Management Chapter 14 Homework Explain Notes Leadership Challenge 4

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CHAPTER 14

Shaping Culture and Values

Chapter Outline

Organizational Culture

Culture Strength, Responsiveness, and Performance

Cultural Leadership

In the Lead

Flint Lane, Billtrust

Menlo Innovations

Aaron Levie, Box

Harvard Business School, Columbia Business School, Yale School of Management, Wharton

School of the University of Pennsylvania

Jim Sinegal and Craig Jelinek, Costco

Leader’s Self-Insight

Working in an Responsive Culture

Culture Preference Inventory

How Spiritual Are You?

Leader’s Bookshelf

Summary and Interpretation

Creating the right culture is one of the most important jobs of the leader. Culture is the set of key

values, norms, and assumptions that is shared by members of an organization and taught to new

members as correct. Culture serves two critically important functions—to integrate

organizational members so they know how to relate to one another and to help the organization

adapt to the environment. Strong, responsive cultures have a positive impact on organizational

outcomes. Creating and influencing a responsive culture is important because the right culture

can drive high performance. Leaders build high-performance cultures by emphasizing both

values and solid business operations as the drivers of organizational success.

Many types of values make up an organization’s culture; ethical values are considered among the

most important. Ethics is the code of moral principles and values that governs the behavior of a

person or group with respect to what is right or wrong. Leaders shape cultural values through

Your Leadership Challenge

After reading this chapter, you should be able to:

• Understand why shaping culture is a vital function of leadership.

• Recognize the characteristics of a responsive, as opposed to a resistant, culture.

• Know how to establish a high-performance culture by paying attention to both values and

results.

Key Terms

Culture: the set of key values, assumptions, understandings, and norms that is shared by

members of an organization and taught to new members as correct.

Culture strength: the degree of agreement among employees about the importance of specific

values and ways of doing things.

Culture gap: the difference between desired and actual values and behaviors.

High-performance culture: a culture that is based on a solid mission, embodies shared

responsive values that guide-decisions, and encourages individual ownership of both bottom-line

results and cultural values.

Organizational values: the enduring beliefs that have worth, merit, and importance for the

organization.

Adaptability culture: culture characterized by values that support the organization’s ability to

interpret and translate signals from the environment into new behavior responses.

Achievement culture: culture characterized by a clear vision of the organization’s goals and

leaders’ focus on the achievement of specific targets.

Involvement culture: culture with an internal focus on the involvement and participation of

employees to meet changing expectations from the external environment.

Consistency culture: culture with an internal focus and consistency orientation for a stable

environment.

Introduction

After sinking into bankruptcy and having to be bailed out by the U.S. government, General

Motors amazingly regained its position as the world’s largest automaker in 2011. Leaders have

been praised for making tough decisions that have led to impressive financial results, bringing

out new models that connect with customers, and fixing a myriad of operational and systems

issues. However, there is one area in which CEO Dan Akerson and other leaders admit

significant challenges remain—changing the bureaucratic, tradition-bound culture that crippled

GM in the past. Like leaders in other companies, GM executives are finding that changing

culture is the toughest part of leading a turnaround. One of Akerson’s goals is to get more

women into top jobs, partly because he believes they can lead the radical culture change the

company needs.

Annotated Lecture/Outline

Leadership Challenge #1: Understand why shaping culture is a critical function of leadership.

I. Organizational Culture

Corporate culture is powerful because it affects a company’s performance for better or worse. A

shifting environment often calls for new values and fresh approaches to doing business. Most

leaders now understand that when a company’s culture fits the needs of its external environment

and company strategy, employees can create an organization that is tough to beat.

A. What is Culture?

Some people think of culture as the character or personality of an organization. Culture can

be defined as the set of key values, assumptions, understandings, and norms that is shared by

members of an organization and taught to new members as correct. Norms are shared

Exhibit 14.1: Levels of Corporate Culture

Culture can be thought of as consisting of three levels, as illustrated in Exhibit 14.1, with each

level becoming less obvious:

• At the surface level are visible artifacts, such as manner of dress, patterns of behavior,

physical symbols, organizational ceremonies, and office layout—all the things one can

see, hear, and observe by watching members of the organization.

• At a deeper level of culture are the expressed values and beliefs, which are not

observable but can be discerned from how people explain and justify what they do.

B. Importance of Culture

Culture gives employees a sense of organizational identity and generates a commitment to

particular values and ways of doing things. Culture serves two important functions in

organizations

• It integrates members so that they know how to relate to one another.

• It helps the organization adapt to the external environment.

New Leader Action Memo: As a leader, you can pay attention to organizational culture and

develop an awareness of how cultural values, norms, and beliefs influence people’s behavior in

the organization.

Internal Integration

Culture helps employees develop a collective identity and know how to work together

effectively. Culture can imprint a set of unwritten rules inside employees’ minds.

In the Lead: Flint Lane, Billtrust

Over a two-year period, Billtrust grew from 45 to 145 employees, and increasing business meant

more new people would be coming on board. That was good news, but founder Flint Lane

wanted to be sure the culture that promoted fun, open communication, teamwork, and

interdepartmental interaction remained strong.

External Adaptation

Culture determines how the organization meets goals and deals with outsiders. The right

cultural values can help the organization respond rapidly to customer needs or the moves

of a competitor. Culture can encourage employee commitment to the core purpose of the

organization, its specific goals, and the basic means used to accomplish goals.

The culture should embody the values and assumptions needed by the organization to

succeed in its environment. All effective cultures encourage adaptation to the environment

in order to keep the organization healthy and profitable.

Consider This: Here is Your Assignment

2. You will learn lessons. You are enrolled in a full-time, informal school called life. Each day

3. There are no mistakes, only lessons. Growth is a process of trial and error, experimentation.

4. A lesson is repeated until it is learned. A lesson will be presented to you in various forms

until you have learned it, then you can go on to the next lesson.

6. “There” is no better than “here.” When your “there” has become a “here,” you will simply

obtain another “there” that will, again, look better than “here.”

8. What you make of your life is up to you. You have all the tools and resources you need;

what you do with them is up to you. The choice is yours.

10. Whether you think you can or can’t, in either case you’ll be right. Think about it.

Discussion Question #3: Describe the culture for an organization you are familiar with. Identify

some physical artifacts—such as logo, mascot, building, advertising images—associated with the

company and discuss what underlying values these suggest. What did you learn?

Notes_________________________________________________________________________

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Leadership Challenge #2: Recognize the characteristics of a responsive, as opposed to a

resistant culture.

II. Culture Strength, Responsiveness, and Performance

Culture strength refers to the degree of agreement among employees about the importance of

specific values and ways of doing things. If widespread consensus exists, the culture is strong

New Leader Action Memo: As a leader, you can build a responsive culture by showing concern

for customers and other stakeholders and by supporting people and projects that bring about

useful change. To improve your understanding of responsive versus resistant cultures, go to

Leader’s Self-Insight 14.1.

A strong culture increases employee cohesion and commitment to the values, goals, and

strategies of the organization, but companies can sometimes have unethical values or values that

A. Responsive Cultures

Cultures can be thought of as either responsive or resistant.

Exhibit 14.2: Responsive versus Resistant Cultures

As illustrated in Exhibit 14.2, responsive corporate cultures have different values and

behavior from resistant cultures. In responsive cultures, leaders are concerned with customers

and with people, processes, and procedures within the organization that bring about useful

change. In resistant cultures, leaders are concerned with themselves or their own special

projects, and their values tend to discourage risk taking and change.

An organization’s culture may not always be in alignment with the needs of the external

environment. The difference between desired and actual values and behaviors is called the

culture gap. An important step toward shifting the culture toward more adaptive values is to

recognize when people are adhering to the wrong values or when important values are not

held strongly enough.

Discussion Question #4: Name one or two companies in the news that seem to have strong

corporate cultures, and describe whether the results have been positive or negative. Discuss how

a culture could have either positive or negative consequences for an organization.

Notes_________________________________________________________________________

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Discussion Question #5: As a leader, how might you recognize a culture gap? What are some

techniques leaders might use to influence and change cultural values when necessary?

Notes_________________________________________________________________________

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Discussion Question #7: If you were the leader of a small technology firm, how might you

imprint in people’s minds the values shown in Exhibit 14.2 for responsive cultures in order to

create a high performance culture? Be specific with your ideas.

Notes_________________________________________________________________________

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Leadership Challenge #3: Know how to establish a high-performance culture by paying

attention to both values and results.

B. The High-Performance Culture

In Corporate Culture and Performance, Kotter and Heskett provided evidence that companies in

which leaders intentionally managed cultural values outperformed similar companies whose

leaders did not. Companies that succeed have leaders who pay careful attention to both cultural

values and business performance.

Exhibit 14.3: Combining Culture and Performance

Exhibit 14.3 illustrates four organizational outcomes based on the relative attention leaders

pay to cultural values and business performance. For example, leaders in Quadrant C of

Exhibit 14.3 pay little attention to either cultural values or business results, and the company

holds the organization together—that is, shared cultural values—is missing.

Companies that maintain success over the long term have leaders who fit into Quadrant B.

They put high emphasis on both culture and solid business performance as drivers of

organizational success. Quadrant B organizations represent the high-performance culture, a

culture that:

• Is based on a solid organizational mission or purpose

In the Lead: Menlo Innovations

Richard Sheridan, James Goebel, Robert Simms, and Thomas Meloche founded Menlo

Innovations to create custom software for organizations, but one of their primary goals was to

create a unique culture that embraces the values of equality, teamwork, learning, and fun. The

founders say they were inspired by the collaborative and creative work environment

demonstrated at Thomas Edison’s Menlo Park, New Jersey, “Invention Factory” more than 120

years ago.

At many software companies developers work alone and are driven to meet rigorous

performance goals, but at Menlo, collaboration is valued above anything else. Everyone works in

Discussion Question #1: How difficult would it be for you as a leader to fire someone who is

bringing in big sales and profits for the company but not living up to the cultural values?

Explain.

Notes_________________________________________________________________________

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Leadership Challenge #4: Understand and apply how leaders shape culture and values through

ceremonies, stories, symbols, language, selection and socialization, and daily actions.

III. Cultural Leadership

An organization exists only because of the people who are a part of it, and those people both

shape and interpret the character and culture of the organization. Leaders in particular formulate

a viewpoint about the organization and the values that can help people achieve the organization’s

mission, vision, and strategic goals.

A cultural leader defines and uses signals and symbols to influence corporate culture. Cultural

leaders influence culture in two key areas:

• The cultural leader articulates a vision for the organizational culture that employees can

believe in. This means the leader defines and communicates central values that employees

Some of the mechanisms leaders use to enact cultural values are ceremonies, stories, symbols,

and specialized language. In addition, they emphasize careful selection and socialization of new

employees to keep cultures strong.

A. Ceremonies

A ceremony is a planned activity that makes up a special event and is generally conducted for

the benefit of an audience. Leaders can schedule ceremonies to provide dramatic examples of

what the company values. Ceremonies reinforce specific values, create a bond among

B. Stories

A story is a narrative based on true events that is repeated frequently and shared among

employees. Leaders can use stories to illustrate the company’s primary values. In some cases,

stories may not be supported by facts, but they are consistent with the values and beliefs of

the organization.

C. Symbols

A symbol is an object, act, or event that conveys meaning to others. Leaders can use physical

artifacts to symbolize important values.

D. Specialized Language

Leaders sometimes use slogans or saying to express key corporate values. Slogans can easily

E. Selection and Socialization

To maintain cultural values over time, leaders emphasize careful selection and socialization

of new employees. Companies with strong, healthy cultures, such as Google and Zappos often

have rigorous hiring practices.

New Leader Action Memo: As a leader, you can shape cultural values through rites and

ceremonies, stories, symbols, and language. You can keep the culture strong by carefully

selecting and socializing people, and by making sure your actions match the espoused values.

Socialization is the process by which a person learns the values, norms, perspectives, and

expected behaviors that enable him or her to successfully participate in the group or

F. Daily Actions

One of the most important ways leaders build and maintain the cultures they want is by

signaling and supporting important cultural values through their daily actions. For example,

Discussion Question #2: How might leaders use symbolic acts to strengthen a cultural value of

teamwork and collaboration? How about a value of customer care and responsiveness?

Notes_________________________________________________________________________

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Leadership Challenge #5: Identify the cultural values associated with adaptability, achievement,

involvement, and consistency cultures and the environmental conditions associated with each.

IV. The Competing Values Approach to Shaping Values

Organizational values are the enduring beliefs that have worth, merit, and importance for the

organization. Changes in the nature of work, globalization, increasing diversity in the workforce,

and other shifts in the larger society have also made the topic of values one of considerable

concern to leaders.

In considering what values are important for the organization, leaders consider the external

New Leader Action Memo: Determine your own cultural preferences by completing the

exercise in Leader’s Self-Insight 14.2.

Organizational cultures can be assessed along many dimensions, such as the extent of

collaboration versus isolation among people and departments, the importance of control and

where control is concentrated, or whether the organization’s time orientation is short-range or

long-range. Two specific dimensions are:

Exhibit 14.4: Four Corporate Cultures

Four categories of culture associated with these differences, as illustrated in Exhibit 14.3, are

A. Adaptability Culture

The adaptability culture is characterized by strategic leaders encouraging values that support

In the Lead: Aaron Levie, Box

“My main goals are to innovate and to disrupt,” says Aaron Levie, the young CEO of Box.

“Also, I want to avoid being disrupted.” Those goals are reflected in the company’s culture,

which emphasizes speed, flexibility, and pushing the boundaries. Levie is constantly reminding

people that they can do things “10 times bigger, 10 times better, and 10 times faster,” a core

value he calls “10X.” Other core values are “Get s—done” and “Take risks. Fail fast.”

B. Achievement Culture

The achievement culture is characterized by a clear vision of the organization’s goals, and

leaders focus on the achievement of specific targets such as sales growth, profitability, or

market share. This is a results-oriented culture that values competitiveness, aggressiveness,

New Leader Action Memo: As a leader, you can align the organization’s culture to its strategy

and the needs of the external environment. You can choose to implement the appropriate culture

(adaptability, achievement, clan, or bureaucratic) depending on environmental requirements and

the organization’s strategic focus.

C. Involvement Culture

The involvement culture has an internal focus on the involvement and participation of

D. Consistency Culture

The consistency culture has an internal focus and a dependability orientation for a stable

environment. The culture supports a methodical, rational, orderly way of doing business.

The relative emphasis on various cultural values depends on the organization’s strategic focus

and the needs of the external environment. Leaders might have preferences for the values

Discussion Question #6: Compare and contrast the achievement culture with the involvement

culture. What are some possible disadvantages of having a strong involvement culture? A strong

achievement culture?

Notes_________________________________________________________________________

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V. Ethical Values in Organizations

Organizations incorporate many types of values into their cultures. Of the values that make up an

organization’s culture, ethical values have gained renewed emphasis in today’s era of financial

scandals and moral lapses. Ethics is the code of moral principles and values that governs the

behavior of a person or group with respect to what is right or wrong. Ethics sets standards as to

In the Lead: Harvard Business School, Columbia Business School, Yale School of

Management, Wharton School of the University of Pennsylvania

Some members of the 2009 graduating class of Harvard Business School did something unusual.

They signed a voluntary student-led pledge saying that the goal of a business leader is to “serve

the greater good” and promising that they will act responsibly and ethically and refrain from

advancing their “own narrow ambitions” at the expense of others.

At Harvard and other business schools, there has been an explosion of interest in ethics classes

and activities that focus on personal and corporate responsibility. Many students, as well as

educators, are recognizing a need to give future leaders a deeper understanding of how to

Changing how future leaders are trained could be one key to solving the ethics deficit pervading

organizations. Leaders can create and sustain a climate that emphasizes ethical behavior for all

employees.

Leadership Challenge #6: Act as a value-based leader and instill healthy values in the

organizational culture.

VI. Values-Based Leadership

A. Personal Values

Employees learn about values from watching leaders. Values-based leaders generate a high

level of trust and respect from employees based not just on stated values but on the courage,

determination, and self-sacrifice they demonstrate in upholding those values.

In the Lead : Jim Sinegal and Craig Jelinek, Costco

In 2009, as the recession deepened and many employers were slashing jobs and cutting salaries,

Costco CEO Jim Sinegal was handing out raises. Costco is the second-largest retailer in the

United States, behind Walmart, and while Walmart leaders are seeing growing troubles, Costco

leaders seem to be seeing nothing but growing sales and profits. In early 2013, the company’s

profit soared to $537 million, proving that paying employees above-average wages and treating

them well in other ways can pay off. Since 2009, Costco’s sales have grown 39 percent and the

stock price has doubled.

Several factors contribute to an individual leader’s values. Every individual brings a set of

personal beliefs, personality characteristics, and behavior traits to the job. The family

backgrounds and spiritual beliefs of leaders often provide principles and values by which they

conduct business, and these are sometimes incorporated into the organizational culture.

New Leader Action Memo: As a leader, you can be ethical and act on high moral principles in

your daily behavior. You can help people find deeper fulfillment in their jobs. Complete Leader’s

Self-Insight 14.3 to see if you might be a leader who incorporates spiritual values as part of the

corporate culture.

Discussion Question #9: If a leader directs her health-care company to reward hospital

managers strictly on hospital profits, what kind of values is she encouraging within the company

culture? Discuss.

Notes_________________________________________________________________________

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Leadership Challenge #7: Apply the principles of spiritual leadership to help people find

deeper life meaning and a sense of membership through work.

B. Spiritual Values

Managers who incorporate spiritual values in addition to the traditional mental and behavioral

aspects of leadership tend to be successful as leaders. Values and practices considered as

spiritual ideals include integrity, humility, respect, appreciation for the contributions of others,

fair treatment, and personal reflection.

Spiritual leadership is the display of values, attitudes, and behaviors necessary to

intrinsically motivate oneself and others toward a sense of spiritual expression through calling

and membership.

Exhibit 14.5: Model of Spiritual Leadership

As illustrated in Exhibit 14.5, spiritual leaders start by creating a vision through which

organization participants experience a sense of calling that gives meaning to their work.

Second, spiritual leaders establish a corporate culture based on altruistic love. Spiritual

leaders also engage hope and faith to help the organization achieve desired outcomes.

Spiritual leadership behaviors enable employees to have a sense of calling that provides

deeper life meaning through work. Spiritual leadership also provides a sense of membership

through a work community in which one feels understood and appreciated. The outcome for

the organization is improved commitment and productivity.

Spiritual leadership can decrease or eliminate negative emotions and conflicts in the

workplace and provide a stronger foundation for personal well-being. The four main types of

destructive emotions are:

• Fear, including anxiety and worry

• Anger, including hostility, resentment, and jealousy

provides both service and meaning.

Discussion Question #8: Discuss the meaning of calling and membership, as related to spiritual

leadership. Identify an organization or leader that uses these concepts. To what extent were these

concepts present where you have worked?

Notes_________________________________________________________________________

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Discussion Question #10: Some mortgage company leaders have said that providing subprime

mortgages (earn a commission by making loans to people at high interest rates who may have

difficulty making the payments) was based on the noble purpose of giving poor people a chance

to participate in the American dream of home ownership. Discuss your opinion of this

explanation.

Notes_________________________________________________________________________

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Discussion Question #11: Some people believe that all good leadership is spiritual in nature.

Others think spiritual values have no place at work. Discuss these two opposing viewpoints.

Notes_________________________________________________________________________

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Discussion Questions

1. How difficult would it be for you as a leader to fire someone who is bringing in big sales

and profits for the company but not living up to the cultural values? Explain.

Students’ answers may vary. Some may say that though it would be tough for a leader to

fire someone who is bringing in big sales for the company, if such employees don’t live up

2. How might leaders use symbolic acts to strengthen a cultural value of teamwork and

collaboration? How about a value of customer care and responsiveness?

Students’ answers may vary. A symbol is one of the tools used by the leaders for

conveying cultural values. A symbol is an object, act, or event that conveys meaning to

others. In order to strengthen a cultural value of teamwork and collaboration:

3. Describe the culture for an organization you are familiar with. Identify some physical

artifacts—such as logo, mascot, building, advertising images—associated with the

company and discuss what and underlying values these suggest. What did you learn?