Book 8: Organisational capabilities: culture and power
_(Originally published on_ _OUBS Blog_ _)_
_The organisational paradigm are the beliefs and assumptions that make up “an organisation’s view of itself and its environment” (Johnson, 1988). Together with:
\- stories and myths
\- symbols
\- rituals and routines
\- control systems
\- organisational structures
\- power structures
\- symbols
it builds the “cultural web” or an organisation.
Deal and Kennedy (1982) defined culture as ‘the way we do things around here’. Some of the elements of the cultural web are formal mechanism and others are informal. The meaning of those are what is significant. This is again made visible through the stories and myths, often used for sensemaking of events and hence not always accurate but more about getting the point across. Stories can be enhanced through rituals and routines.
A richer culture definition comes from Wilson and Rosenfeld (1990, p.229):
…the basic values, ideologies and assumptions which guide and fashion individual and business behaviour. These values are evident in more tangible factors such as stories, ritual, language, and jargon, office decoration and layout and prevailing modes of dress among staff.
This shows that organisational culture (what the “other” members value) is a very difficult to define beast, with corporate culture (what the dominant members value) being a small part of it. Often the values of the dominant are more important than of other individuals or even of society.
Culture can also be a capability or resource, also because in case it is a strong and homogeneous one, you might need less formal systems and procedures as control. To homogeneous can also mean group think though, which combined with a limited corporate (rather than organisational) view of culture can lead to too narrow horizons. A strong culture will include commitment to a strategic intent over a long time, making subsequent strategic shifts harder. A culture is a “sticky” factor that locks in an organisation.
In the public sector it is often tried to make responsiveness to the citizen part of the culture.
Many of our deep routed values have been shaped when we were young, teaching us what is right and what is wrong. Not all of them have to be codified in law. The question is whether working ethically will lead to success and Hosmer (1994) argued that equitable acts lead to trust, which leads to commitment. This commitment, when it is co-operative and innovate, can lead to success. To behave ethically you need to go above the law though, to work within norms and values in a worldwide community/society.
There is a close link between national cultures and organisational cultures, which can be seen in the difference between Japanese and Western way of doing things. The Japanese are using something called ‘simultaneous loose-tight coupling’ meaning that they have tight conformity to core values with looser control systems. These differences are not only rooted in culture though, but include financial, investment and policy for example. An analysis of 116000 IBM employees in the same or similar jobs found that culture, in relation to nationality, has some distinct dimensions that influence it:
\- Power Distance: Acceptance of unequal power distribution
\- Uncertainty Avoidance: Tolerance of uncertainty
\- Individualism: Personal over Group achievement
\- Masculinity: Dominance of masculine tendencies
The paradigm is empirically driven, built on experiences rather than a model of how things should be. They are built on beliefs that have repeatedly been validated. How can managers use this? In a top-down system the manager only pays attention to what he or she wants to pay attention to. In a bottom-up system, the management does not interfere with data.
As strategy making is a collective activity, we need to share each others maps and models of the corporation and the environment to find a collective course of action. This shows again that strategy is not linear and rational but more of a social and cultural contruct. The paradigm defines environmental ‘reality’. This makes it a powerful tool for coping with complex situations but also something that is a liability under change conditions. When performance of a company does not work out, we can fist find tighter control of our implementation, then we might reconstruct the strategy and only then would we attack and change our paradigm.
A knowledge creating company needs a special kind of culture and power structure. An example in the book is the middle-up-down process of knowledge management suggested by Japanese economics (Nonaka, 1991; Nonaka and Takeuchi, 1995).
Top down management assumes that only top managers are able to create knowledge and it only exists to be processed and/or implemented. It is good for dealing with explicit knowledge. Buttom-up management makes work autonomous allowing knowledge to be created at the bottom. It is good for tacit knowledge but due to the inherent autonomy this knowledge is extremely hard to communicate.
In the top-down model the fate of the company might be aligned with the fate of a few top managers and bottom-up knowledge creation can be very slow as it rests on the patience and talent of the individual.
Japanese companies seem to create knowledge in the middle management through a spiral conversion process involving top and front-line employees. They serve as the strategic knot. Knowledge can be interpreted differently in a different context and middle-management is used to orient knowledge creation towards a purposeful end, making available frameworks to sense making of new knowledge. Top management creates a dream and middle management develops concrete concepts for the front-line.
__Culture, Power and Change_ _
The paradigm is the outcome of all elements of the cultural web and cultural change likely needs to attack this paradigm head on, it must be challenged, discredited and devalued. This can be done by:
\- use of an outsider who has little commitment to the current paradigm
\- exposing the paradigm
\- power reconfiguration
\- advocating and legitimising dissent
\- powerful advocacy
Senge sees leadership as culture-formation through building shared vision.
In terms of recovery and turnaround strategies there are a few things that generally are done (Slatter, 1984):
\- change of management
\- strong central financial control
\- organisational change and decentralisation
\- product-market re-orientation
\- improving marketing
\- growth via acquisitions
\- asset reduction
\- cost reduction
\- investment
\- dept rstructuring and other financial strategies
Important here is cash flow. It is also important to focus on those 20 per cent of the factors involved that have 80% of the impact (Pareto principle).
__Power_ _
Mintzberg (1983): Power is the capacity to effect (or affect) organisational outcomes
A relationship is needed for power to be present. This relationship leads to interdependencies and then one can argue that power is about the degree of dependence on the othe part of the relationship. The power of a unit can be seen in:
\- the importance of the resource
\- the control over allocation
\- the substitutability of the resource
Important relationships are your stakeholders and the most important ones as of a study chaired by Sir Anthony Cleaver are:
\- shareholders
\- employees
\- customers
\- suppliers
\- community
The power of any of those relationships depends on your paradigm and the setting of your cultural web.
Remember the following about managing strategy and power:
\- power is present in all ofrms of the organisation
\- understand power structures and how to management them
\- restructure dependencies and resource allocation to manage power
\- long-term external relationships are gaining importance and shared expectations are needed here
\- you need to balance power
Lord Acton (1887): Power tends to corrupt and absolute power corrupts absolutely._