Organizational culture

Organizational culture can loosely be defined as the shared assumptions, beliefs, and norms (normal behaviors) of a group. These are powerful influences on the way people live and act; to a large degree, what we do is determined by our culture. The same person in different organizations (or parts of the same organization) tends to act in different ways.

Culture is very powerful. One (admittedly dated) example is the cultural change effort at British Airways, which transformed an unprofitable airline with a poor reputation into a paragon of politeness and profit.

An example: Cultural change at Chrysler (1991-2001) — up and down again

In the early 1990s, Chrysler had terrible customer service, with a history of innovation shadowed by outdated products and lagging technology. Its market share was falling, and its fixed costs were high. The company leaders created a clear, globally applicable vision — making Chrysler to become the technology and quality leader in cars and trucks.

Quite a bit of the change in culture came from buying AMC, a much smaller company. AMC executives and engineers had used “do more with less” cross-functional methods which were to play a major role in Chrysler’s revival. Two vehicles designed largely by AMC people with AMC methods were the 1994 Dodge Ram and 1993 Dodge Intrepid, both runaway successes which redefined their markets.

By changing the culture — and altering the structure to match it — Chrysler cut its overhead by $4.2 billion in under four years, quadrupled its stock price, and changed its slide into bankruptcy into large profits. A completely new and competitive line of cars or trucks started to appear each year. New engines produced more fuel economy and power as new cars added comfort, performance, and space. They did this with the same people, working in different ways.

With hindsight, we can see that the problem with cultural change, though, is that it can easily be sabotaged by new leaders. Chrysler’s gains were lost when the company was acquired by Daimler-Benz, starting years of poor morale and market losses.

Involvement of people

When Chrysler was entering its final “golden age,” it started to involve both employees and suppliers in decision making. In four years, 60% of ideas solicited from suppliers were adopted, saving over $235 million. Customers were called in during development of new models, to provide suggestions (rather than just ratings of what they liked). One designer photographed the interiors of about 200 pickups to see where cups, maps, and such were being stored, so they could tailor the interior of the new trucks to the needs of the drivers. Chrysler has also been listening to customers who write to the company; the designers even responded to some letters by phone.

Rather than have a small number of people control new products, planners set out customer desires and needs early on, and worked with the functional groups; their role became more advisory. Assembly line workers were also included; with the new Ram trucks, they were working with engineers six months before production started. Mechanics were also consulted, to help prepare the cars and trucks for real-life maintenance. The payoff came with fewer assembly glitches and higher productivity.

Product teams followed vehicles through their development to identify systems and process issues. “Today, we feel we have a lot more facts, and more of a groundswell of information that comes from groups of people who know exactly what we’re trying to do,” reported Robert Johnson of Dodge Trucks.

Agreeing on objectives

One change which helps to keep projects pure is setting down objectives clearly, at the beginning. Core objectives were agreed on at the beginning by all parties; because “Everybody agrees up front and we stick to the plan,” (Bernard Robertson, Jeep/Truck team), there were no last-minute changes in focus, which can result in expensive disasters (such as the Corvair, Vega, and Fiero). Because everyone was involved in setting goals, they took responsibility for living up to them.

Learning

Changes in the way cars were made began with help from AMC, which had operated with a far smaller staff than most automakers. Bob Lutz and former AMC engineering chief Francois Castaing reorganized their departments into AMC-style teams. Since then, Chrysler changed its teams by learning from its achievements and mistakes.

Pilot vehicles in the new Ram program - which would triple Chrysler’s market share despite a price premium - were ready 13 months ahead of time. The number of improvements made each year increased dramatically each year as learning spread.

Pitfalls

Cultural change is neither easy nor foolproof. It can take time — at least one year, more likely between three and six years — and it takes effort and vigilance. A great deal of patience and long-term support is needed.

Communication may be key, as small successes are used to support larger efforts. Sometimes, it is necessary to start changing small parts of an organization first, later expanding efforts. Chrysler did this by starting with their engineering teams and moving on to other areas.

The proponents of change must carefully model the behavior they want to see in others. If they do not send a consistent message and keep that message clear and dominant over time, cultural change may be seen as just another fad.

Frequently, change becomes harder when the organization starts to turn around. At Chrysler, the pace of change dropped off dramatically when profits started to appear regularly, and Bob Eaton began to fatten middle management again, adding layers between line workers and decision makers. Complacency is an ever-present danger when changes start to take effect.

The example of Chrysler also shows that cultural change, though powerful, is always subject to the whims of senior leaders. After the sale to Daimler-Benz, strong leaders dropped away or were asked to resign, and Chrysler reverted to massive, simple cost-cutting, lack of clear and honest communication, and using short-term fixes.

There is a great deal of literature on cultural change, but successful efforts generally involve the services of an experienced consultant to provide some guidance and unbiased feedback. As the Chrysler example shows, vigilance by the senior leaders and process owners is also required over the long term.

Applying cultural changes to your organization

Cultural changes take time, and the process may be bumpy. Some people get used to it quickly, and other people take more time. Cultural changes may take a long time in a larger business. At Chrysler, they started with engineering, moved on to customer service, down to the dealers, and so on. This made for some strange experiences for those who dealt with the company during the transitional times. Many wondered why Chrysler, in the midst of heavy losses, was spending billions on new buildings and research. Their answer did not come until years later, when Chrysler regained its billions and a few extra as well.

Rensis Likert wrote that major changes could take two or three years before the results showed. The lag time may be shorter if your commitment to the program is deep and shows clearly; if your vision of what your business should look like is clear; and if all of your actions are consistent with this vision. For example, at advertising giant Ogilvy & Mather, posters and cards are issued to each employee with clear, colloquial statements on “how we do business” (signed by David Ogilvy). At Chrysler, the pace of change was slowed by structural problems (e.g., dealerships are independently owned) and by the jaded viewpoints of many who had seen fads come and go. Another problem has been the onset of complacency, as winning products, record profits, and high sales erased the “emergency” atmosphere that contributed to the speed of change.

While simple cost-cutting may show faster results, the profits don’t stay for long. The cost-cutting programs of Roger Smith and Richard Stempel resulted in the biggest losses in GM’s history, while the cultural change programs of Chrysler stopped the company’s losses and increased its market share for the first time in years. Chrysler’s own cost-cutting after the takeover resulted in problems getting new products developed and produced, and do not appear to have helped profits, since sales also fell. You can’t make a tree grow larger by cutting the roots.

Cultural changes must often be spearheaded by one or two people with strong ideas. This may be the head of the business, a consultant, or a designated executive or team. The best results seem to be achieved when there is a firm commitment from the top, which is communicated directly to each and every person in the business.

The accessibility of top people is a powerful incentive for workers to feel that they are part of the company. Often, if workers know they can walk into the president’s or owner’s office and be greeted with their attention and respect, they will work much harder to make that vision a reality. This one step may help to save a great deal of money, as workers may feel more free to bring in suggestions, and the executive may be more likely to try it out...sometimes with quite surprising results. (3M’s successful Scotch tape and Post-It notes were the result of worker suggestions).

Before planning a cultural change, it may help to study companies with successful cultures, such as 3M, Ben & Jerry’s, Wal-Mart, or Chrysler, to find out how they became and stay successful, deal with failures and successes, and keep their fingers on their customers’ and employees’ pulses. In Search of Excellence (Harper & Row) describes a number of companies with successful cultures (though some have declined, which, if nothing else, shows the need for vigilance). Many consultants, such as Rensis Likert, Warner Burke, David Nadler, and Chris Argyris, have also written about their experiences. (These books and examples may not be especially current, but they still provide the same lessons — people have not changed even if technology and businesses have).

The power of cultural change is strong — strong enough to turn an aging dinosaur into a state-of-the-art profit-maker. It may do wonders in your business or institution, as well.

Organizational development • Contact us for information on our cultural change services.

Bibliographic information: by David Zatz, Ph.D. and Katherine Zatz, Ed.D.; publication date, 1994 (revised 2020); source, https://www.toolpack.com/