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CHAPTER 10
Leadership of Culture, Ethics, and Diversity
Chapter Outline
I. What is Organizational Culture?
A. Culture Creation and Sustainability
B. The Power of Culture
C. Strong versus Weak Cultures
D. The Leader’s Role in Influencing Culture
E. Types of Cultures
F. National Culture Identities—Hofstede’s Value Dimensions
II. Organizational Ethics
A. Fostering an Ethical Work Environment
B. Authentic Leadership
III. Diversity Leadership
A. The Changing Work Place
B. Benefits of Embracing Diversity
C. Creating a Pro-Diversity Organizational Culture
D. The Effects of Globalization on Diversity Leadership
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New To This Edition
The chapter has been updated throughout. There are 117 references and 4 are from the 5e; so 113 or 97% of
the references are new to this edition.
The opening case is Avon Corporation, but the case has been completely re-written to focus on Avon’s a
new CEO – Sheri McCoy.
All the Concept Application Exercises have been changed or updated.
A new subsection on Culture Creation and Sustainability has been added.
Two sub-headings – Characteristics of Strong Cultures and Characteristics of Weak Cultures – have been
dropped from level 2 to level 3 sub-headings. These two sub-headings have been significantly shortened
by not discussing each characteristic as a separate subheading. Instead a summary narrative is given and
the specific characteristics presented in the Exhibits.
The four sub-headings on Types of Culture – Cooperative, Competitive, Adaptive and Bureaucratic – have
been dropped from level 2 to level 3 sub-headings.
Each of Hofstede’s Five Value Dimensions for Understanding National Cultures has been dropped from a
level 2 to a level three sub-heading.
The four recommended practices for Fostering an Ethical Work Environment have been dropped from level
2 to level 3 sub-headings.
The sub-section on the Characteristics of Authentic Leaders has been dropped. Its content is included in
the sub-section titled “What is Authentic Leadership?”
The sub-heading formerly titled “Changing Demographics and Workforce Diversity” has been re-titled to
“The Changing Workplace.” Also, demographic diversity has been deleted as a key term.
The sub-section on The Downside of Diversity has been deleted.
Each of the factors that support a Pro-Diversity Organizational Culture has been changed from level 2 to
level 3 sub-headings.
The end-of-chapter case is new.
Lecture Outline
PowerPoint: You may use the PowerPoint supplement to enhance your lectures. Even if your classroom is not
equipped to use PowerPoint, you can review the material on your personal computer to get teaching ideas and to
copy the slides. Copies of the slides can be made into overheads. (Slide 10-1 is title slide and Slide 10-2 is LOs)
I. WHAT IS ORGANIZATIONAL CULTURE? (Slide 10-3)
An organization’s culture is manifested in:
The structures, rules, routines, values, norms, and expectations leaders preach and practice
Employees’ attitudes and behavior
Ethical guidelines
Operating policies
The stories people repeat about key events in the organization
Organizational culture gives identity to an organization.
Culture is the aggregate of beliefs, norms, attitudes, values, assumptions, and ways of doing things that is shared by
members of an organization and taught to new members.
It is described by some as a “shared mental model” or the “social glue” that holds an organization together.
A. Culture Creation and Sustainability (Slide 10-5 and Discussion Question on Slide 10-4)
Culture is created either by intentional design or by default
By design, culture can also be imposed on an organization by a new leader’s desire to change an existing
culture so it aligns with his or her vision, values, objectives and strategies.
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Culture creation can also happen by default as a slowly evolving process.
An organization’s core values and beliefs can come about from the experiences gained or lessons learned
during trying times of the organization’s life.
A culture is sustained as each successive generation of leaders and followers embraces and passes it to the next
through mechanisms such as stories, artifacts, rituals, slogans, symbols, and special ceremonies.
B. The Power of Culture (Slide 10-6)
Learning Outcome (LO) 10-1. Explain the power of culture to an organization’s effectiveness, both
internally and externally.
An organization’s culture determines the way that it responds to changes in its external and internal
environments. The two important functions served by culture are directly tied to this concept: (1) that
culture creates internal unity, and (2) that culture helps the organization adapt to the external
environment. Culture provides a value system in which to operate, and when all employees buy into such
a value system, there is internal unity. Culture determines how the organization responds to changes in its
external environment.
Culture serves two important functions in organizations: (1) it creates internal unity and (2) it helps the
organization adapt to changes in its environment.
1. Internal Unity
Organizational culture defines a normative order that serves as a source of consistent behavior inside an
organization.
2. External Adaptation
Culture determines how the organization responds to changes in its environment.
C. Strong versus Weak Cultures (Slide 10-7)
LO 10-2. Describe the characteristics of low- and high-performing cultures.
When there is little or no consensus on the values and norms governing member behavior, we describe it
as a low-performing or weak culture. The lack of common values and norms means that members of the
organization may not show any sense of close identification with the organization’s vision, mission, and
strategy. Strong cultures are ones in which core values are widely shared across the organization, from
top management to rank-and-file employees.
The characteristics of low-performance cultures include insular thinking, resistance to change, a highly
Organizational culture may influence such performance outcomes as quality, customer satisfaction,
A unique corporate culture can be the source of a firm’s competitive advantage.
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Therefore: (Slide 10-8)
o A weak culture symbolizes a lack of agreement or shared mind-set on key values and norms.
o A strong culture symbolizes a complete agreement or shared mind-set on key values and norms,
with leaders playing a key role.
1. Characteristics of a Weak (Low) Performing Cultures
Weak cultures are generally associated with low performance. There is a low degree of fit between
strategy and an organization’s culture
See Exhibit 10.1: Characteristics of Weak (Low) Performing Cultures (Slide 10-9)
2. Characteristics of Strong (High) Performing Cultures
See Exhibit 10.2: Characteristics of Strong (High) Performing Cultures (Slide 10-10)
An organization’s culture is considered strong and cohesive when it conducts its business according to
a clear and explicit set of principles and values that are widely shared.
In a strong culture, there is an emphasis on excellence. There is a passion for achieving and employees
are encouraged to take measured risks.
Organizations with high-performing cultures see their employees as their number one asset.
Trust, responsibility, accountability, and integrity are defining features of relationships between leaders and
their followers in high-performing cultures.
WORK APPLICATION 10-1
Would you describe the organization where you work or have worked as a low- or
high-performing culture? Explain your answer?
CONCEPT APPLICATION 10-1
Characteristics of Low- and High-Performing Cultures
Answers to the Concept Application questions are at the end of lecture outline.
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D. The Leader’s Role in Influencing Culture (Slide 10-11)
LO 10-3. Distinguish between symbolic and substantive leadership actions for shaping
organizational culture.
Leaders can initiate many different types of policies, programs, and practices to change, modify, or
sustain an organization’s culture. Some of these actions are substantive, while others are simply
symbolic; yet taken together, they can shape the culture of an organization according to the expectations
of the leader. Substantive actions are explicit and highly visible and are indicative of management’s
commitment to a particular way of doing things. Symbolic actions are valuable for the signals they send
about the kinds of behavior and expectations leaders wish to encourage and promote.
Leaders use different tools for changing, modifying or sustaining culture. Some of these actions are
substantive, whereas others are simply symbolic.
Substantive actions are explicit and highly visible and indicative of management’s commitment to a new
way of doing things.
Symbolic actions are valuable for the signals they send about the kinds of behavior and expectations leaders
wish to encourage and promote.
See Exhibit 10.3: Leadership Actions for Shaping Culture (Slide 10-12)
1. Substantive Actions
The strongest sign of management’s commitment to creating a new culture is replacing current members
who are unwilling to change with a new breed of employees.
Accomplished through new HR criteria matching the values and expectations of the new culture.
A lack of “fit” will hinder or constrain strategy execution.
Existing policies and practices that impede the execution of new strategies must be scrapped.
2. Symbolic Actions
Employees learn what is valued most in an organization by watching what attitudes and behaviors leaders
pay attention to and reward and whether the leaders’ own behaviors match those values.
Employees want to see their leaders “walk the walk.”
Leaders can schedule ceremonies to celebrate and honor people whose actions and performance exemplify
what is called for in the new culture.
A culture that celebrates accomplishments helps retain valued employees.
Another symbolic action a leader can use to influence culture is simply being visible.
A leader may appear at ceremonial functions and/or make special appearances at non-ceremonial
events to stress key priorities, values, norms, and ethical principles.
WORK APPLICATION 10-2
Identify and briefly explain which of the leadership actions for shaping culture
have been used by a leader where you work or have worked.
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E. Types of Culture (Slide 10-13 and 10-14 and Discussion Question on 10-15)
LO 10-4. Identify and briefly describe the four types of culture commonly found in organizations.
The cooperative culture emphasizes teamwork amongst its employees. Collaboration is seen as critical to
achieving organizational goals. The belief is that empowering, respecting, rewarding, and trusting
employees is the key to capitalizing on external opportunities. The adaptive and cooperative cultures are
often referred to as cultures of innovation, for their flexibility and creativity in responding to
environmental changes. Competitive cultures are common in mature markets in which the emphasis is on
the achievement of specific targets (such as market share, revenue growth, and profitability). The
bureaucratic cultures are highly structured and efficiency driven. Change is slow in bureaucratic cultures.
There is no one best organizational culture.
Our focus is on four culture types, they are not mutually exclusive; an organization’s culture may reveal
characteristics that fit one or more of these types.
However, high-performing organizations with strong cohesive cultures tend to emphasize or lean more toward
one particular culture type – a shared mind-set.
1. Cooperative Culture
The cooperative culture represents a leadership belief in strong, mutually reinforcing exchanges and
linkages between employees and departments.
This culture encourages cooperation, teamwork, power sharing, and camaraderie among employees. It
is an internally focused culture.
2. Adaptive Culture
The adaptive culture represents a leadership belief in active monitoring of the external environment
for emerging opportunities and threats and adapting to them.
This culture supports employees’ ability to respond quickly to changing environmental conditions
where members are encouraged to take risks, experiment, innovate, and learn from these experiences.
The adaptive culture is generally known for its flexibility and innovativeness.
3. Competitive Culture
The competitive culture represents a leadership mind-set that encourages and values a highly
competitive work environment.
All organizational policies, beliefs, norms, and work practices foster competition, both internal and
external.
These organizations operate in a mature market in which competition is intense. Some describe this
type of organizational culture as a market-oriented culture.
The drive to win, either internally or against an external competitor, is what holds the organization
together.
4. Bureaucratic Culture
The bureaucratic culture represents a leadership mind-set that values order, stability, status, and
efficiency.
Bureaucratic cultures emphasize strict adherence to set rules, policies, and procedures; their cultures
are highly structures and efficiency driven.
Faced with global competition, many leaders are shifting away from bureaucratic cultures because of
the need for greater flexibility and adaptation.
WORK APPLICATION 10-3
Describe which of the four types of organizational cultures exist where you work
or have worked. Does it lean toward one type or is it a compilation of all four
types?
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CONCEPT APPLICATION 10-2
Type of Organizational Culture
Answers to the Concept Application questions are at the end of lecture outline.
F. National Culture Identities—Hofstede’s Value Dimensions (Slide 10-16)
LO 10-5. Describe Hofstede’s theory on National Culture Identities.
The conceptual framework for understanding global cultural differences proposes that national cultures
differ by the values they espouse. Researchers have associated different value dimensions with the
cultures of different nationalities and/or regions of the world. Leading this effort is the work of Geert
Hofstede, whose research identified five value dimensions for understanding global cultural differences.
Each value dimension represents a continuum of two opposite ends. The five value dimensions making up
the framework are the following:
a. Individualism–collectivism
b. High–low uncertainty avoidance
c. High–low power distance
d. Long-term–short-term orientation
e. Masculinity–femininity
On a national level, there are unique cultural identities associated with different countries.
An organization’s cultural archetype may have its roots or some of its roots in the national culture.
Hofstede developed five value dimensions that distinguish a nation’s culture from other nations.
Each of these five dimensions contains two opposing values on opposite ends of a continuum.
See Exhibit 10.4: Hofstede’s Value Dimensions for Understanding National Cultural Differences (Slide 10-17)
1. Individualistic or Collectivistic Cultures (Slide 10-18)
This dimension involves a person’s source of identity in society.
Individualism is a psychological state in which people see themselves first as individuals and believe their
own interest and values are primary.
Collectivism is the state of mind wherein the values and goals of the group—whether extended family,
ethnic group, company, or community—are primary.
The United States, Great Britain, and Canada are individualistic cultures, while Greece, Japan, and Mexico
have collectivistic cultures.
2. High- or Low-Uncertainty-Avoidance Cultures (Slide 10-19)
A society with a high-uncertainty-avoidance culture has a majority of people who do not tolerate risk,
avoid the unknown, and are comfortable when the future is relatively predictable and certain.
In a high uncertainty avoidance country like Japan, managers prefer well-structured and
predictable situations.
The other end of the continuum is a society where the majority of the people have low uncertainty
avoidance.
A low-uncertainty-avoidance culture has a majority of people who are comfortable with and accepting of
the unknown, and tolerate risk and unpredictability.
The United States, Australia, and Canada are associated with low-uncertainty-avoidance cultures
while Argentina, Italy, Japan, and Israel are associated with high-uncertainty-avoidance cultures.
3. High- or Low-Power-Distance Cultures (Slide 10-20)
Power distance is the way in which people of different status, power, or authority should relate to each
other as equals or unequels.
In a high-power-distance culture, leaders and followers rarely interact as equals.
In a low-power-distance culture, leaders and their followers interact on several levels as equals.
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High power-distance cultures include Mexico, Japan, Spain, and France.
Low power-distance cultures include Germany, the United States, and Ireland.
4. Long- or Short-Term Orientation (Slide 10-21)
People from a culture with a long-term orientation have a future-oriented view of life and thus are thrifty
(saving for the future) and persistent in achieving goals.
A short-term orientation derives from values that express a concern for maintaining personal happiness
and for living for the present. Immediate gratification is a priority.
Most Asian countries, known for their long-term orientation, also have a high rate of per capita savings.
Most European countries and the U.S. tend to spend more, save less, and have a short-term orientation.
5. Masculinity or Femininity Cultures (Slide 10-22)
This value dimension was used by Hofstede to make the distinction between the quest for material assets
and the quest for social connections with people.
Masculinity describes a culture that emphasizes assertiveness and a competitive drive for money and
material objects.
Femininity describes a culture that emphasizes developing and nurturing personal relationships and a
high quality of life.
Countries with masculine cultures include Japan and Italy.
Feminine cultures include Sweden and Denmark.
6. Implications for Leadership (Slide 10-23)
In the academic community, there is greater recognition that future leaders need diversity competencies to
effectively leverage a diverse workforce.
More and more organizations are relying on leaders with international experience to lead a multicultural
workforce and compete in the global marketplace.
WORK APPLICATION 10-4
Based on the five value dimensions discussed, briefly explain the level of cultural
understanding that exists where you work or have worked.
YOU MAKE THE ETHICAL CALL 10-1
Buy American
Answers will vary based on opinion.
II. Organizational Ethics (Slide 10-24)
Ethics are the standards of right and wrong that influence behavior.
Here we focus on the role of leadership in creating an ethical work environment, whose absence can lead to severe
consequences for the organization.
Self-Assessment 10-1
Personal Values
If you want students to complete the Self-Assessment exercises throughout the
book, you may want to tell students and spend a little time talking about them.
A. Fostering an Ethical Work Environment (Slide 10-25)
LO 10-6. Identify organizational practices that do foster an ethical work environment.
Organizational practices that can promote an ethical work environment include the following: a jointly
developed code of ethics that everyone is well informed of its contents, creating ethics committees to
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oversee and process ethical violations, making ethical training part of employee development programs,
and ensuring that there are available and safe disclosure mechanisms such as a whistle-blowing program
for reporting ethical violations.
For an organization to display consistently high ethical and socially responsible behavior, its leaders must create
and maintain a culture of ethics that permeates the entire organization.
An ethical work environment is mission and values-driven, stakeholder balanced, and effectively managed.
Some of the tools available for creating and fostering an ethical work environment include:
1. Code of Ethics
They serve as benchmarks for judging both company decisions and actions and individual conduct.
A code of ethics is of no consequence if a supportive corporate culture and leadership are lacking.
2. Ethics Committees
Enforcing the ethical code is critical. This may be done with an ethics committee or through an
ombudsperson.
An ethics ombudsperson is a single person entrusted with the responsibility of acting as the
organization’s conscience.
3. Training and Education Programs
Training teaches employees how to incorporate ethics into daily behavior. It helps align member behaviors
with the organization’s values.
4. Disclosure Mechanisms
Proactive organizations have also instituted disclosure mechanisms to encourage employees to report any
knowledge of ethical violations.
Whistle blowing is employee disclosure of illegal or unethical practices on the part of the
organization.
WORK APPLICATION 10-5
In your school, look around or investigate if any of the tools discussed here for
enforcing an ethical and socially responsible work environment is present.
Describe briefly what it is, where it is located, and what behavior it regulates.
YOU MAKE THE ETHICAL CALL 10. 2
Avon Bribe Investigation
Answers will vary based on opinion.
B. Authentic Leadership (Slide 10-26)
LO 10-7. Explain how authentic leadership has its roots in moral and ethical theory of leadership.
Authenticity is a psychological construct that focuses on knowing, accepting, and acting in accordance
with one’s core values, beliefs, emotions, and preferences. The authentic leader holds him- or herself to a
higher moral standard. Authentic leadership theory has an introspective quality that allows leaders to
reflect on whether their actions are consistent with who they are, ensuring that their values and ethics take
precedence over external pressures, and not vice versa. The authentic leader is driven by a value system
that calls for being moral and focusing on what is ethical or the right thing to do.
Authentic leaders have the highest integrity, a deep sense of purpose and are true to their values.
We need leaders who have the courage to tell their followers the hard truths even if it’s not what they want to
hear.
Authentic leadership is a values-based concept.
1. Personality profile of the authentic leader
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Authentic leadership has an introspective quality that allows leaders to reflect on whether their actions are
consistent with who they are, ensuring that their values and ethics take precedence over external pressures,
and not vice versa.
2. How Authentic Leaders Influence Follower Behaviors and Attitudes
Authentic leadership emphasizes a transparent and high-quality exchange relationship between leaders and
followers.
III. DIVERSITY LEADERSHIP (Slide 10-27)
Diversity is the inclusion of all groups at all levels in an organization.
During the past three decades, the U.S. workplace has become more multi-culturally diverse.
A number of factors have contributed to this trend; among these are:
o the Civil Rights Acts, which outlawed most types of employment discrimination;
o increased immigration, which has resulted in a more racially and ethnically mixed population;
o changing demographics of the population and
o the passage of the Americans with Disabilities Act (ADA) which has further broadened the scope of
diversity in the workplace.
A. The Changing Work Place
Major demographic changes, as well as greater minority representation in the workforce, have accounted for the
most significant increase in workforce diversity.
The latest census revealed an increasing number of Hispanics, African-Americans, and Asians in the U.S.
workforce. Their population is growing at a faster rate than the overall population.
Hispanics are now the largest minority group and growing the fastest.
Longer term, Caucasians are projected to become a minority by 2050.
The passage of the ADA means workers often share work duties and space with co-workers who are disabled.
Another demographic trend is the age and gender mix.
There are more women entering the workforce today than at any other time in recent memory.
The aging trend has now created what some have called generational or age diversity in the workplace.
For the first time, four distinct generations comprise today’s workforce—the Traditionalists (1900–1945),
the Baby Boomers (1946–1964), the Generation Xers (1965–1980), and the Millennials (1981–2000).
There is a growing interest in adding diversity management competency as part of leadership development
programs.
WORK APPLICATION 10-6
Describe diversity where you work or have worked. For example, approximately
what percentage are male versus female, Caucasian versus non-Caucasian, older
versus younger, and so on?