Essays On Organisational Culture
It's a cliché, but when it comes to ethical culture, tone from the top – or how the most senior people in your organisation act – really does count.
Leaders set the example. They determine direction, goals and priorities. They make important decisions and choose who and what to reward. And when things go wrong, they determine the consequences. Getting the role models and authority figures in your company to walk the talk may be the single most important thing you can do to build your culture of integrity.
How not to lead
Figures show there’s work to do to get corporate leaders to live by the high ethical standards expected of them. As people rise up the hierarchy the stakes get bigger, and so do the pressures and temptations. Yet if the very people who are meant to act as role models behave badly, this is bound to trickle down to employees, too.
OECD analysis of foreign bribery enforcement actions reveals that most international bribes are paid by large companies, with senior management knowledge. This pattern is repeated in the US, where ERC’s National Business Ethics Survey 2013 found that over half of misconduct incidents involved supervisory to top management (see Figure 2). Senior managers were responsible for a quarter of observed misdeeds and were more likely than lower-level managers to flout rules.
FIGURE 2. Most misconduct committed by managers
Actions say it all
Integrity is a fundamental leadership attribute and it’s essential for a strong, ethical culture that good conduct starts at the top. ‘Do as I say, not as I do’ cannot be the basis for a culture of integrity. Ethical leadership includes the following traits:
Aligning thoughts, words and deeds.
Modelling the behaviour we ask of others.
Learning as well as teaching.
Considering stakeholder needs, including global society and the planet.
Leaders who demonstrate 24/7 integrity and establish ethical conduct as a priority by putting in place high standards, setting a good example and communicating openly will exert the positive influence on employees that is the oxygen of strong ethical culture. Follow-through is vital. A good example, according to Ethisphere’s Timothy Erblich, is GE. ‘When someone raises their hand they’ll get a call from GE President and CEO Jeff Immelt or someone to say ‘‘Good job, we’re glad you did that!’”
The role of the CEO
As the head of the company, the CEO has an oversize role in shaping the ethical culture: they set the example. The way they act, the messages they send and the objectives they choose are key determinants of company culture. Scania’s Andreas Follér agrees. ‘The CEO is the company embodied’, he stresses, ‘I can’t overemphasise how crucial it is that the CEO is active. That’s more or less their top task – to safeguard and remind the organisation of its culture.’
The boss is a powerful influence when it comes to ethical culture change. Their role includes:
Framing the big picture around ethics and leading the senior management team in determining the organisation’s values.
Articulating clear demands and expectations for ‘how’ as well as ‘what’ business objectives must be achieved in line with those values.
Keeping an open door for dialogue and continually reinforcing ethical culture by being a ‘storyteller’.
Creating a positive legacy by empowering others to make right choices for the long term.
It takes around five years to push ethical culture change down through middle management. With the average tenure of a listed company chief executive just five years, their focus should be on leaving a positive legacy by embedding values for the long term and empowering others to carry on the baton.
The role of the board
The board’s primary function in creating and maintaining a culture of integrity is to oversee the long-term interests of the company and its stakeholders and see that value is generated in an ethical way. Its responsibilities include helping to steer corporate values and ensuring that the executive team adequately balances corporate objectives with risk management and values-led behaviour so that long-term value generation is safeguarded for all stakeholders.
A well-functioning board holds the CEO and senior leadership to account by asking the right questions, verifying that adequate checks and balances are in place to manage risk, supporting tough calls and – if necessary – changing the team if they fail to deliver against company values and stakeholder expectations. Betsy Rafael, a director at Autodesk and GoDaddy, calls this a ‘noses in but hands off’ tactic. The board needs to stay alert to red flags like inconsistencies, decisions that clash with values, and make sure that particularly high-stakes situations where values may be compromised ‘pass the sniff test’.
By working closely with the relevant steering group, internal audit, ethics and HR functions, the board can monitor the ethical climate of the organisation and health of the E&C programme. A good way to take the ethical pulse is to invite open-ended discussion about problems and use visits to unofficially ‘kick the tyres’ and ‘get under the hood’ of the E&C programme.
The role of the manager
It’s when values are lived consistently by every person in the company that a culture of integrity is created. Managers are responsible for embedding values through the ranks. Says RBS’s Laing: ‘Tone from the top is very important but not helpful if that just turns into a diktat about how you must behave. People also have to think for themselves.’
Managers are key to ensuring this happens. They serve as an essential conduit to deliver and reinforce the message in a multitude of ways to frontline employees, and have the best view and insight into real-life operational challenges that people face on the job.
“Tone from the top is fine, but what about the ‘‘muddle in the middle?’’ 30,000 of our 42,000 people are either blue collar or frontline. If you don’t embed the culture in these people you’ve failed. They won’t breach the bribery act in a material way, the Serious Fraud Office won’t be knocking on your door, but if you don’t deal with the culture here, the culture won’t be right in the organisation, and things will become problematic.” Sam Al Jayousi, Group Compliance Manager, Carillion
As well as being a role model, their first job is to engage their team or unit in defining how the values contained in the CoC translate and apply in daily work. This means using their unique understanding of each role – and the challenges and risks that go with it – to develop clear guidelines. These will differ according to function: sales, for example, face very different sets of issues to R&D and this should be factored into guidelines.
Their second task is to set balanced key performance indicators (KPIs) that reward behaviour consistent with the company’s values and don’t put staff under unfair pressure to cut corners. Giving immediate feedback – both good and bad – is essential, along with making sure promotions reflect good performance on values and ethics metrics as well as bottom line results.
Finally, the manager needs to foster a ‘speak-up’ culture by making it clear that their door is always open for discussion, that reports will be acted on, and that no sanctions will be taken against whistleblowers. Providing regular feedback on investigations helps build this trust.
Ultimately, values are everybody’s business. The integrity of an organisation boils down to the sum of individual choices and actions of every employee. Along with modelling ‘right’ behaviours, senior leaders need to ensure that effective education and incentives are there to empower each individual to do things right.
Make high personal integrity, good character and strong alignment with your company’s values key criteria for promotion to all leadership roles.
Bake the requirement to consistently walk the talk into management job descriptions and monitor whether their stated business objectives actively support ethical conduct throughout the organisation.
Tips for the CEO
Keep ethics high on your CEO’s radar with excellent regular briefings, strong messaging and great stories to tell that... p48 box
This is an edited extract from the book 'Creating a Culture of Integrity', part of the DōShorts Sustainable Business Collection
OECD culture cr culture Good culture Leadership Responsible leaders
Table of contents
2. Changing Organisational Culture?
2.1 Definition of Organisational Culture
2.2 Can culture be changed?
2.2.1 Culture is resistant to change
2.2.2 Culture can be systematically changed
2.3 The cycle of cultural evolution
Table of figures
Figure 1: Levels of organisational culture
Figure 2: Sources of change resistance
Figure 3: Guiding principles of culture management
Figure 4: The cycle of cultural evolution
‘Organisational culture is highly resistant to change.’ (Morley et al. 1998). Discuss
Organisational culture is nowadays considered as a crucial factor that strongly influences the performance of organisations. From a manager’s point of view cultural aspects therefore move into the centre of attention (Ogbonna and Harris 1998: 273). Because of its specific features organisational cultures tend to have a persisting character. Nevertheless its systematic change is one of the most relevant topics within the field of change management. This essay therefore discusses the question whether organisational culture is resistant to change or not.
Starting with a working definition based on Schein’s (1992) model of organisational culture, this essay examines the possibilities of changing organisational culture and the barriers that aggravate change. The essay integrates both, the pragmatist and the purist perspective and gives therefore a balanced analysis of the question. Examples will link theory with practice and support the arguments that have been put forth. The conclusion finally summarizes the implications that have been made and states the author’s opinion towards the initial question.
2. Changing Organisational Culture
In order to analyse the possibilities for changing organisational culture the object of investigation first must be clarified (Section 2.1). The next paragraph (Section 2.2) looks at the two dominant different theoretical perspectives – pragmatism and purism – and examines the logic of their arguments by looking at some practical examples. The focus lies thereby on the question if organisational cultural can change at all and if this change can be managed or not. Section 2.3 describes a third perspective that strikes a balance between the two extreme positions. Based on the cycle of cultural evolution proposed by Dyer (1985) it will be shown that cultural change can be initiated and supported by the management but the actual process and the outcome are very difficult to influence.
2.1 Definition of Organisational Culture
The definition of culture in general and organisational culture in particular is subject to lively discussions within the scientific debate. In the context of change management there are many different perspectives on organisational culture that highlight different aspects. One of the best known definitions is the model of organisational culture proposed by Edgar Schein (1992). The essay takes this model of organisational culture as a starting point for the further examination because it is the most appropriate for the examined question.
According to Schein organisational culture is build up of three different levels. The core of organisational culture can be described as a set of basic assumptions that guide the perception and the action of an organisation. These assumptions are mostly invisible and unconscious. The members of the organisation take them for granted and do normally not question them as they are present in the organisation for a long time. The mid-level of organisational culture consists of so-called espoused values which are commonly shared by the members of the organisation. These values or beliefs are nevertheless still invisible to a high degree. Some companies try therefore to create a formal mission statement or a corporate philosophy to concretise these unwritten behavioural directives (Schreyögg 2003: 628). These mostly unconscious and invisible values and assumptions find their expression in the top level of organisational culture. This surface level consists of artifacts and builds the visible embodiment of an organisation’s culture. Artifacts can take a multitude of different forms such as corporate language or style of clothes, stories or tales about the company and celebrations and traditions. It must be stated that these three levels do not stand separate to each other but are interdependent. Each of the three different levels and the relationship between them is necessary to understand organisational culture in its entirety.
Figure 1 illustrates these levels and gives a brief description of the respective characteristics.
illustration not visible in this excerpt
Figure 1: Levels of organisational culture (According to Schein 1992: 17)
It is obvious that changes on the surface level of artifacts can be achieved more easily than changes on the lower levels of the espoused values and the underlying basic assumptions (Brown 1998: 163). This differentiation between these three different levels of organisation culture with different characteristics therefore has to be taken into consideration when looking at the possibilities to change organisational culture within the next paragraphs.
2.2 Can culture be changed?
Within the scientific debate about organisational culture there are two main theoretical perspectives which are diametrically opposed to one another (Willmott 1993: 520; Schreyögg 2003: 644). They both address the same question: ‘Can the culture of a company be actively manipulated to produce the ‘ideal’ organisation?’ (McAleese and Hargie 2004: 158). On the one hand there are the cultural purists who see organisational culture as a given condition which can not be changed systematically by the management. According to this, the culture of an organisation is an organic structure that is withdrawing from any attempt of planned change. On the other hand there are the cultural pragmatists or functionalists which understand the well directed modification of a company’s culture as a way to improve the business performance. Pragmatists are therefore open-minded towards cultural change programmes and even try to give instructions of how cultural change can be managed successfully.
2.2.1 Culture is resistant to change
As shown above in section 2.1 one of the main characteristics of organisational culture is its implicit character. Most of the constituent elements of the culture are not visible and often even unconscious which complicate the identification of the current dominant cultural pattern within the organisation. This fact can be seen as the basic problem of culture management within organisations. As you do nott know exactly how the existing culture looks like you do not know what you want to change. The deeper rooted the culture is in the heads and minds of the employees and in everyday life within the organisation the more difficult it is to identify the core values and assumptions and to finally influence them in a specific way (Brown 1998: 163). It is of no avail to alter only the surface level of culture such as the visible or written behavioural norms without paying attention to the underlying basic assumptions and values. This bottom-level of organisational culture is the most important factor to consider to ensure the success and the stability of cultural change but at the same time the most difficult to manipulate.
On the other hand there are a number of organisational as well as individual sources of resistance which can be generally applied to all change management topics but are relevant particularly for the discussion about organisational culture. At the side of the organisational sources of resistance the phenomenon of ‘structural inertia’ (Hannah and Freeman 1984) is probably the most important one. The structure of an organisation is build to maintain stability over time and is therefore naturally reluctant to change of any kind. The individual sources of resistance are rooted within the nature of the human being. People generally experience what Moorhead and Griffin (1989: 712) call the ‘fear of the unknown’. As a result employees are more likely to stick with the status quo and stay with their traditional habits instead of taking the risk to change their current situation and to move into an uncertain future. Security aspects play a crucial role within this context. People want to maintain their position and power and they are afraid that they could be worse off after the change.
 There are many other well established definitions of organisational culture such as Hofstede’s (1991) which can not be taken into account in this essay.
 See Schein (1992), Morley et al. (2004) or Schreyögg (2003) for more information about the structure of organisational culture as it can not be described here in every detail.