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Explanations

Organisational Culture - Problems of Changing Culture

The key problems in changing organisational culture are outlined in this brief revision note:

Definitions

  • Culture clash: When one or more cultures are integrated into one environment, causing disruption and challenging contemporary traditions

Culture as a Corporate Priority:

  • Corporate culture has become the buzzword as the culprit and potential solution for the problems of modern capitalism. For change to be effective, culture needs to be high enough on the boardroom agenda. But is it?

Problems of Change

  • Common sources of culture clash:
  • Mergers & acquisitions
  • Generational differences
  • National / geographical
  • Departmental
  • Strategic or leadership change

Forces Resisting Change

  • Loyalty to existing relationships:
  • Failure to accept the need for change; Insecurity; Preference for the existing arrangements; Different person ambitions
  • Fear of change:
  • Loss of power; Loss of skills; Loss of income; Fear of the unknown; Inability to perform as well in the new situation; Break up of work groups

Key Examples / Evidence

  • Takeovers and mergers provide a rich source of examples of how difficult it is to change and integrate organisational culture:
  • Classic example is “merger of equals" in 1998: Daimler / Chrysler:
  • "I think part of it is the culture, because you had an upright, hierarchal approach to things at Daimler Benz and Chrysler was a risk taking, entrepreneurial, loose organization. " This (merger) is like trying to mix oil and water"
  • But, compare and contrast with successful takeover of Pixar by Disney, and of Youtube and Zappos by Google.
  • Barclays / RBS etc: can the big banks change their bonus culture? Is the risk-taking inherent in investment banking part of the DNA of the banks – i.e. impossible to remove?

Depends on Factors

  • Organisational culture is deep: there is a danger that if management treat it as a superficial phenomenon and assume it can be changed at will, they will fail!
  • Organisational culture is normally and inherently stable (resistant to change). Humans do not like chaotic, unpredictable situations – and they naturally work hard to stabilise things = resistance to cultural change!
  • If an organisation is to change, then it has to unlearn something before it can learn something new. The same goes for cultural change. The "unlearning" is painful and causes resistance to change.
  • Is there a role for regulation in promoting and changing corporate culture? Possibly (e.g. in financial services) but it can only go so far.
  • Boardroom - does management truly understand the purpose of its business? What are the cultural values of the firm?

Further Evaluation Opportunities

  • Recognise that an organisation's culture is in a continuous state of flux responding to change in the external environment (e.g. society, economy)
  • Aiming to create, change or protect culture is challenging and takes time.
  • Successful cultural change requires a clear business strategy and a strong set of corporate values.
  • Culture change is unlikely to be successful if leaders don't role-model the behaviours they want employees to model.
  • Edgar Schein: never start with the idea of changing a culture - start with the issues that the organisation faces and assess whether the existing culture gets in the way of resolving those issues.
  • Always think first of the organisational culture as a source of strength even if some elements are dis-functional. If major changes are needed, try to build on existing cultural strengths.

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