project on organizational culture

5/21/2018 Project on Organizational Culture

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ORGANIZATIONAL CULTURE

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ORGANIZATIONAL CULTURE:

Organizational culture is defined as a pattern of basic assumptions invented, discovered or

developed by a given group, as it learns to cope with the problems of external adaption and

internal investigation that has worked well enough to be considered valid and therefore is to be

taught to the new members as the correct way to perceive, think, and feel in relation to those

problems. Organizational culture is a set of shared understandings, norms, values, attitudes and

beliefs of an organization which can foster or impede change.

When people join an organization, they bring with them the values and beliefs that they have

been taught. Quite often, however these values and beliefs are insufficient for helping the

individual succeed in the organization. The person needs to learn how the particular enterprisedoes things.

A common misconception is that an organization has a uniform culture. However, at least as

anthropology uses the concept; it is probably more accurate to treat organizations as if they

had a uniform culture. All organizations have culture, in the sense that they are embedded in

specific societal cultures and are part of them. According to this view, organization culture is a

common perception held by the organizations members. Everyone in the organization would

have to share this perception. However, all may not do so to the same degree. As a result, there

can be a dominant culture as well as subcultures throughout a typical organization.

A dominant culture is a set of core values shared by a majority of the organizations members.

The values that create dominant cultures in organizations help guide the day-to-day behavior of

the employees. Important, but often overlooked, are the subcultures in an organization. A

subculture is a set of values shared by a minority, usually a small minority of the organizations

members. Subcultures typically are a result of problems or experiences that are shared by

members of a department or unit. Subcultures can weaken and undermine an organization if they

are in conflict with the dominant culture and overall objectives. Successful firms, however find

that this is not the case always. Most subcultures are formed to help the members of a particular

group deal with the specific day-to-day problems with which they are confronted. The members

may also support many, if not all, of the core values of the dominant culture.

A NEW CONCEPT: WHISTLE BLOWING

Whistle blowing is commonly defined as "the disclosure by organization members (former or

current) of illegal, immoral, or illegitimate practices under the control of their employers, to


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persons or organizations that may be able to effect action". While whistleblowing includes

disclosures both internal and external to the organization, organizations benefit when employees

choose to report internally. Internal reporting facilitates early detection of misconduct and

creates opportunity for timely investigation and corrective action. Internal reporting alsopositions organizations to proactively manage, or even avoid public embarrassment, government

scrutiny, costly fines, and litigation.

To encourage internal reporting organizational ethics and compliance programs often include the

availability of an anonymous or confidential reporting channel that enables employees the

opportunity to report, without fear of retaliation, their concerns regarding organizational conduct

ranging from slight indiscretions and unprofessional behaviors to criminal acts warranting felony

convictions. Employee utilization of these reporting channels, however, is limited, and it has

been found that the majorities of employees who become aware of individual or corporate

wrongdoing never report or disclose their observations to anyone.

Numerous variables have been studied in the literature for their relationship to whistleblowing.

An employee's decision to report individual or organizational misconduct is a complex

phenomenon that is based upon organizational, situational, and personal factors.

A FEW DIMENSIONS OF ORGANIZATIONAL CULTURE

VIGILANCE

Prior to pondering whether or not to communicate an ethical, compliance, or legal concern, anemployee must first be in a position to detect violations. "What are the standards in this

organization?" "What is my role in upholding these standards?" Accordingly, the first step in

supporting employee communication and reporting behaviors is to influence a culture that

promotes not only awareness of an organization's commitment to integrity, but a shared

understanding of organizational standards. A look out for threats to organizational integrity also

must be cultivated among organization members.

Thoughtful attention to training employees on the values and standards outlined in the

organization's code of conduct will facilitate awareness building. However, the most

fundamental and powerful values of an organization are not written down and exist only in theshared norms, beliefs, and assumptions reflected in the organization's culture. These norms,

beliefs, and assumptions guide how organization members think and act. The organizational

culture informs members how to relate to each other and to outsiders, how to analyze problems,

and how to respond to situations encountered in the organization. To promote a shared

understanding of which "code" to follow, the formal code of conduct or the unwritten code of


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culture, the dynamics of organizational culture on an employee's ability to accurately interpret

the ethical standards of the organization must be addressed.

To support a culture of vigilance, employees also must be educated on the relationship betweenorganizational integrity and the organization's strategic positioning. Employees who observe

wrongdoing may not report it because they cannot fully estimate the resulting damage.

Therefore, the organization should ensure employees are in a position to identify the potential

consequences of ethical, compliance, and legal breaches, including opportunity costs and harm to

the organization, its reputation, and stakeholders.

ENGAGEMENT

The cultural dimension of engagement is multifaceted and complex. Engagement is concerned

with organizational and individual factors that contribute to a personal state of authenticinvolvement in the organization. Organizational processes used to recruit, orient, socialize, and

manage employees influence engagement. Employees sense making, psychological contracts,

and perceptions of fairness in organizational dealings influence the degree of authentic

involvement by them. Managing these organizational processes and individual perceptions to

facilitate high degrees of organizational commitment and identification encourages a culture of

engagement that supports internal whistle blowing.

If an organization member is not committed to high ethical standards there may be a tendency to

rationalize questionable behavior as a common or even necessary practice in performing job

duties. On the other hand, if an employee has high ethical standards that are not supported by theorganization, there is a tendency for the employee to experience internal conflict. Such conflict

will arise when organizational demands on employees are inconsistent with personal or

professional values. The result is decreased commitment and an unwillingness to exert effort on

behalf of the organization.

Once employees enter the organization, socialization methods, including training on ethical

standards can be used to deepen employee commitment to organizational values and norms.

CREDIBILITY

A culture of engagement that supports organizational commitment and identification, however,

may not be sufficient for prompting employee disclosures. An employee will also seek to "test"

the organization's commitment to integrity. Leadership behavior is a key determinant of

employee perceptions and beliefs.


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The most powerful strategy that can be relied upon to facilitate credibility is employee belief in

espoused ethics and values including organizational expectations for employee disclosure,

attending to and monitoring congruence in the organizational culture. The role of leadership is

central to this strategy.

Aligning leadership behaviors with formal policies and consistent modeling of espoused values

are important practices for fostering credibility. Demonstrating personal commitment to

organizational values builds trust and creates a safe environment for employees to come forward

and report concerns.

ACCOUNTABILITY

Accountability for communicating knowledge of wrongdoing will be carefully judged by

employees. "Is it my job to report?" "Isn't this someone else's responsibility?" "Why should I get

involved? After all, I am not the only one aware of what is going on here." Again, values, beliefs,

and norms embedded in the organizational culture and picked up by employees will influence

employee reflections.

HOW DID ORGANIZATIONAL CULTURE START

While organizational cultures developed in different ways, the process usually involves some

version of the following steps:

A single person (founder) has an idea for a new enterpriseThe founder brings in one or more other key people and creates a core group that shares acommon vision with the founderThe founding core group begins to act in concert to create an organization by raisingfunds, obtaining patents, incorporating, locating space, building and so onAt this point, others are brought into the organization and a common history begins to bebuilt

Most of todays successful corporate giants in all industries basically followed these steps. Three

well-known representative examples are Motorola, McDonalds and Wal-Mart.

McDonalds: Ray Kroc worked for many years as a salesperson for a food supplier. He learned

how retail food operations were conducted. He also had an entrepreneurial streak and began a

sideline business with a partner. They sold multimixers, machines that were capable of mixing

up to six frozen shakes at a time. One day Kroc received a large order for multimixers from the

McDonald brothers. The order intrigued Kroc and he decided to look in on the operation the next


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time he was in their area. When he did, Kroc became convinced that the McDonalds fast food

concept would sweep the nation. He bought the rights to franchise McDonalds units and

eventually bought out the brothers. At the same time, he built the franchisee on four basic

concepts: quality, cleanliness, service and price. In order to ensure that each unit offers thecustomer the best product at the best price franchisees are required to attend McDonald

University, where they are taught how to manage their business. Here they learn the McDonald

cultural values and the proper way to run the franchisee. This training ensures that the

franchisees all over the world are operating their units in the same way. Kroc died several years

ago, but the culture he left behind is still very much alive in McDonalds franchisees across the

globe. In fact, new employees receive videotaped messages from the late Mr. Kroc.

Wal-Mart: Sam Walton, founder of Wal-Mart Stores, Inc., opened his first Wal-Mart store in

1962. Focusing on the sale of discounted name brand merchandise in small town markets, he

began to set up more and more stores in the Sun Belt. At the same time, he began developingeffective inventory control systems and marketing techniques. Today, Wal-Mart has not only

become the largest retailer but also one of the biggest firms in the country. Although Sam died a

few years ago, his legacy and cultural values continue. To ensure that these values get out to all

the associates, the company has a communication network worthy of the Pentagon. It includes

everything from a six-channel satellite system to a private air force of numerous planes.

Everyone is taught this culture and is expected to operate according to the core cultural values of

hard work, efficiency and customer service.

LEVELS OF CULTURE:

ARTIFACTS

VALUES

BASIC ASSUMPTIONS

ARTIFACTS:

Artifacts are the most visible and accessible level of culture. It is symbol of culture in the

physical and social work environment of the organization.

Artifacts of culture are:

PERSONAL ENACTMENT

RITES AND CEREMONIES

STORIES AND LEGENDS


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RITUALS

SYMBOLS

PERSONAL ENACTMENT:

Personal enactment is a behavior that reflects the value of organization, through the examination

of the behavior of organization members.

CEREMONIES AND RITES:

Set of activities that are enacted time and again on important occasion.It provides the opportunity

to reward and recognize the employees whose behaviors are according to the values of the

organization.

Rites to the employees can be awarded as

Rites of passage

rites of renewal

Rites of integration

Rites of conflict reduction

Rites of degradations

RITES OF PASSES:

Rites of passes show the changed status of individuals in the respected organization.

Retirement dinner

RITES OF RENEWAL:

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth.

RITES OF INTEGRATION:


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It emphasize on the commitment of the employees by uniting diverse group within the

organization.Company function, annual picnic, cultural fest are the rites of integration in the

organization.

RITES OF COFLICT REDUCTION:

Its primal objective is to dwindle the disagreements and keep up with the positive environment

inside the organization by satisfying the tangible and intangible needs of the employee.

Grievance hearing, negotiation of union contracts isrite of conflict reduction.

RITES OF DEGRADATION:

It is basically punishment oriented and organization people may be punished visibly if they dontfollow the organizational norms.

Ribbon of shame, demotion in the organizational post, reduction in salary can be under the rites

of degradation.

STORIES AND LEGENDS:

Stories are the most effective way to reinforce the organizational values. it give meaning and

identity to the organizations and very helpful in orienting new employees.

Stories can be delivered in different ways

Stories about the boss

Stories about getting fired

Stories about company details

Stories about employees

Stories about rules

RITUALS:

Rituals are unwritten and shows the way the employee follow the things to be done in theorganization. These are the everyday organizational practices repeated over and over.

SYMBOLS:

Symbols are again one important artifact of the organization which communicates about the

organizational culture by unspoken messages.


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VALUES:

Values reflect apersonsunderling believes in the organization, it is often consciously articulated

both in conversation and the companys mission statement or annual report. a firmsvalues andhow it promotes and publicizes them can also affect workers feeling about their job and

themselves.

ASSUMPTIONS:

Assumptions are deeply held believes that guide behavior and awakens the members of the

organization how to perceive and go about the things.

FUNCTIONS OF ORGANIZATIONAL CULTURE:

These are the functions being served by the organization

Sense of identity

Sensemaking device

Reinforcing the values in organization

Control mechanism for shaping behavior

SENE OF IDENTITY:

Culture provides a sense of identity to the members and enhances their commitment towards the

organization.

SENSE MAKING DEVICE:

Culture in the organization provides the employees to interpret the meaning of the organizational

events.

VALUE REINFORCEMENT:

Values in the organization can be reinforced by the cultural activities.

CONTROL MECHANISM:

In shaping the behavior of members in the organization culture plays the big role.

CULTURAL PERPECTIVES:


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THE STRONG PERSPECTIVE

THE FIT PERSPECTIVE

THE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE:

The strong culture facilitates performance with the intensity visible to the outsiders.It states that

organization with strong culture performs better than other organizations.

THE FIT PERSPECTIVE:

Fit perspective argues that the culture of the organization is valid, if it fits the industry or firmsstrategies. It is useful in explaining short term performances.

THE ADAPTATION PERSPECTIVE:

The cultures that help organizations adapt to environmental change are deeply associated with

excellent performance. It encourages confidence and risk taking capacity among the employees.

LEADERS ROLE IN SHAPING CULTURE:

WHAT LEADERS PAY ATTENTION TO

HOW LEADERS REACT TO THE CRISES

HOW LEARERS BEHAVE

HOW LEADERS ALLOCATE REWARDS

HOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION:

Another process that perpetuates culture is the way it is handed down from generation of

employees. Newcomers learn the culture through organizational socialization The process by

which newcomers are transformed from outsiders to participating, effective members of the

organizations. The process is also a vehicle for bringing newcomers into the organizational

culture.

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages:


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Anticipatory Socialization.

Encounter.

Change and Acquisition.

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomers first day

on the job. It includes the newcomers expectations. The two concerns at this stage are:

Realism.

Congruence.

Realism is the degree to which a newcomer holds realistic expectations about the job and about

the organization. One thing newcomers should receive information about during entry into the

organization is the culture. Information about values at this stage can help newcomers begin to

construct a scheme for interpreting their organizational experiences.

There are two types of Congruence between an individual and an organization:

Congruence between the individuals abilities and the demand of the job, and the fit between the

organizations values and the individuals values. Value Congruence is particularly important for

organizational culture. It is also important in terms of newcomer adjustment.

ENCOUNTER

The second stage of socialization, encounter, is when newcomers learn the tasks associated withthe job, clarify their roles, and establish new relationships at work. This stage commences on the

first day at work and is thought to encompass the first six to nine months on the new job.

TASK DEMAND

Task demand involves the actual work performed. Learning to perform tasks is related to the

organizations culture. In some organizations, newcomers are given considerable latitude to

experiment with new ways to do the job, and creativity is valued.

ROLE DEMANDRole demand involves the expectations placed on newcomers. Newcomers may not know exactly

what is expected of them or may receive conflicting expectations from other individuals. The

way newcomers approach these demand depends in part on the culture of the organization.


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INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work. Politics, Leadership style, and group

pressure are interpersonal demand. All of them reflect the values and assumptions that operatewithin the organization.

CHANGE AND ACQUISITION

In the third and final stage of socialization, change and acquisition, newcomers begin to master

the demands of the job. They become proficient at managing their tasks, clarifying and

negotiating their roles, and engaging in relationship at work. The end of the process is signaled

by newcomers being considered by themselves and others as organizational insiders.

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance, high job satisfaction, and

the intention to stay with the organization. In addition, they should exhibit low levels of distress

symptoms. High levels of organizational commitment are also marks of successful socialization.

Successful Socialization is also signaled by mutual influences.

When socialization is effective, newcomers understand and adopt the

organizations values and norms. This provides employees a context for interpreting and

responding to things that happen at work.

Newcomers adopt the companys norms and values more quickly when they

receive positive support from organizational insiders.

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool. While the transmission of information

about cultural artifacts is relatively easy, the transmission of value is more difficult. The

communication of organizational assumption is almost impossible.

The primary purpose of socialization is the transmission of core values to new

organization members. Newcomers are exposed to these values through the role models they

interact with, the training they receive, and the behavior they observe being rewarded and

punished.


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ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with

quantitative methods, others say qualitative methods yield better results. Quantitative methodssuch as questionnaires are valuable because of their precision, comparability and objectivity.

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the

expectations of coworkers. Using Maslows motivational need hierarchy as its basis, it measures

twelve cultural styles. The two underlying dimensions of the OCI are task/people and

security/satisfaction. There are four satisfaction cultural styles and eight securities cultural styles.

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the

expectations of others in the organization. Its two underlying dimensions are technical/human

and time. With these two dimensions, the actual operating norms and the ideal norms in four

areas are assessed. The areas are task support task innovation social relationships and personal

freedom.

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improveinclusiveness and accuracy in measuring the organizational culture. Triangulation has been used

by anthropologists, sociologists and other behavioral scientists to study organizational culture. Its

name comes from the navigational technique of using multiple reference points to locate an

object.

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization. With rapidenvironmental changes such as globalization, workforce diversity and technological innovation,

the fundamental assumptions and basic values that drive the organization may need to be altered.

One particular situation that may require cultural change is a merger or acquisition.


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EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND

SERVICE QUALITY

Empowerment unleashes employees creativity

Empowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

Remove obstacles to their performance

Communicate the value of product and service quality


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CISCO CULTURE CASE STUDY

ABSTRACT:

The case focuses on Cisco's organization culture, which many feel, was responsible for Cisco

bouncing back to profit after recording losses during the tech meltdown of 2001. The case looks

at Cisco's growth through the years, the drivers of Cisco culture, and the characteristics of work

culture at Cisco. Incorporated in 1984, Cisco had a culture based on the principles of customer

focus, transparent communication, employee empowerment, integrity, and frugality. The work

culture, which epitomized fun and fostered a spirit of employee involvement, ensured that

employee turnover was way below industry norms. Continuous Learning, an element of the

Cisco culture, was taken care of even through acquisition and partnerships. The case also looks

into the role played by the company's CEO, John Chambers, in the evolution of the Ciscoculture.

CASE:

Cisco Systems Inc. (Cisco), the leader in Internet Protocol (IP)-based networking technologiesand networking gear, recorded $2.2 billion in revenues and a market capitalization of $9 billionin 1995. By March 2000, market capitalization went up to $ 531 billion while revenues in 2000were $19 billion. In 1995, Cisco accounted for 15% of the networking industry's profit and thisfigure went up to 50% in 2000. But with the tech meltdown of 2000-01, telecom companies andInternet service providers stopped purchasing telecom equipments from Cisco. Cisco was thus on

a free fall, a situation the top management did not expect. "If somebody would've told me thenthat we'd go from 70% growth to minus 30% growth in 45 days, I'd have said it wasmathematically impossible," said John T. Chambers (Chambers), President and CEO, CiscoSystems Inc.5

Though the company recorded losses in 2001, it bounced back with net profits the next year.

Cisco's net sales for fiscal 2004 were $22.0 billion, an increase of 16.8 percent from the $18.9

billion for fiscal 2003, while net income for fiscal 2004 was $4.4 billion or $0.62 per share,

compared with $3.6 billion or $0.50 per share for fiscal 2003 (Refer Exhibit I for stock market

movement of Cisco between 1990 and 2005). Industry observers were quick to point out that it

was the organization culture of Cisco that helped it survive the tough periods of meltdown. Ciscowas founded on a culture based on the principles of customer focus, open communication,

empowerment, trust, integrity, and giving back to the community.

This culture ensured that Cisco was on the list of the Fortune magazine's '100 best places towork' for eight consecutive years, starting 1998.
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BACKGROUND NOTE

Headquartered at San Jose, California, US, Cisco was incorporated on December 10, 1984. The

company was founded by a group of computer scientists, who designed software named IOS

(Internet Operating System), which could send streams of data from one computer to

another. This was loaded into a box containing microprocessors specially designed for routing.

In 1985, the company started a customer support site from where customers could download

software over FTP6and also upgrade the downloaded software. Cisco, on its site, also provided a

database that contained information about potential software problems to help customers and

developers.

By 1991, Cisco's support centre was receiving around 3,000 calls a month, which increased to12,000 by 1992. To deal with the large volume of transactions, it built an online customersupport system on its site.

In 1993, Cisco installed an Internet-based system for large multinational corporate customers.The system allowed customers to post queries related to their problems. Cisco also installed atrigger function called the 'Bug Alert' on its website. The 'Bug Alert' sent e-mails on softwareproblems within 24 hours of their discovery.

Encouraged by the success of its customer support site, in 1994, Cisco launched Cisco

Information Online, a public website that offered not only company and product information butalso technical and customer support to customers.

In 1995, it introduced applications for selling products or services on its website. This was donemainly to transfer paper, fax, and e-mails to the web to save time for employees, customers, andtrading partners, besides broadening Cisco's market reach. In 1996, the company introduced anew Internet initiative, 'Networked Strategy' to leverage on its enterprise network to fosterinteractive relationships with prospective customers, partners, suppliers, and employees.

In August 1996, Cisco launched transactional facilities including product configuration andonline order placement connected to Cisco's ERP systems.In 1997, it introduced the dial-in access from desktop computers that enabled customers to placeorders without accessing the Internet. In the same year, it also introduced customized businessapplications for its customers' corporate Intranets and automated the ordering process by linkingdirectly to Cisco's internal systems. Commenting on the growth of Cisco in the late 1990s,Jeremy Duke, analyst at market research firm In-Stat7said, "They are entering into the zone ofthe great phone companies, as moneymakers and as builders of infrastructure. There's nobodylike them.
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WHAT DRIVES CISCO'S CULTURE?

CUSTOMERS FIRST

Cisco's success has been attributed to its relationship with its customers. Cisco professed a 'worshcustomers', which was a part of the company's culture right from its inception. "This is a culture whercustomer comes first. If the customer has a problem, we drop everything," said Pete Solvik (SolSenior Vice President and Chief Information Officer (CIO), Cisco. Cisco viewed the assessmecustomer satisfaction as a continuous process. One of the elements of this assessment was getting recustomer feedback, which helped Cisco employees to be proactive in identifying problem areas, rthan waiting for an annual customer satisfaction survey. Cisco's field teams designed the questionnthat were used to assess customer satisfaction.

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement. "Very often it'smost efficient to just work with the person involved, without the formality of passing throughevery layer of management. But that requires a level of trust that not all organizations have,"mentioned Solvik. If a Cisco employee wanted the top management support for an innovativeidea, he had to discuss the idea with an employee decision-making team and get its assent. If thedecision-making team accepted the idea, the top management gave the green signal. "They (thedecision-making teams) are empowered to make that decision because we put the authority, theresponsibility, and the accountability at the same layer.

RECRUITMENT AT CISCO

Cisco's recruitment practices reflected the company culture. Cisco's recruiting teamidentified candidates whom they felt the company 'should hire' and then designed its hiringprocesses to attract them to the company. In the late 1990s, the company was hiring at a ratewhich averaged 1000 new employees every month. For recruiting candidates who fit into theculture of Cisco, a selection criterion was developed which targeted candidates who werefrugal, enthusiastic about the future of the Internet, and were not obsessed with status - allhallmarks of the Cisco culture.

'BUILT TO LAST'

According to some analysts, Cisco faced the risk of diluting its culture due to the influences ofnew recruits who brought in behaviors from past job experiences. "We're focusing on what it willtake to communicate the culture and preserve it. That's another learning experience: Culture isnot automatic.


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That it follows a principle of customer focus, transparent communication, employee

empowerment, integrity and fragility.

It is the culture where customer comes first but in CISCO itsalso the product that works andmatters. Here engineer counts as much as culture. So CISCOs betting big on collaboration that

draws manager input from all levels as the main drivers for its strategy to grab new market. Its

taking a decentralized form, rather than working on a single leader decision making.

In conclusion, Cisco Systems appeals to businesses and employees in similar ways by offering a

standard to be the best provider and staying ahead of the competition. Their cultural presence is

felt by worldwide leadership in technology by bringing jobs, as well as, communications to

countries and government structures. Cisco offers a strong customer-responsive organization that

blends with cultural needs and service to its employees.

Thus it has a fit culture perspective where customer and competitors comes first .

Although customer is the top priority in CISCOs culture but it gives equal importance to its

employees. Its decentralized system of decision making & futuristic approach are the major

gluing factor in retaining employees.


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3M CASE STUDY

ABSTRACT:

The case examines the organizational culture at 3M and the way in which it facilitated innovationat 3M. The policies and mechanisms adopted by 3M's management to encourage the spirit ofinnovation in its employees are also discussed.

The case takes a close look at 3M's environment of innovation; the culture of knowledge sharing;and the reward system. It also discusses the steps implemented by the new CEO, James McNerney,to accelerate growth at 3M. The impact of cultural change at 3M on the spirit of innovation is also

discussed.

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M! The company completed 100 years in business in 2002. For many,3M represented the house of innovation. For 100 years, 3M formula for growth - recruit the rightpeople, provide them with the right environment to work and let them do their things - resulted inaround 55,000 products and over thousands of patents for the company. Analysts attributed 3M'ssuccess to its commitment to innovation. They pointed out that 3M gave its employees the freedomto conduct research in areas of their choice even if that research was not related to their officialprojects.

By thus nurturing the talents of its employees and fostering a climate of innovation, 3M became

one of the most innovative companies in the world.

In 2001, James McNerney Jr. (McNerney) took over as Chairman and CEO of 3M andannounced several initiatives to revive the stagnating growth rate of the company. He initiatedcost cutting measures, rationalized purchases, and implemented process improvement programsin the company. He gave a centralized direction to the company from its earlier laissez-faireworking style. Analysts cautioned that the changes brought about by McNerney might harm the100-year old culture at 3M that fostered innovation and sustained its growth over the years.However, McNerney pointed out that the changes brought about in 3M would provide thecompany a strategic direction in a volatile business environment without harming itsorganizational culture.

INVENTING 3M

In 1902, five businessmen founded Minnesota Mining and Manufacturing (popularly referred toas 3M) in Two Harbors, US. The new company was in the business of mining corundum, amineral best suited for making sandpaper and grinding wheels. In 1904, when an artificial


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abrasive replaced corundum, 3M decided to manufacture sandpaper. Edgar Ober (Ober), one ofthe founding members of 3M, approached his friend Lucius Ordway (Ordway), a successfulbusinessman for funds for the new venture. Ordway agreed to invest $25,000 in the company,

on condition that he won't be involved in the day-to-day affairs of the company.

However, by 1906, Ordway had invested around $200,000 in 3M and had become involved inthe day-to-day affairs of the company. In the same year he became the President of the company.

When 3M realized that the corundum owned by it was a low-grade anorthosite, it decided to shutdown the mine and shift to Duluth in 1905. In the same year, 3M decided to import garne t5fromSpain. 3M received its first shipment of garnet in 1907 and started producing sandpaper. By1911, 3M reported sales of $212, 898 and in the same year Ober appointed William L. McKnight(McKnight), who joined the company in 1907 as assistant bookkeeper as sales manager. In 1911,3M brought out its first breakthrough product, Three-M-ite cloth. Three-M-ite became the

company's first profitable product. The Carborundum Company, which had developed artificialabrasive coated emery cloth before 3M, filed a patent infringement suit against the company.

3M hired Paul Carpenter; a Chicago based lawyer and expert in patent law, and won the caseagainst Carborundum. Due to Three-M-ite's success, 3M became debt free and announced itsfirst dividend of 6 cents per share in 1916. In the same year, McKnight became vice-president. Inthe 1920s, 3M recruited people with diverse backgrounds and expanded its product portfolio. Italso introduced two breakthrough products, waterproof sandpaper and Scotch masking tape,invented by Francis Okie (Okie) and Dick Drew (Drew) respectively. In 1922, 3M entered theEnglish market and reported sales of $68,000 in the first year of its operations. In order toconsolidate its presence in global markets, 3M established research laboratories, and a sales and

marketing network across Europe.

EXPERTS

FOSTERING INNOVATION

From its early days, 3M fostered a culture of innovation in its organization. McKnight tried tocreate an organization that would encourage its employees to take the initiative and come upwith new ideas.

RECRUITING AND RETAINING TALENT3M recruited people who were creative and had a broad range of interests. According tocompany sources people who had a broad range of interests were willing to learn and explorenew ideas. In addition, they brought a multi-disciplinary approach to their work. To make it easyfor recruiters, 3M codified the six traits of innovative people in its recruiting brochure:
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Creativity Broad interests Self motivated

Resourceful Hard working Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions. As these divisions increased in size,McKnight noticed that there was a slowdown in innovation; not much time was devoted to newproduct development.

To increase the pace of new product launches, McKnight introduced the philosophy of divide an

grow. In line with this philosophy, new businesses were spun off and new management teams werdevoted to the spun off units. As a result, these new units were able to grow quickly. When these new

businesses were spun off, the established divisions had to develop new products and find new market

to achieve their growth objectives to make up for contributions from the businesses that had becom

independent. This mechanism, which analysts called 'Renewal,' resulted in increased diversification

3M.

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation, 3M also took steps toencourage knowledge sharing among its employees. According to analysts, innovation couldflourish in 3M because the management encouraged its employees to talk. 3M employees neverexperienced any communication barriers.

REWARDING INNOVATION

In addition to recruiting innovative people, creating a challenging environment for employees, anencouraging a culture of knowledge sharing, 3M also focused on rewarding employees. To encouragthe spirit of innovation among employees 3M realized it was necessary to reward them appropriately

The dual ladder career path adopted by 3M, created two career ladders - technical anmanagement. This approach allowed even a technical person to get promoted to the vice-presiden

level without taking on managerial and administrative responsibilities.From the 3M case we reach at the conclusion that though McNerney wanted to make the

decision system a bit centralized but he preferred employees taking initiatives. Creativity, hard

work & problem solving attitude are given importance at 3M. It focused on rewarding


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employees and there was not any communication barrier which encouraged the process of

knowledge sharing. It basically followed an adaptive culture where employees were the main

priority.

3M recognized that a strategic commitment to innovative products would pay off if it were tied

to creating a culture that allowed its employees to be innovative and creative. When an employee

at 3M made a mistake or had an idea that didn't work, he or she discussed it at a team meeting

and the entire team celebrated the learning experience. Over time, a culture evolved where risk

and innovation were viewed as necessary and complementary. 3M managed to link strategies to

management and employee actions. It successfully linked corporate success to the development

of new products and a lesser dependence on mature products. It linked its HR systems to its

strategic framework by creating a set of HR strategies that provided; innovative compensation

and reward systems, creative organizational structures, training and development plans tied to

strategic outcomes, and targeted employee skills. Through over 90 years of trial and error, 3Mhas developed a culture that effectively supports both quality and innovation.

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in:

CULTURE OVERHAUL

By the late 1990s, 3M's growth rate started slowing down. According to reports, the stock priceof 3M dropped from $83.00 in 1996 to $71.13 in 1998 and the price-earning ratio (P/E ratio) ofthe company also declined considerably.

t was reported that during 1995-2000, earnings per share grew at an average of only 8.8% andshareholder returns fell far behind Dow and the S&P 500. Analysts felt that 3M was unable to

espond to market conditions. Commenting on 3M's performance during the decade, Bob

urgstahler (Burgstahler), chief of Business development, said, "We have not produced elite

esults that correspond to the view that this is an elite organization." In December 2000, 3M

announced the appointment of James McNerney Jr. (McNerney) of General Electric as its CEO.

or the first time, an outsider was appointed as CEO of 3M. The stock markets responded

ositively to the appointment of McNerney and 3M's stock price closed at $120.50, the highest in

he decade.

M has been encouraging a culture of innovation from the very beginning where employees aregiven freedom to work without any pressure. They are given full freedom to implement new ideas

ith no or very less questioning. There is no communication barrier in the organization. These are

he major gluing factor in 3M which has retained its employees since so long.


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SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18,

1971, with three Boeing 737 aircraft serving three Texas cities - Houston, Dallas, and SanAntonio. Today, Southwest operates more than 500 Boeing 737 aircraft between 67 cities.

Southwest topped the monthly domestic originating passenger rankings for the first time in May

2003. Yearend results for 2008 marked Southwests 36th consecutive year of profitability.

Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark.

Southwest is the United States most successful low-fare, high frequency, point-to-point carrier.

More than 38 years ago, Rollin King and Herb Kelleher got together and decided to start a

different kind of airline. They began with one simple notion: If you get your passengers to their

destinations when they want to get there, on time, at the lowest possible fares, and make darn

sure they have a good time doing it, people will fly your airline.

CULTURE DONE DIFFERENTLY

For more than 38 years, the Southwest Culture has thrived, but it hasnt been easy. The longevity

has been both their biggest accomplishment and their most significant challenge.

At Southwest, They think of Their Culture in a positive light, but every company has a culture,

whether that culture is supportive or stifling, active or passive, fun or discouraging. The way they

keep their Culture supportive, active, and fun is by making Southwests Culture everyones

responsibility. In fact, they ask everyone to own it.

The Culture Committees are just the beginning of what separates them from the way other

companies approach their culture. One of the most significant Southwest differences in their

pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the

Company. Hardly any company make having a Fun-Loving Attitude a key pillar of their

leadership expectations. Those same expectations include The Golden Rule and possessing a

Servants Heart. The annual Performance Appraisal for all of their Employees includes

asection on Southwest Culture. From an Employees initial interview until the day he or she

retires, the Southwest Culture is an ingrained part of daily life.

And finally, their Culture encourages celebration. First, they celebrate their Veterans on the

month of Nov. America would be a much different place without the courage of their Veterans.

They then celebrate the blessings of the past year on Thanksgiving.

Southwest's no-layoff response to September 11 was a reminder to its employees of the

organization's tradition of caring for its people. When asked to comment on this, an official


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explained, "Its part of our culture. We've always said we'll do whatever we can to take care of

our people. So that's what we've tried to do."1

Southwest's organizational culture was shaped by Kelleher's leadership. Kelleher's personalityhad a strong influence on the culture of Southwest, which epitomized his spontaneity, energy and

competitiveness. Southwest's culture had three themes: love, fun and efficiency. Kelleher treated

all the employees as a "lovely and loving family". Kelleher knew the names of most employees

and insisted that they referred to him as Herb or Herbie. Kelleher's personality charmed workers

and they reciprocated with loyalty and dedication. Friendliness and familiarity also characterized

the company's relationships with its customers...

BUILDING RELATIONSHIPS

Since its inception, Southwest attempted to promote a close-knit, supportive and enduringfamily-like culture The Company initiated various measures to foster intimacy and informality

among employees. Southwest encouraged its people to conduct business in a loving manner.

Employees were expected to care about people and act in ways that affirmed their dignity and

worth.

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can

be seen in the way the Southwest Company treats its employees. To help keep the Culture at the

forefront, they have two groups: Local Culture Committees and the Corporate Culture

Committee. Both groups put on low-cost Employee events throughout the year.

The Employees roll up their sleeves to help out their area Ronald McDonald Houses at

Thanksgiving.

Colleen Barrett who is the former President of southwest airlines sent cards to all

employees on their birthdays...

The CEO joins with the Employees to wish Happy Thanksgiving.

Instead of decorating the wall of its headquarters with paintings, the company hung

photographs of its employees taking part at company events, news clippings, letters,

articles and advertisements.

Customers are not assigned seats; rather, they are assigned to one of three "boarding

groups" depending on their check-in time (earlier check-ins get to board earlier), and are

left to choose their own seats on the plane, which helps the airline to board passengers

faster
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VALUESCompany Values ... Core Values

LUV

Code word for treating individuals, employees, customers

Dignity, respect and caring loving attitude.

Appeared on banners and posters at company facilities

Fun

Entertaining behavior of employees in performing their jobs.

The ongoing pranks and jokes.

Frequent company-sponsored parties and celebrations.

Charity benefit games, chili cook-offs, Halloween parties

THRIVING UNDER PRESSURE

Post-September11, 2001, when most airlines in the US went in for massive layoffs, Southwest

avoided laying off any employee. Even before the September 11 crisis hit, Kelleher had

explained his philosophy regarding layoffs in an interview to Fortune magazine. He said,

"Nothing kills your company's culture like layoffs. Nobody has ever been furloughed [at

Southwest], and that is unprecedented in the airline industry. It's been a huge strength of ours. It's

certainly helped us negotiate our union contracts. One of the union leaders.came in to

negotiate one time, and he said, "We know we don't need to talk with you about job security."

We could have furloughed at various times and been more profitable, but I always thought that

was shortsighted.

You want to show your people that you value them and you're not going to hurt them just to get a

little more money in the short term. Not furloughing people breeds loyalty. It breeds a sense of

security. It breeds a sense of trust. So in bad times you take care of them, and in good times

they're thinking, perhaps, "We've never lost our jobs. That's a pretty good reason to stick

around."...

Southwest was the only airline to remain profitable in every quarter since the September 11

attack. (Refer Exhibit VIII for financial position of Southwest.) Although its stock price dropped

25% since September 11, it was still worth more than all the others big airlines combined. Itsbalance sheet looked strong with a 43% debt-to-equity ratio and it had a cash of $1.8 billion with

an additional $575million in untapped credit lines. The company left no stone unturned to boost

employee loyalty and morale.


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South West Airlines has follows a fun loving attitude. Their culture is all about care, friendliness

and familiarity this resulted in the thinking of the employees that they value us and thus we

need to stick around. This is the main gluing factor of the organizations culture.


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CONCLUSION

Organizational culture is a pattern of basic assumptions that are taught tothe personnel as the correct way to perceive, think and act on a day-

To-day basis. Some of the important characteristics of organizational

culture are observed behavioral regularities, norms, values, rules,

philosophy and so on. While everyone in the organization will share the

organization's culture, not all may do so to the same degree. There can

be a dominant culture, but also a number of subcultures. Some

organizations have strong cultures and others have weak cultures. The

strength of the culture will depend on sharedness and intensity. In some

cases organizations find that they must change their culture in order to

remain competitive and even survive in their environment. With

reference to the cases in this project, we had analyzed the value system

of the organization like CISCO, 3M and SOUTH WEST AIRLINES.

3M has built its organizational culture which holds its employees

together in line with the vision and mission of the organization-

southwest airlines has built an organization of repute - an enterprise that

stands apart which even during the last economic downturn was

unshaken. While CISCO has given its culture an innovative and

futuristic approach with customer as the top priority.


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BIBLOGRAPHY:

www.icmrindia.orgOrganizational Behavior by Nelson Quick

Organizational Behavior by K.Aswathappa
http://www.icmrindia.org/http://www.icmrindia.org/http://www.icmrindia.org/

project on organizational culture

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