumed expectations can lead to an organization of

individuals who feel cheated or of managers who are disappointed in their subordinates. To avoid such

misunderstandings, both parties the members and the representatives of the organization should formulate

a psychological contract that can be continually renegotiated.

OD in Practice: What's your culture worth?

The founders of Setpoint had a pretty good idea of the sort of company culture they wanted to build. It

didn't occur to them that what they came up with would become one of the company's most valuable

assets.

Steve Peterson, owner of his own company, Peterson Inc., with about 300 employees, says he had no

particular agenda when he dropped by Setpoint for a visit. He certainly wasn't thinking about a merger.

Organization Development MGMT 628

Setpoint was just another custom-manufacturing company employing only about 30 employees. Most of its

revenues come from designing and building factory-automation equipment. He'd heard about some of the

things they were doing with project management and open-book accounting. Setpoint CEO, Joe Knight,

took Peterson on a tour of the facility. At some point they wound up in the shop, where about 10

employees were working on half a dozen machines. Peterson noticed a large whiteboard off to one side.

Scribbled across the board were about 20 rows and 10n columns of numbers forming a table of some sort.

The Board

"What's that?" he asked

"That's our board," Knight said. "It's how we track our projects and figures out whether or not we're

making money."

"How do you do that?" Peterson asked. Knight began explaining what the numbers were and where they

came from.

Then Knight stopped. "You know," he said, "you really shouldn't take my word for it. You should get

these guys to tell you about it." He called out to one of the technicians and introduced him.

"Would you mind explaining this board to us?" Peterson asked.

"Sure," the young man said and proceeded to walk them through it. He talked about calculating the gross

profit that he and his colleagues had earned the previous week on each project. He pointed out the column

showing each project's gross profit per hour and explained the importance of keeping that number in mind.

He said he also watched the ration of overall gross profit to operating expenses, since that's how you knew

if the company was making money. He added that he liked to see it running at about 2.0

"I was just amazed," Peterson recalls. "He knew the board inside and out. He knew every number on it. He

knew exactly where the company was and where they had to focus their attention. There was no hesitation.

He had great confidence in what was up there." Peterson continues, "I could see that the board was a

cherished possession, and I was so impressed, not that Joe Knight understood it, but that the people on the

shop floor had it down like that. It was their scoreboard. It was the way they could tell if they were winning

or losing. I talked to several of them, and I just couldn't get over the positive attitude they had and their

understanding of business ...I knew right then that Setpoint had what we needed, and somehow we had to

get it."

Merger Negotiation

Shortly thereafter, Peterson began negotiating with the owners of Setpoint to acquire their business, their

services, their management system, and their culture.

Companies are bought for a limited number of reasons. In almost every acquisition the buyer is looking for

market share, earnings, cash flow, strategic advantage, or some kind of synergy, either alone or in

combination. Setpoint has little to offer Peterson in terms of those criteria. Yet Setpoint does have one

asset that Steve Peterson would be willing to pay a substantial price for namely, a particular type of

corporate culture.

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