Blog

Organisational Culture: The Reasons for Changes in Organisational Culture

Jim Riley

25th May 2014

We've summarised below some key points that students should consider when revising the reasons for changes in organisational culture:

Definitions

  • Static culture: a culture that does not change (evolve or deliberate change) in response to the changing external environment. Maybe based on historical success (e.g. Sony)
  • Dynamic culture: a culture that evolves in response to changes in the external environment and/or a different business strategy / model.

Key Theories / Concepts

  • Bonus culture: a culture in which importance of financial rewards is emphasised and celebrated. Can be for key individuals (e.g. investment banking) or company-wide (e.g. John Lewis Partnership)
  • Toxic culture: when a workplace culture evolves on its own with little attention given to relationships and employees aren't held accountable for rudeness or disrespect.

Reasons for Changing Culture

Improved business performance:

  • Declining profits and sales
  • Inadequate returns on investment
  • Low quality or standards of customer service

To respond to significant change:

  • Market changes (growth, competitors)
  • Political & legal environment
  • Change of ownership (e.g. takeover / merger)
  • Change of leadership (e.g. new CEO)
  • Economic conditions (e.g. downturn)

To address/correct illegal or unethical activity

Potential Signs / Evidence of Dysfunctional Culture

  • Internal fighting; management criticism ("us & them mentality")
  • High levels of voluntary staff turnover & hard to retain top talent
  • Greater absenteeism
  • Processes become more bureaucratic
  • Innovation is no longer valued
  • Evidence of declining customer service
  • Leadership show double standards or decision-making becomes inconsistent
  • Communication becomes more closed and restricted

Key Examples / Evidence

  • Some firms whose culture may have contributed to a failure to change:
  • Kodak: too late to embrace the rapid shift from film to digital photography; bankrupt in 2012
  • Nokia: long-time dominant market leader in mobile phones failed to spot fast-moving challengers
  • Sony: silo mentality arising from market leadership reduced the incentive & energy to innovate
  • Toyota: culture of complacency (market leader) contributed to quality problems in 2011/12
  • RIM( Blackberry): believed their market dominance of business mobile phones would last
  • Businesses going through a painful process of organisational change:
  • Royal Mail: regulatory change and potential privatisation force a substantial change programme
  • NHS: political pressure for “modernisation" & high profile care scandals (e.g. Staffordshire)
  • BBC: pressure from frozen licence-fee income, restricted commercial activities & fallout from Jimmy Saville scandal. A culture claimed to be driven by “silos" and “empires" & rigid hierarchy.
  • RBS: significant retrenchment following nationalisation
  • Santander UK: restructuring & rebranding to integrate three separate financial services takeovers

Depends on Factors

  • Organisation culture evolves naturally, but the pace and nature of change will very much depend on the evolving circumstances of the organisation.
  • Managing that cultural evolution is one of the primary tasks of an organisation's leadership. Do the leaders have the necessary expertise / experience?
  • Is step-change (rather than incremental change) only necessary if a business is in “distress" – i.e. culture change is required for survival?

Further Evaluation Opportunities

  • Organisational culture is not an entity or a “thing" that is independent from business strategy; it can't simply be changed by pulling different levers.
  • The culture of society (and work in particular) is changing all the time – regardless of whether a firm wants to change its culture.
  • A decision to make a planned change to organisational culture should derive from a clear shortfall in business performance or a decision to change business strategy.

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

© 2002-2022 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.