Study Notes

Reasons for Changing Organisational Culture

Level:
A-Level, IB, BTEC National
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 28 Jul 2019

Here are four main reasons why a business may want and/or need to change its organisational culture.

BUSINESS PERFORMANCE

When the sales and profits of a business decline sharply or when even the survival of the business is threatened, that's a pretty clear signal that things need to change - including the culture. Whilst the culture might not itself be the cause of poor business performance, it can be a powerful symptom of the need for change.

Perhaps a business has lots its edge by becoming too complacent about the need to innovate, or though a bureaucratic culture allowed competitors to gain an advantage by becoming more agile or efficient.

NEW LEADERSHIP / STRATEGY

New leaders often align a change in strategy with a call for a change in culture. Usually this is because the existing culture is identified as a potential restraining force (Lewin) which might reduce the chances of successful change management. Satya Nadella (at Microsoft) and Moya Greene (Royal Mail) both identified the need for cultural change to accompany changes in strategic direction.

CHANGE IN EXTERNAL ENVIRONMENT

External shocks can be a powerful facilitator of cultural change. For example, following the banking and financial crisis of 2007-9, and the subsequent business failures of market leaders such as Lehmann Brothers and the bank bailouts, it became clear that significant cultural change was required in firms that survived. A culture had developed (and was fostered by senior management) that encouraged and rewarded excessive risk-taking. For businesses like RBS, rescued by the UK government, the arrival of new leadership soon led to a very different culture being required.

TO SUPPORT CHANGE MANAGEMENT

As mentioned above, an attempt to change culture is often part of major (step) change projects. These may include new leadership, but not always. It is perfectly possible for existing management to identify the need for culture change as part of change initiatives designed to improve the competitiveness of a business,

For example, new processes and/or incentives to encourage innovation might be introduced. Similarly, a business might change from a centralised to a decentralised approach to decision-making - with the need for changes in how the business communicated identified as a key part of the required culture change.

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