CHAPTER OUTLINE

Institutionalization: A Forerunner
CHAPTER of Culture
What Is Organizational Culture?

16
What Does Culture Do?
Creating and Sustaining Culture
How Employees Learn Culture

ORGANIZATIONAL
CULTURE
In any organization, there
are the ropes to skip and
the ropes to know.
—R. Ritti and
G. Funkhouser

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LEARNING OBJECTIVES
After studying this chapter, you should be able to
1 Describe institutionalization and its relationship
to organizational culture
2 Define the common characteristics making up
organizational culture
3 Contrast strong and weak cultures
4 Identify the functional and dysfunctional effects
of organizational culture on people and the
organization
5 Explain the factors determining an
organization’s culture
6 List the factors that maintain an organization’s
culture
7 Clarify how culture is transmitted to employees
8 Outline the various socialization alternatives
available to management

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 From Mazda Motor Corp’s Hiroshima headquarters, its president is trying
to change his company’s corporate culture.1 The president, Henry Wallace
(see photo), has his work cut out for him. Mazda’s internal culture closely mir-
rors Japan’s national culture. The company values indirect communication,
loyalty, obedience, and relationships. Mr. Wallace believes these cul-
tural values, which worked in the company’s favor in the postwar
years, are outdated in the current, highly competitive, global economy.
He was brought in by Ford Motor Co., which owns controlling interest
in Mazda, in the spring of 1996 to turn around declining sales and
return Mazda to profitability. In 1995, Mazda made only 771,000 cars,
half the number it made in 1990.
Mr. Wallace, a gangly Scot, stands out like a sore thumb in Japan.
As the only foreigner running a Japanese company of any size, he is
a celebrity and a curiosity. His outsider status provides him both
advantages and disadvantages. Since foreigners are always expected
to act differently, he is given more leeway in introducing non-Japanese prac-
tices at Mazda. But he lacks fluency in Japanese and his efforts to inject more
English into the workplace and change established organizational norms is
raising anxiety levels. Many Mazda employees feel Wallace just doesn’t
understand the way Japanese do things and the unique culture of Mazda.
Mr. Wallace faces an organizational culture where people are afraid to
speak up in meetings and where employees and parts suppliers are set for
life. Wallace wants to change this. He has turned carefully staged meetings
into freewheeling brainstorming sessions. He expects people to ask questions

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 and to challenge ideas. This doesn’t come easy to Mazda employees. He has
forced Mazda staff members to use more marketing data to back up new-
product proposals. He’s injecting more English, the international business
language, into the company. And while he hasn’t laid anyone off yet, he talks
about it as a possibility, and that’s raising concerns throughout the company.
But one of his biggest challenges is breaking up Japan’s traditional system of
longtime, family-like relationships with suppliers. Hundreds of suppliers get
blueprints from Mazda and build parts to company specifications. While sup-
pliers give Mazda loyalty and obedience, Wallace believes Mazda suffers in
terms of price, quality, and delivery schedules. He wants to reduce the num-
ber of suppliers that Mazda works with and increase competition among those
that are left. “If the president [of Mazda] were a Japanese, he would have
some sympathy toward us,” complains the head of a small supplier. “He would
think: ‘You have been working so hard for Mazda.’ Even in times of difficulties,
he would take care so that as many companies as possible would survive.” ◆

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A
strong organizational culture like that found at Mazda pro-
vides employees with a clear understanding of “the way
things are done around here.” It provides stability to an orga-
nization. But, as evidenced at Mazda, it can also be a major barrier
to change. In this chapter, we show that every organization has a
culture and, depending on its strength, it can have a significant
influence on the attitudes and behaviors of organization members.

Institutionalization: A Forerunner
of Culture
The idea of viewing organizations as cultures — where there is a system
of shared meaning among members — is a relatively recent phenome-
non. Until the mid-1980s, organizations were, for the most part, sim-
ply thought of as rational means by which to coordinate and control
a group of people. They had vertical levels, departments, authority
relationships, and so forth. But organizations are more. They have per-
sonalities too, just like individuals. They can be rigid or flexible,
unfriendly or supportive, innovative or conservative. General Electric
offices and people are different from the offices and people at General
Mills. Harvard and MIT are in the same business — education — and
separated only by the width of the Charles River, but each has a
unique feeling and character beyond its structural characteristics.
Organizational theorists now acknowledge this by recognizing the

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important role that culture plays in the lives of organization members.
Interestingly, though, the origin of culture as an independent variable
affecting an employee’s attitudes and behavior can be traced back 50
years ago to the notion of institutionalization.2 institutionalization
When an organization becomes institutionalized, it takes on a life When an organization takes
of its own, apart from its founders or any of its members. Ross Perot on a life of its own, apart
created Electronic Data Systems (EDS) in the early 1960s, but he left in from any of its members,
and acquires immortality.
1987 to found a new company, Perot Systems. EDS, now part of
General Motors, has continued to thrive despite the departure of its
founder. Sony, Eastman Kodak, and Timex Corporation are examples
of organizations that have existed beyond the life of any one member.
Additionally, when an organization becomes institutionalized, it
becomes valued for itself, not merely for the goods or ser-
vices it produces. It acquires immortality. If its original goals
are no longer relevant, it doesn’t go out of business. Rather,
it redefines itself. When the demand for Timex’s watches ◆ When an organization
declined, the company merely redirected itself into the con- becomes institutionalized, it
sumer electronics business — making, in addition to watches, takes on a life of its own,
clocks, computers, and health-care products such as digital apart from its founders or any
thermometers and blood pressure testing devices. Timex of its members.
took on an existence that went beyond its original mission
to manufacture low-cost mechanical watches.
Institutionalization operates to produce common understand-
ings among members about what is appropriate and, fundamen-

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tally, meaningful behavior.3 So when an organization takes on insti-
tutional permanence, acceptable modes of behavior become largely
self-evident to its members. As we’ll see, this is essentially the same
thing that organizational culture does. So an understanding of what
makes up an organization’s culture, and how it is created, sustained,
and learned will enhance our ability to explain and predict the
behavior of people at work.

What Is Organizational Culture?

A number of years back, I asked an executive to tell me what he
thought organizational culture meant and he gave me essentially the
same answer that a Supreme Court Justice once gave in attempting
to define pornography: “I can’t define it, but I know it when I see
it.” This executive’s approach to defining organizational culture
isn’t acceptable for our purposes. We need a basic definition to pro-
vide a point of departure for our quest to better understand the phe-
nomenon. In this section, we propose a specific definition and
review several peripheral issues that revolve around this definition.

A Definition organizational culture

A common perception held by
There seems to be wide agreement that organizational culture the organization’s members; a
refers to a system of shared meaning held by members that distin- system of shared meaning.

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guishes the organization from other organizations.4 This system of
shared meaning is, on closer examination, a set of key characteris-
tics that the organization values. The most recent research suggests
that there are seven primary characteristics that, in aggregate, cap-
ture the essence of an organization’s culture.5
1. Innovation and risk taking. The degree to which employees are
encouraged to be innovative and take risks.
2. Attention to detail. The degree to which employees are expected
to exhibit precision, analysis, and attention to detail.
3. Outcome orientation. The degree to which management focuses
on results or outcomes rather than on the techniques and
processes used to achieve these outcomes.
4. People orientation. The degree to which management decisions
take into consideration the effect of outcomes on people within
the organization.
5. Team orientation. The degree to which work activities are orga-
nized around teams rather than individuals.
6. Aggressiveness. The degree to which people are aggressive and
competitive rather than easygoing.
7. Stability. The degree to which organizational activities empha-
size maintaining the status quo in contrast to growth.

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Exhibit 16-1 Contrasting Organizational Cultures

Organization A
This organization is a manufacturing firm. Managers are expected to fully document
all decisions; and “good managers” are those who can provide detailed data to
support their recommendations. Creative decisions that incur significant change or
risk are not encouraged. Because managers of failed projects are openly criticized
and penalized, they try not to implement ideas that deviate much from the status quo.
One lower-level manager quoted an often used phrase in the company: “If it ain’t
broke, don’t fix it.”
There are extensive rules and regulations in this firm that employees are
required to follow. Managers supervise employees closely to ensure there are no
deviations. Management is concerned with high productivity, regardless of the impact
on employee morale or turnover.
Work activities are designed around individuals. There are distinct departments
and lines of authority, and employees are expected to minimize formal contact with
other employees outside their functional area or line of command. Performance
evaluations and rewards emphasize individual effort; although seniority tends to be
the primary factor in the determination of pay raises and promotions.

Organization B
This organization is also a manufacturing firm. Here, however, management
encourages and rewards risk taking and change. Decisions based on intuition are

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 valued as much as those that are well rationalized. Management prides itself on its
history of experimenting with new technologies and its success in regularly
introducing innovative products. Managers or employees who have a good idea are
encouraged to “run with it.” And failures are treated as “learning experiences.” The
company prides itself on being market driven and rapidly responsive to the changing
needs of its customers.
There are few rules and regulations for employees to follow, and supervision is
loose because management believes that its employees are hardworking and trust-
worthy. Management is concerned with high productivity, but believes that this comes
through treating its people right. The company is proud of its reputation as being a
good place to work.
Job activities are designed around work teams and team members are encour-
aged to interact with people across functions and authority levels. Employees talk
positively about the competition between teams. Individuals and teams have goals,
and bonuses are based on achievement of these outcomes. Employees are given con-
siderable autonomy in choosing the means by which the goals are attained.

Each of these characteristics exists on a continuum from low to

high. Appraising the organization on these seven characteristics,
then, gives a composite picture of the organization’s culture. This
picture becomes the basis for feelings of shared understanding that
members have about the organization, how things are done in it,

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and the way members are supposed to behave. Exhibit 16-1 demon-
strates how these characteristics can be mixed to create highly
diverse organizations.

Culture Is a Descriptive Term

Organizational culture is concerned with how employees perceive
the characteristics of an organization’s culture, not with whether or
not they like them. That is, it is a descriptive term. This is important
because it differentiates this concept from that of job satisfaction.
Research on organizational culture has sought to measure how
employees see their organization: Does it encourage teamwork?
Does it reward innovation? Does it stifle initiative?
In contrast, job satisfaction seeks to measure affective responses
to the work environment. It is concerned with how employees feel
about the organization’s expectations, reward practices, and the
like. Although the two terms undoubtedly have overlapping char-
acteristics, keep in mind that the term organizational culture is
descriptive, while job satisfaction is evaluative.

Do Organizations Have Uniform Cultures?

Organizational culture represents a common perception held by the
organization’s members. This was made explicit when we defined
culture as a system of shared meaning. We should expect, therefore,

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that individuals with different backgrounds or at different levels in
the organization will tend to describe the organization’s culture in
similar terms.6
Acknowledgment that organizational culture has common
properties does not mean, however, that there cannot be subcul-
tures within any given culture. Most large organizations have a
dominant culture and numerous sets of subcultures.7
A dominant culture expresses the core values that are shared dominant culture
by a majority of the organization’s members. When we talk about Expresses the core values that
an organization’s culture, we are referring to its dominant culture. It are shared by a majority of the
organization’s members.
is this macro view of culture that gives an organization its distinct
personality.8 Subcultures tend to develop in large organizations subcultures
to reflect common problems, situations, or experiences that mem- Minicultures within an orga-
bers face. These subcultures are likely to be defined by department nization, typically defined by
department designations and
designations and geographical separation. The purchasing depart-
geographical separation.
ment, for example, can have a subculture that is uniquely shared by
members of that department. It will include the core values of the core values
dominant culture plus additional values unique to members of the The primary or dominant
purchasing department. Similarly, an office or unit of the organiza- values that are accepted
throughout the organization.
tion that is physically separated from the organization’s main oper-
ations may take on a different personality. Again, the core values are
essentially retained but modified to reflect the separated unit’s dis-
tinct situation.

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 If organizations had no dominant culture and were composed
only of numerous subcultures, the value of organizational culture
as an independent variable would be significantly lessened
because there would be no uniform interpretation of what repre-
sented appropriate and inappropriate behavior. It is the “shared
meaning” aspect of culture that makes it such a potent device for
guiding and shaping behavior. But we cannot ignore the reality
that many organizations also have subcultures that can influence
the behavior of members.

Strong vs. Weak Cultures

It has become increasingly popular to differentiate between strong
and weak cultures.9 The argument here is that strong cultures have
a greater impact on employee behavior and are more directly
related to reduced turnover.
In a strong culture, the organization’s core values are both strong cultures
intensely held and widely shared.10 The more members who accept Cultures where the core val-
the core values and the greater their commitment to those values is, ues are intensely held and
widely shared.
the stronger the culture is. Consistent with this definition, a strong
culture will have a great influence on the behavior of its members
because the high degree of sharedness and intensity creates an
internal climate of high behavioral control. For example, Seattle-
based Nordstrom has developed one of the strongest service cul-

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 The core value of enhancing people’s lives through sports
and fitness is intensely held and widely shared by Nike
employees. Nike founder Philip Knight has created a strong
sports-oriented culture and promotes it through company
practices such as paying employees extra for biking to work
instead of driving. Nike is recognized worldwide as an
athlete’s company that hires former college, professional,
and Olympic athletes to design and market its shoes and
clothing for sports enthusiasts. Nike headquarters in
Beaverton, Oregon, is a 74-acre campus with walking and
jogging trails and buildings named for sports heroes such as
the Joan Benoit Samuelson Center, the Bo Jackson Fitness
Center, and the Joe Paterno Day Care Center.

tures in the retailing industry. Nordstrom employees know in no

uncertain terms what is expected of them and these expectations go
a long way in shaping their behavior.
One specific result of a strong culture should be lower employee
turnover. A strong culture demonstrates high agreement among
members about what the organization stands for. Such unanimity
of purpose builds cohesiveness, loyalty, and organizational com-
mitment. These qualities, in turn, lessen employees’ propensity to
leave the organization.11

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 From Concepts to Skills
How to “Read” an Organization’s Culture
organization’s culture can be a defi-

T
he ability to read and assess
an organization’s culture can nite plus in successfully completing
be a valuable skill.12 If you’re these pursuits.
looking for a job, you’ll want to For the sake of simplicity, we’ll
choose an employer whose culture is approach the problem of reading an
compatible with your values and in organization’s culture from that of a
which you’ll feel comfortable. If you job applicant. We’ll assume you’re
can accurately assess a prospective interviewing for a job. Here’s a list of
employer’s culture before you make things you can do to help learn
your decision, you may be able to about a potential employer’s culture:
save yourself a lot of grief and reduce
◆ Observe the physical sur-
the likelihood of making a poor
roundings. Pay attention to signs,
choice. Similarly, you’ll undoubtedly
pictures, style of dress, length of
have business transactions with
hair, degree of openness between
numerous organizations during your
offices, and office furnishings and
professional career. You’ll be trying to
arrangements.
sell a product or service, negotiate a
◆ Who did you meet with? Just
contract, arrange a joint venture, or
the person who would be your
merely be seeking out who in an
immediate supervisor? Or potential
organization controls certain deci-
colleagues, managers from other
sions. The ability to assess another

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departments, or senior executives? company lawyer. Questions that will
And based on what they revealed, to give you insights into organizational
what degree do people other than processes and practices might include:
the immediate supervisor have input
◆ What is the background of the
to the hiring decision?
founders?
◆ How would you characterize
the style of the people you met? ◆ What is the background of current
Formal? Casual? Serious? Jovial? senior managers? What are their
◆ Does the organization have functional specializations? Were
formal rules and regulations printed they promoted from within or
in a personnel policy manual? If so, hired from outside?
how detailed are these policies? ◆ How does the organization integrate
◆ Ask questions of the people new employees? Is there an orienta-
with whom you meet. The most valid tion program? Training? If so, could
and reliable information tends to you describe these features?
come from asking the same questions ◆ How does your boss define his or
of many people (to see how closely her job success? (Amount of profit?
their responses align) and by talking Serving customers? Meeting dead-
with boundary spanners. Boundary lines? Acquiring budget increases?)
spanners are employees whose work
◆ How would you define fairness in
links them to the external environ-
terms of reward allocations?
ment and includes jobs such as
human resource interviewer, salesper- ◆ Can you identify some people here
son, purchasing agent, labor negotia- who are on the “fast track”? What
tor, public relations specialist, and do you think has put them on the
fast track?

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 ◆ Can you identify someone who the consequences for the decision
seems to be considered a deviant in maker?
the organization? How has the orga-
nization responded to this person? ◆ Could you describe a crisis or
critical event that has occurred
◆ Can you describe a decision that
recently in the organization?
someone made here that was well
How did top management
received?
respond? What was learned from
◆ Can you describe a decision that this experience?
didn’t work out well? What were

Culture vs. Formalization

A strong organizational culture increases behavioral consistency. In
this sense, we should recognize that a strong culture can act as a
substitute for formalization.
In Chapter 13, we discussed how formalization’s rules and reg-
ulations act to regulate employee behavior. High formalization in
an organization creates predictability, orderliness, and consistency.
Our point is that a strong culture achieves the same end without
the need for written documentation. Therefore, we should view for-
malization and culture as two different roads to a common desti-
nation. The stronger an organization’s culture, the less manage-
ment need be concerned with developing formal rules and

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regulations to guide employee behavior. Those guides will be inter-
nalized in employees when they accept the organization’s culture.

Organizational Culture vs. National Culture

We opened this chapter by describing the challenges facing Mazda’s
new president as he tries to change Mazda’s organizational culture.
But we also saw how Japan’s national culture was closely inter-
twined with Mazda’s corporate culture. Throughout this book we’ve
argued that national differences — that is, national cultures — must
be taken into account if accurate predictions are to be made about
organizational behavior in different countries. It seems appropriate
at this point, then, to ask the question: Does national culture over-
ride an organization’s culture? Is an IBM facility in Germany, for
example, more likely to reflect German ethnic culture or IBM’s cor-
porate culture?
The research indicates that national culture has a greater impact
on employees than does their organization’s culture.13 German
employees at an IBM facility in Munich, therefore, will be influ-
enced more by German culture than by IBM’s culture. These find-
ings, incidentally, are consistent with what the new president at
Mazda found — that Japan’s national culture has strongly shaped
this company’s organizational culture, and that Japanese employees
resist Ford-type cultural values. Our conclusion: As influential as

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 Japan’s electronic giant Matsushita Electric Company
recognizes that national culture has a greater impact
on employees than does organization culture.
Matsushita tries to accommodate national cultural
values in managing its 150 plants in 38 countries
throughout Southeast Asia, North America, Europe, the
Middle East, Latin America, and Africa. At its plants in
Malaysia, the company offers special ethnic food in its
cafeterias for Muslim Malays, Chinese, and Indian
employees and accommodates Muslim religious
customs by providing special prayer rooms at each
plant and allowing two prayer sessions per shift.

organizational culture is to understanding the behavior of people at

work, national culture is even more so.
The preceding conclusion has to be qualified to reflect the self-
selection that goes on at the hiring stage. IBM, for example, may be
less concerned with hiring the “typical Italian” for its Italian oper-
ations than in hiring an Italian who fits within the IBM way of
doing things.14 Historically, Italians who have a high need for
autonomy are more likely to go to Olivetti than IBM. Why? Because
Olivetti’s organizational culture is informal and nonstructured. It
has tended to allow employees considerably more freedom than

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IBM does.15 In fact, Olivetti seeks to hire individuals who are impa-
tient, risk taking, and innovative — qualities in job candidates that
IBM’s Italian operations historically sought to exclude in new hires.

What Does Culture Do?

We’ve alluded to organizational culture’s impact on behavior. We’ve
also explicitly argued that a strong culture should be associated
with reduced turnover. In this section, we will more carefully review
the functions that culture performs and assess whether culture can
be a liability for an organization.

Culture’s Functions
Culture performs a number of functions within an organization.
First, it has a boundary-defining role; that is, it creates distinctions
between one organization and others. Second, it conveys a sense
of identity for organization members. Third, culture facilitates the
generation of commitment to something larger than one’s indi-
vidual self-interest. Fourth, it enhances social system stability.
Culture is the social glue that helps hold the organization
together by providing appropriate standards for what employees
should say and do. Finally, culture serves as a sense-making and
control mechanism that guides and shapes the attitudes and

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behavior of employees. It is this last function that is of particular
interest to us.16 As the following quote makes clear, culture
defines the rules of the game:

Culture by definition is elusive, intangible, implicit, and taken

for granted. But every organization develops a core set of assump-
tions, understandings, and implicit rules that govern day-to-day
behavior in the workplace. . . . Until newcomers learn the rules,
they are not accepted as full-fledged members of the organization.
Transgressions of the rules on the part of high-level executives or
front-line employees result in universal disapproval and powerful
penalties. Conformity to the rules becomes the primary basis for
reward and upward mobility.17

The role of culture in influencing employee behavior appears to

be increasingly important in the 1990s.18 As organizations have
widened spans of control, flattened structures, introduced teams,
reduced formalization, and empowered employees, the shared
meaning provided by a strong culture ensures that everyone is
pointed in the same direction.
As we show later in this chapter, who receives a job offer to join
the organization, who is appraised as a high performer, and who
gets the promotion are strongly influenced by the individual – orga-
nization “fit” — that is, whether the applicant or employee’s atti-
tudes and behavior are compatible with the culture. It’s not a coin-

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cidence that employees at Disney theme parks appear to be almost
universally attractive, clean, and wholesome looking, with bright
smiles. That’s the image Disney seeks. The company selects employ-
ees who will maintain that image. And once on the job, a strong
culture, supported by formal rules and regulations, ensures that
Disney theme-park employees will act in a relatively uniform and
predictable way.

Culture as a Liability
We are treating culture in a nonjudgmental manner. We haven’t said
that it’s good or bad, only that it exists. Many of its functions, as out-
lined, are valuable for both the organization and the employee. Culture
enhances organizational commitment and increases the consistency of
employee behavior. These are clearly benefits to an organization. From
an employee’s standpoint, culture is valuable because it reduces ambi-
guity. It tells employees how things are done and what’s important. But
we shouldn’t ignore the potentially dysfunctional aspects of culture,
especially a strong one, on an organization’s effectiveness.

BARRIER TO CHANGE Culture is a liability when the shared values

are not in agreement with those that will further the organization’s
effectiveness. This is most likely to occur when the organization’s
environment is dynamic. When the environment is undergoing

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rapid change, the organization’s entrenched culture may no longer
be appropriate. So consistency of behavior is an asset to an organiza-
tion when it faces a stable environment. It may, however, burden the
organization and make it difficult to respond to changes in the envi-
ronment. This helps to explain the challenges that executives at
companies like IBM, Eastman Kodak, and General Dynamics have
had in recent years in adapting to upheavals in their environment.
These companies have strong cultures that worked well for them in
the past. But these strong cultures become barriers to change when
“business as usual” is no longer effective. As a case in point, when
Louis Gerstner left RJR Nabisco in 1993 to become head of IBM, he
made turning around IBM’s conservative, risk-aversive culture his
highest priority. After three years of focused attention, he seems to be
finally succeeding.19 For many organizations with strong cultures,
practices that led to previous successes can lead to failure when those
practices no longer match up well with environmental needs.20
BARRIER TO DIVERSITY Hiring new employees who, because of
race, gender, ethnic, or other differences, are not like the majority
of the organization’s members creates a paradox.21 Management
wants new employees to accept the organization’s core cultural val-
ues. Otherwise, these employees are unlikely to fit in or be accepted.
But at the same time, management wants to openly acknowledge
and demonstrate support for the differences that these employees
bring to the workplace.

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 Strong cultures put considerable pressure on employees to con-
form. They limit the range of values and styles that are acceptable.
In some instances, such as the recent Texaco case (which was settled
on behalf of 1,400 employees for $176 million) where senior man-
agers made disparaging remarks about minorities, a strong culture
that condones prejudice can even undermine formal corporate
diversity policies.22
Organizations seek out and hire diverse individuals because of
the alternative strengths these people bring to the workplace. Yet
these diverse behaviors and strengths are likely to diminish in strong
cultures as people attempt to fit in. Strong cultures, therefore, can be
liabilities when they effectively eliminate those unique strengths
that people of different backgrounds bring to the organization.
Moreover, strong cultures can also be liabilities when they support
institutional bias or become insensitive to people who are different.

BARRIER TO MERGERS AND ACQUISITIONS Historically, the key

factors that management looked at in making merger or acquisition
decisions were related to financial advantages or product synergy.
In recent years, cultural compatibility has become the primary con-
cern.23 While a favorable financial statement or product line may
be the initial attraction of an acquisition candidate, whether the
acquisition actually works seems to have more to do with how well
the two organizations’ cultures match up.

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 A number of mergers consummated in the 1990s already have
failed or show signs of failing. And the primary cause is conflicting
organizational cultures.24 Time Inc.’s merger with Warner Communi-
cations in 1990 has had trouble from the start. Time’s culture was con-
servative and paternalistic, while Warner’s was a “high-risk, high-
reward” culture of deal making.25 Employees from the two companies
don’t trust each other and the combined Time Warner has never seen
the synergies that the premerger pundits predicted. AT&T’s 1991
acquisition of NCR and Matsushita’s 1991 acquisition of MCA are
other visible examples of culture-based merger failures. And few deals
made more sense in financial terms than the October 1993 merger of
Price Club and Costco Wholesale. The combined Price/Costco would
have had the clout to compete directly with Wal-Mart’s Sam’s Club.
But the marriage failed. The Price and Costco people couldn’t work
together. Said one analyst, “The Price guys had much more of a real
estate strip-mall mentality. The Costco guys were the type who started
working at grocery stores bagging groceries when they were 10 years
old and worked their way up the ladder.”26 It was a very short mar-
riage. Price and Costco broke up in August 1994.

Creating and Sustaining Culture

An organization’s culture doesn’t pop out of thin air. Once estab-
lished, it rarely fades away. What forces influence the creation of a

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culture? What reinforces and sustains these forces once they are in
place? We answer both of these questions in this section.

How a Culture Begins

An organization’s current customs, traditions, and general way of
doing things are largely due to what it has done before and the
degree of success it has had with those endeavors. This leads us to
the ultimate source of an organization’s culture: its founders.27
The founders of an organization traditionally have a major
impact on that organization’s early culture. They have a vision of
what the organization should be. They are unconstrained by previ-
ous customs or ideologies. The small size that typically characterizes
new organizations further facilitates the founders’ imposition of
their vision on all organizational members.
Microsoft’s culture is largely a reflection of co-founder and cur-
rent CEO, Bill Gates. Gates is personally aggressive, competitive, and
highly disciplined. Those are the same characteristics often used to
describe the software giant he heads. Other contemporary examples
of founders who have had an immeasurable impact on their organi-
zation’s culture are Akio Morita at Sony, Ted Turner at Turner
Broadcasting Systems, Fred Smith at Federal Express, Mary Kay at
Mary Kay Cosmetics, and Richard Branson at the Virgin Group.

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 OB in the News
Chung Ju Yung and the Company He Created: Hyundai

ture. Family loyalty and authoritarianism reign.

H
yundai is a $45 billion-a-year business
empire made up of more than 40 com- “The boss is still the boss,” says Kim Yung Duc,
panies in fields ranging from ships to president of Hyundai Corp. U.S.A.
semiconductors, motor vehicles to computers, At the height of his powers, Chung was a
engineering to robots, petrochemicals to depart- fearsome figure. There are rumors that a
ment stores. The Hyundai group is a disciplined, stretcher used to be a fixture in Hyundai’s exec-
militaristic organization. The man who made it utive boardroom because Chung would some-
this way is Chung Ju Yung. times punch out underlings who wouldn’t lis-
Chung was born in 1915, one of seven chil- ten to him or do what he wanted.
dren from an impoverished peasant farm family. Hyundai may represent an extreme in feudal
Following World War II, Chung set up an auto obedience but it evolved into what Chung’s
repair business. He called it “Hyundai,” which executives call the “Hyundai Spirit.” A manual
means modern in Korean. From this small begin- given to new recruits states: “The hard work of
ning, the giant empire began. Throughout the the creator [Chung] and the courage of the pio-
company’s growth, Chung’s style shaped its cul- neer have helped us open the way for the

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 expansion, sophistication and internationaliza- If you want to understand Hyundai’s fierce,
tion of the industrial society of our country.” In competitive style, its feudal obedience, or its
Hyundai lore and literature, Chung is quoted disciplined, militaristic nature, you don’t need
nearly as much as the Chinese, two decades to go any further than looking at its founder,
ago, invoked Mao Zedong. Chung Ju Yung.
“Everything at Hyundai is run on a fairly mil-
itary basis,” says a U.S. consultant. “They have
an armory in the yard. The guys who are edu-
cated all know what they have to do if war (Based on D. Kirk, “The Humbling of Chairman Chung,”
breaks out.” Asia, Inc., April 1994, pp. 24 – 29).

Take It to the Net

We invite you to visit the Robbins page on the Prentice Hall Web site at:
http://www.prenhall.com/robbinsorgbeh
for this chapter’s World Wide Web exercise.

Keeping a Culture Alive

Once a culture is in place, there are practices within the organiza-
tion that act to maintain it by giving employees a set of similar
experiences.28 For example, many of the human resource practices
discussed in the previous chapter reinforce the organization’s cul-
ture. The selection process, performance evaluation criteria, train-

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ing and career development activities, and promotion procedures
ensure that those hired fit in with the culture, reward those who
support it, and penalize (and even expel) those who challenge it.
Three forces play a particularly important part in sustaining a cul-
ture: selection practices, the actions of top management, and social-
ization methods. Let’s take a closer look at each.

SELECTION The explicit goal of the selection process is to iden-

tify and hire individuals who have the knowledge, skills, and abili-
ties to perform the jobs within the organization successfully.
Typically, more than one candidate will be identified who meets
any given job’s requirements. When that point is reached,
it would be naive to ignore that the final decision as to who
is hired will be significantly influenced by the decision ◆ The final decision as to
maker’s judgment of how well the candidates will fit into who is hired will be
the organization. This attempt to ensure a proper match, significantly influenced by the
whether purposely or inadvertently, results in the hiring of decision maker’s judgment of
people who have values essentially consistent with those of how well the candidates will
the organization, or at least a good portion of those val- fit into the organization.
ues.29 Additionally, the selection process provides informa-
tion to applicants about the organization. Candidates learn
about the organization and, if they perceive a conflict between their
values and those of the organization, they can self-select themselves
out of the applicant pool. Selection, therefore, becomes a two-way

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street, allowing employer or applicant to abrogate a marriage if
there appears to be a mismatch. In this way, the selection process
sustains an organization’s culture by selecting out those individuals
who might attack or undermine its core values.
Applicants for entry-level positions in brand management at
Procter & Gamble (P&G) experience an exhaustive application and
screening process. Their interviewers are part of an elite cadre who
have been selected and trained extensively via lectures, videotapes,
films, practice interviews, and role plays to identify applicants who
will successfully fit in at P&G. Applicants are interviewed in depth
for such qualities as their ability to “turn out high volumes of excel-
lent work,” “identify and understand problems,” and “reach thor-
oughly substantiated and well-reasoned conclusions that lead to
action.” P&G values rationality and seeks applicants who think that
way. College applicants receive two interviews and a general knowl-
edge test on campus before being flown back to Cincinnati for three
more one-on-one interviews and a group interview at lunch. Each
encounter seeks corroborating evidence of the traits that the firm
believes correlate highly with “what counts” for success at P&G.30
Applicants for positions at Compaq Computer are carefully chosen
for their ability to fit into the company’s teamwork-oriented cul-
ture. As one executive put it, “We can find lots of people who are
competent. . . . The No. 1 issue is whether they fit into the way
we do business.”31 At Compaq, that means job candidates who are

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easy to get along with and who feel comfortable with the com-
pany’s consensus management style. To increase the likelihood that
loners and those with big egos get screened out, it’s not unusual for
an applicant to be interviewed by 15 people, who represent all
departments of the company and a variety of seniority levels.32

TOP MANAGEMENT The actions of top management also have a

major impact on the organization’s culture.33 Through what they
say and how they behave, senior executives establish norms that fil-
ter down through the organization as to whether risk taking is desir-
able; how much freedom managers should give their subordinates;
what is appropriate dress; what actions will pay off in terms of pay
raises, promotions, and other rewards; and the like.
For example, look at Xerox Corp.34 Its chief executive from 1961
to 1968 was Joseph C. Wilson. An aggressive, entrepreneurial type, he
oversaw Xerox’s staggering growth on the basis of its 914 copier, one
of the most successful products in American history. Under Wilson,
Xerox had an entrepreneurial environment, with an informal, high-
camaraderie, innovative, bold, risk-taking culture. Wilson’s replace-
ment as CEO was C. Peter McColough, a Harvard MBA with a formal
management style. He instituted bureaucratic controls and a major
change in Xerox’s culture. When McColough stepped down in 1982,
Xerox had become stodgy and formal, with lots of politics and turf
battles and layers of watchdog managers. His replacement was David

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T. Kearns. He believed the culture he inherited hindered Xerox’s abil-
ity to compete. To increase the company’s competitiveness, Kearns
trimmed Xerox down by cutting 15,000 jobs, delegated decision
making downward, and refocused the organization’s culture around
a simple theme: boosting the quality of Xerox products and services.
By his actions and those of his senior managerial cadre, Kearns con-
veyed to everyone at Xerox that the company valued and rewarded
quality and efficiency. When Kearns retired in 1990, Xerox still had
its problems. The copier business was mature and Xerox had fared
badly in developing computerized office systems. The current CEO,
Paul Allaire, has again sought to reshape Xerox’s culture. Specifically,
he has reorganized the corporation around a worldwide marketing
department, has unified product development and manufacturing
divisions, and has replaced half of the company’s top-management
team with outsiders. Allaire seeks to reshape Xerox’s culture to focus
on innovative thinking and out-hustling the competition.

SOCIALIZATION No matter how good a job the organization does

in recruiting and selection, new employees are not fully indoctrinated
in the organization’s culture. Maybe most important, because they are
unfamiliar with the organization’s culture, new employees are poten- socialization
tially likely to disturb the beliefs and customs that are in place. The The process that adapts
organization will, therefore, want to help new employees adapt to its employees to the organiza-
culture. This adaptation process is called socialization.35 tion’s culture.

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 All Marines must go through boot camp, where they “prove”
their commitment. Of course, at the same time, the Marine trainers
are indoctrinating new recruits in the “Marine way.” New Sanyo
employees go through an intensive five-month training program
(trainees eat and sleep together in company-subsidized dorms and
are required to vacation together at company-owned resorts) where
they learn the Sanyo way of doing everything — from how to speak
to superiors to proper grooming and dress.36 The company consid-
ers this program essential for transforming young employees, fresh
out of school, into dedicated kaisha senshi, or corporate warriors.
Starbucks, the rapidly growing gourmet-coffee chain, doesn’t go to
the extreme that Sanyo does, but it seeks the same outcome.37 All
new employees go through 24 hours of training. Just for an entry-
level job in a retail store making coffee? Yes! Classes cover every-
thing necessary to make new employees brewing consultants. They
learn the Starbucks philosophy, the company jargon (including
phrases such as “half-decaf double tall almond skim mocha”), and
even how to help customers make decisions about beans, grind, and
espresso machines. The result is employees who understand
Starbucks’ culture and who project an enthusiastic and knowledge-
able interface with customers.
As we discuss socialization, keep in mind that the most critical
socialization stage is at the time of entry into the organization. This
is when the organization seeks to mold the outsider into an

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employee “in good standing.” Those employees who fail to learn
the essential or pivotal role behaviors risk being labeled “noncon-
formists” or “rebels,” which often leads to expulsion. But the orga-
nization will be socializing every employee, though maybe not as
explicitly, throughout his or her entire career in the organization.
This further contributes to sustaining the culture.
Socialization can be conceptualized as a process made up of
three stages: prearrival, encounter, and metamorphosis.38 The first
stage encompasses all the learning that occurs before a new mem-
ber joins the organization. In the second stage, the new employee
sees what the organization is really like and confronts the possibil-
ity that expectations and reality may diverge. In the third stage, the
relatively long-lasting changes take place. The new employee mas-
ters the skills required for his or her job, successfully performs his
or her new roles, and makes the adjustments to his or her work
group’s values and norms.39 This three-stage process impacts on the
new employee’s work productivity, commitment to the organiza-
tion’s objectives, and eventual decision to stay with the organiza-
tion. Exhibit 16-2 depicts this process.
The prearrival stage explicitly recognizes that each individ- prearrival stage
ual arrives with a set of values, attitudes, and expectations. These The period of learning in the
cover both the work to be done and the organization. For instance, socialization process that
occurs before a new employee
in many jobs, particularly professional work, new members will
joins the organization.
have undergone a considerable degree of prior socialization in train-

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 Exhibit 16-2
A Socialization Model

Socialization Process Outcomes

Productivity

Prearrival Encounter Metamorphosis Commitment

Turnover

ing and in school. One major purpose of a business school, for

example, is to socialize business students to the attitudes and
behaviors that business firms want. If business executives believe
that successful employees value the profit ethic, are loyal, will work
hard, and desire to achieve, they can hire individuals out of busi-
ness schools who have been premolded in this pattern. But prear-
rival socialization goes beyond the specific job. The selection
process is used in most organizations to inform prospective employ-
ees about the organization as a whole. In addition, as noted previ-

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ously, the selection process also acts to ensure the inclusion of the
“right type” — those who will fit in. “Indeed, the ability of the indi-
vidual to present the appropriate face during the selection process
determines his ability to move into the organization in the first
place. Thus, success depends on the degree to which the aspiring
member has correctly anticipated the expectations and desires of
those in the organization in charge of selection.”40
Upon entry into the organization, the new member enters the
encounter stage. Here the individual confronts the possible encounter stage
dichotomy between her expectations — about her job, her co-work- The stage in the socialization
ers, her boss, and the organization in general — and reality. If expec- process in which a new
employee sees what the
tations prove to have been more or less accurate, the encounter
organization is really like
stage merely provides a reaffirmation of the perceptions gained ear- and confronts the possibility
lier. However, this is often not the case. Where expectations and that expectations and reality
reality differ, the new employee must undergo socialization that may diverge.
will detach her from her previous assumptions and replace them
with another set that the organization deems desirable. At the
extreme, a new member may become totally disillusioned with the
actualities of her job and resign. Proper selection should signifi-
cantly reduce the probability of the latter occurrence. metamorphosis stage
The stage in the socialization
Finally, the new member must work out any problems discov- process in which a new
ered during the encounter stage. This may mean going through employee adjusts to his or
changes — hence, we call this the metamorphosis stage. The her work group’s values and
options presented in Exhibit 16-3 are alternatives designed to bring norms.

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Exhibit 16-3 Entr y Socialization Options

Formal vs. Informal The more a new employee is segregated from the ongoing
work setting and differentiated in some way to make explicit his or her newcomer’s
role, the more formal socialization is. Specific orientation and training programs are
examples. Informal socialization puts the new employee directly into his or her job,
with little or no special attention.
Individual vs. Collective New members can be socialized individually. This
describes how it’s done in many professional offices. They can also be grouped
together and processed through an identical set of experiences, as in military boot camp.
Fixed vs. Variable This refers to the time schedule in which newcomers make the
transition from outsider to insider. A fixed schedule establishes standardized stages of
transition. This characterizes rotational training programs. It also includes pro-
bationary periods, such as the eight- to ten-year “associate” status used by accounting
and law firms before deciding on whether or not a candidate is made a partner.
Variable schedules give no advanced notice of their transition timetable. Variable
schedules describe the typical promotion system, where one is not advanced to the
next stage until he or she is “ready.”
Serial vs. Random Serial socialization is characterized by the use of role mod-
els who train and encourage the newcomer. Apprenticeship and mentoring programs
are examples. In random socialization, role models are deliberately withheld. The
new employee is left on his or her own to figure things out.

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 Investiture vs. Divestiture Investiture socialization assumes that the new-
comer’s qualities and qualifications are the necessary ingredients for job success, so
these qualities and qualifications are confirmed and supported. Divestiture socializa-
tion tries to strip away certain characteristics of the recruit. Fraternity and sorority
“pledges” go through divestiture socialization to shape them into the proper role.
Source: Based on J. Van Maanen, “People Processing: Strategies of Organizational Socialization,”
Organizational Dynamics, Summer 1978, pp. 19–36; and E.H. Schein, Organizational Culture,” American
Psychologist, February 1990, p. 116.

about the desired metamorphosis. Note, for example, that the more
management relies on socialization programs that are formal, col-
lective, fixed, serial, and emphasize divestiture, the greater the like-
lihood that newcomers’ differences and perspectives will be
stripped away and replaced by standardized and predictable behav-
iors. Careful selection by management of newcomers’ socialization
experiences can — at the extreme — create conformists who main-
tain traditions and customs, or inventive and creative individualists
who consider no organizational practice sacred.
We can say that metamorphosis and the entry socialization
process is complete when the new member has become comfortable
with the organization and his job. He has internalized the norms of
the organization and his work group, and understands and accepts
these norms. The new member feels accepted by his peers as a trusted

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and valued individual, is self-confident that he has the competence to
complete the job successfully, and understands the system — not only
his own tasks, but the rules, procedures, and informally accepted prac-
tices as well. Finally, he knows how he will be evaluated, that is, what
criteria will be used to measure and appraise his work. He knows what
is expected, and what constitutes a job “well done.” As Exhibit 16-2
shows, successful metamorphosis should have a positive impact on
the new employee’s productivity and his commitment to the organi-
zation, and reduce his propensity to leave the organization.

Summary: How Cultures Form

Exhibit 16-4 summarizes how an organization’s culture is estab-
lished and sustained. The original culture is derived from the
founder’s philosophy. This, in turn, strongly influences the criteria
used in hiring. The actions of the current top management set the
general climate of what is acceptable behavior and what is not. How
employees are to be socialized will depend both on the degree of
success achieved in matching new employees’ values to those of the
organization’s in the selection process and on top management’s
preference for socialization methods.

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 Exhibit 16-4
How Organization Cultures Form

Top
Philosophy management
of Selection Organization
organization's criteria culture
founders
Socialization

How Employees Learn Culture

Culture is transmitted to employees in a number of forms, the most
potent being stories, rituals, material symbols, and language.

Stories
During the days when Henry Ford II was chairman of the Ford
Motor Co., one would have been hard pressed to find a manager
who hadn’t heard the story about Mr. Ford reminding his execu-
tives, when they got too arrogant, that “it’s my name that’s on the
building.” The message was clear: Henry Ford II ran the company!

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 Nordstrom employees are fond of the following story. It
strongly conveys the company’s policy toward customer returns:
When this specialty retail chain was in its infancy, a customer came
in and wanted to return a set of automobile tires. The sales clerk was
a bit uncertain how to handle the problem. As the customer and
sales clerk spoke, Mr. Nordstrom walked by and overheard the con-
versation. He immediately interceded, asking the customer how
much he had paid for the tires. Mr. Nordstrom then instructed the
clerk to take the tires back and provide a full cash refund. After the
customer had received his refund and left, the perplexed clerk
looked at the boss. “But, Mr. Nordstrom, we don’t sell tires!” “I
know,” replied the boss, “but we do whatever we need to do to
make the customer happy. I mean it when I say we have a no-ques-
tions-asked return policy.” Nordstrom then picked up the tele-
phone and called a friend in the auto parts business to see how
much he could get for the tires.
Stories such as these circulate through many organizations. They
typically contain a narrative of events about the organization’s
founders, rule breaking, rags-to-riches successes, reductions in the
work force, relocation of employees, reactions to past mistakes, and
organizational coping.41 These stories anchor the present in the past
and provide explanations and legitimacy for current practices.42

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Rituals
Rituals are repetitive sequences of activities that express and rein- rituals
force the key values of the organization, what goals are most impor- Repetitive sequences of
tant, which people are important and which are expendable.43 activities that express and
reinforce the key values of
College faculty members undergo a lengthy ritual in their quest
the organization, what goals
for permanent employment — tenure. Typically, the faculty mem- are most important, which
ber is on probation for six years. At the end of that period, the people are important and
member’s colleagues must make one of two choices: extend a which are expendable.
tenured appointment or issue a one-year terminal contract. What
does it take to obtain tenure? It usually requires satisfactory teach-
ing performance, service to the department and university, and
scholarly activity. But, of course, what satisfies the requirements for
tenure in one department at one university may be appraised as
inadequate in another. The key is that the tenure decision, in
essence, asks those who are tenured to assess whether the candidate
has demonstrated, based on six years of performance, whether he or
she fits in. Colleagues who have been socialized properly will have
proved themselves worthy of being granted tenure. Every year, hun-
dreds of faculty members at colleges and universities are denied
tenure. In some cases, this action is a result of poor performance
across the board. More often, however, the decision can be traced
to the faculty member’s not doing well in those areas that the
tenured faculty believe are important. The instructor who spends
dozens of hours each week preparing for class and achieves out-

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 A ritual at Mary Kay Cosmetics is the
annual sales meeting. Recognizing
high achievement is an important
part of the company’s culture, which
values hard work and determination.
The ritual of praise and recognition
honors the beauty consultants’
accomplishments in meeting their
sales quotas, which contribute to the
success of the company.

standing evaluations by students but neglects his or her research

and publication activities may be passed over for tenure. What has
happened, simply, is that the instructor has failed to adapt to the
norms set by the department. The astute faculty member will assess
early on in the probationary period what attitudes and behaviors
his or her colleagues want and will then proceed to give them what
they want. And, of course, by demanding certain attitudes and

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behaviors, the tenured faculty have made significant strides toward
standardizing tenure candidates.
One of the best-known corporate rituals is Mary Kay Cosmetics’
annual award meeting.44 Looking like a cross between a circus and a
Miss America pageant, the meeting takes place over a couple of days
in a large auditorium, on a stage in front of a large, cheering audi-
ence, with all the participants dressed in glamorous evening clothes.
Saleswomen are rewarded with an array of flashy gifts — gold and
diamond pins, fur stoles, pink Cadillacs — based on success in
achieving sales quota. This “show” acts as a motivator by publicly
recognizing outstanding sales performance. In addition, the ritual
aspect reinforces Mary Kay’s personal determination and optimism,
which enabled her to overcome personal hardships, found her own
company, and achieve material success. It conveys to her salespeople
that reaching their sales quota is important and that through hard
work and encouragement they too can achieve success.

Material Symbols
The headquarters of package manufacturers AGI doesn’t look like
your typical head office operation. As we noted in Chapter 14, there
are few individual work areas. It is essentially made up of open,
common areas and meeting rooms. This informal corporate head-
quarters conveys to employees that AGI values openness, equality,
creativity, and flexibility.

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 Some corporations provide their top executives with chauffeur-
driven limousines and, when they travel by air, unlimited use of the
corporate jet. Others may not get to ride in limousines or private
jets but they might still get a car and air transportation paid for by
the company. Only the car is a Chevrolet (with no driver) and the
jet seat is in the economy section of a commercial airliner.
The layout of corporate headquarters, the types of automobiles
top executives are given, and the presence or absence of corporate
aircraft are a few examples of material symbols. Others include the
size of offices, the elegance of furnishings, executive perks, and
dress attire.45 These material symbols convey to employees who is
important, the degree of egalitarianism desired by top manage-
ment, and the kinds of behavior (for example, risk taking, conserv-
ative, authoritarian, participative, individualistic, social) that are
appropriate.

Language
Many organizations and units within organizations use language as
a way to identify members of a culture or subculture. By learning
this language, members attest to their acceptance of the culture
and, in so doing, help to preserve it.
The following are examples of terminology used by employees
at Dialog, a California-based data redistributor: accession number (a

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number assigned to each individual record in a database); KWIC (a
set of key-words-in-context); and relational operator (searching a
database for names or key terms in some order). Librarians are a rich
source of terminology foreign to people outside their profession.
They sprinkle their conversations liberally with acronyms like ARL
(Association for Research Libraries), OCLC (a center in Ohio that
does cooperative cataloging), and OPAC (for on-line patron access-
ing catalog). When Louis Gerstner left RJR Nabisco to head up IBM,
he had to learn a whole new vocabulary which included: the
Orchard (IBM’s Armonk, New York corporate headquarters, which
was once an apple orchard); big iron (mainframe computers); hypo (a
high-potential employee); a one performer (an employee with IBM’s
top performance rating); and PROFS (Professional Office Systems,
IBM’s internal electronic mail system).46
Organizations, over time, often develop unique terms to
describe equipment, offices, key personnel, suppliers, customers, or
products that relate to its business. New employees are frequently
overwhelmed with acronyms and jargon that, after six months on
the job, have become fully part of their language. Once assimilated,
this terminology acts as a common denominator that unites mem-
bers of a given culture or subculture.

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Summary and Implications for Managers
Exhibit 16-6 depicts organizational culture as an intervening vari-
able. Employees form an overall subjective perception of the orga-
nization based on such factors as degree of risk tolerance, team
emphasis, and support of people. This overall perception becomes,
in effect, the organization’s culture or personality. These favorable
or unfavorable perceptions then affect employee performance and
satisfaction, with the impact being greater for stronger cultures.

Exhibit 16-6
How Organizational Culture Impacts Per formance and Satisfaction

Objective factors
• Innovation and risk Strength
taking Performance
Hi
• Attention to detail Perceived as Organizational
• Outcome orientation
culture
• People orientation
• Team orientation Lo Satisfaction
• Aggressiveness
• Stability

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 Just as people’s personalities tend to be stable over time, so too
do strong cultures. This makes strong cultures difficult for managers
to change. When a culture becomes mismatched to its environ-
ment, management will want to change it. But as the Point-
Counterpoint debate for this chapter demonstrates, changing an
organization’s culture is a long and difficult process. The result, at
least in the short term, is that managers should treat their organi-
zation’s culture as relatively fixed.
One of the more important managerial implications of organi-
zational culture relates to selection decisions. Hiring individuals
whose values don’t align with those of the organization are likely to
lead to employees who lack motivation and commitment and who
are dissatisfied with their jobs and the organization.47 Not surpris-
ingly, employee “misfits” have considerably higher turnover rates
than individuals who perceive a good fit.48
We should also not overlook the influence socialization has on
employee performance. An employee’s performance depends to a con-
siderable degree on knowing what he should or should not do.
Understanding the right way to do a job indicates proper socialization.
Furthermore, the appraisal of an individual’s performance includes
how well the person fits into the organization. Can he or she get along
with co-workers? Does he or she have acceptable work habits and
demonstrate the right attitude? These qualities differ between jobs and
organizations. For instance, on some jobs, employees will be evaluated

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☛ 1308 ☛
more favorably if they are aggressive and outwardly indicate that they
are ambitious. On another job, or on the same job in another organi-
zation, such an approach may be evaluated negatively. As a result,
proper socialization becomes a significant factor in influencing both
actual job performance and how it’s perceived by others.

For Review
1. What is the relationship between institutionalization, formaliza-
tion, and organizational culture?
2. What’s the difference between job satisfaction and organiza-
tional culture?
3. Can an employee survive in an organization if he or she rejects
its core values? Explain.
4. How can an outsider assess an organization’s culture?
5. What defines an organization’s subcultures?
6. Contrast organizational culture with national culture.
7. How can culture be a liability to an organization?
8. How does a strong culture affect an organization’s efforts to
improve diversity?
9. What benefits can socialization provide for the organization?
For the new employee?
10. How is language related to organizational culture?

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☛ 1309 ☛
For Discussion
1. Contrast individual personality and organizational culture. How
are they similar? How are they different?
2. Is socialization brainwashing? Explain.
3. If management sought a culture characterized as innovative and
autonomous, what might its socialization program look like?
4. Can you identify a set of characteristics that describes your col-
lege’s culture? Compare them with several of your peers. How
closely do they agree?
5. “We should be opposed to the manipulation of individuals for
organizational purposes, but a degree of social uniformity
enables organizations to work better.” Do you agree or disagree
with this statement? Discuss.

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☛ 1310 ☛
 The Case against Cultural They become comfortable with that fit and
Change will strongly resist efforts to disturb the equi-
librium. The terrific difficulties that organi-

T
hat an organization’s culture is made zations like General Motors, AT&T, and the
up of relatively stable characteristics U.S. Postal Service have had in trying to
would imply that culture is very diffi- reshape their cultures attest to this dilemma.
cult for management to change. Such a con- These organizations historically tended to
clusion would be correct. attract individuals who desired and flour-
➠

An organization’s culture develops over ished in situations that were stable and
many years and is rooted in deeply held val- highly structured. Those in control in orga-
Point

ues to which employees are strongly com- nizations will also select senior managers
mitted. In addition, there are several forces who will continue the current culture. Even
continually operating to maintain a given attempts to change a culture by going out-
culture. These would include written state- side the organization to hire a new chief
ments about the organization’s mission and executive are unlikely to be effective. The
philosophy, the design of physical spaces evidence indicates that the culture is more
and buildings, the dominant leadership likely to change the executive than the other
style, hiring criteria, past promotion prac- way around. Why? It’s too entrenched, and
tices, entrenched rituals, popular stories change becomes a potential threat to mem-
ber self-interest. In fact, a more pragmatic
➠

about key people and events, the organiza-

tion’s historic performance evaluation crite- view of the relationship between an organi-
ria, and the organization’s formal structure. zation’s culture and its chief executive would
Selection and promotion policies are par- be to note that the practice of filling senior-
ticularly important devices that work against level management positions from current
cultural change. Employees chose the orga- managerial employees ensures that those
nization because they perceived their values who run the organization have been fully
to be a “good fit” with the organization. indoctrinated in the organization’s culture.

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☛ 1311 ☛
 Promoting from within provides stability edged as a true life-or-death situation —
and lessens uncertainty. When Exxon’s members of the organization will be respon-
board of directors selects as a new chief exec- sive to efforts at cultural change. For
utive officer an individual who has spent 30 instance, it was only when General Motors’
years in the company, it virtually guarantees and AT&T’s executives were able to success-
that the culture will continue unchanged. fully convey to employees the crises faced
Our argument, however, should not be from competitors that these organizations’
viewed as saying that culture can never be cultures began to show signs of adaptation.
changed. In the unusual case when an orga- However, anything less than a crisis is
nization confronts a survival-threatening unlikely to be effective in bringing about
crisis — a crisis that is universally acknowl- cultural change.

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☛ 1312 ☛
How to Change an Turnover in leadership. New top leadership,
Organization’s Culture which can provide an alternative set of key

➠
values, may be perceived as more capable of

C
hanging an organization’s culture is responding to the crisis. This would defi-
extremely difficult, but cultures can be nitely be the organization’s chief executive

counter Point
changed. For example, Lee Iacocca but also might need to include all senior
came to Chrysler Corp. in 1978, when the management positions. The hiring of outside
company appeared to be only weeks away CEOs at IBM (Louis Gerstner) and General
from bankruptcy. It took him about five Motors (Jack Smith) illustrate attempts to
years but, in what is now a well-worn story, introduce new leadership.
he took Chrysler’s conservative, inward- Young and small organization. The younger
looking, and engineering-oriented culture the organization is, the less entrenched its
and changed it into an action-oriented, mar- culture will be. Similarly, it’s easier for man-
ket-responsive culture. agement to communicate its new values
The evidence suggests that cultural when the organization is small. This again
change is most likely to take place when helps explain the difficulty that multibil-
most or all of the following conditions exist: lion-dollar corporations have in changing
A dramatic crisis. This is the shock that their cultures.
undermines the status quo and calls into Weak culture. The more widely held a cul-
question the relevance of the current cul- ture is and the higher the agreement among
ture. Examples of these crises might be a sur- members on its values, the more difficult it
prising financial setback, the loss of a major will be to change. Conversely, weak cul-
customer, or a dramatic technological break- tures are more amenable to change than
through by a competitor. Executives at Pepsi- strong ones.
Cola and Ameritech even admit to creating If conditions support cultural change, you

➠
crises in order to stimulate cultural change should consider the following suggestions:
in their organizations.*

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☛ 1313 ☛
1. Have top-management people become 8. Work to get peer group consensus
positive role models, setting the tone through utilization of employee par-
through their behavior. ticipation and creation of a climate
2. Create new stories, symbols, and ritu- with a high level of trust.
als to replace those currently in vogue. Implementing most or all of these sugges-
3. Select, promote, and support employ- tions will not result in an immediate or dra-
ees who espouse the new values that matic shift in the organization’s culture. For,
are sought. in the final analysis, cultural change is a
4. Redesign socialization processes to lengthy process — measured in years rather
align with the new values. than months. But if the question is, “Can
culture be changed?” the answer is “Yes!”
5. Change the reward system to encour-
age acceptance of a new set of values.
6. Replace unwritten norms with formal
rules and regulations that are tightly
enforced.
7. Shake up current subcultures through
transfers, job rotation, and/or termina- *B. Dumaine, “Times Are Good? Create a Crisis,”
tions. Fortune, June 28, 1993, pp. 123 – 30.

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☛ 1314 ☛
 Learning about Yourself Exercise
What Kind of Organizational Culture Fits You Best?
For each of the following statements, circle the level of agreement
or disagreement that you personally feel:
SA = Strongly Agree
A = Agree
U = Uncertain
D = Disagree
SD = Strongly disagree

1. I like being part of a team and having my

performance assessed in terms of my
contribution to the team. SA A U D SD
2. No person’s needs should be compromised in
order for a department to achieve its goals. SA A U D SD
3. I like the thrill and excitement from taking
risks. SA A U D SD
4. If a person’s job performance is inadequate, it’s
irrelevant how much effort he or she made. SA A U D SD
5. I like things to be stable and predictable. SA A U D SD

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☛ 1315 ☛
6. I prefer managers who provide detailed and
rational explanations for their decisions. SA A U D SD
7. I like to work where there isn’t a great deal of
pressure and where people are essentially
easygoing. SA A U D SD
Turn to page A-30 for scoring direction and key.

Working with Others Exercise

Rate Your Classroom Culture
Listed here are ten statements. Score each statement by indicating
the degree to which you agree with it. If you strongly agree, give it
a five. If you strongly disagree, give it a one.
1. My classmates are friendly and supportive. ______
2. My instructor is friendly and supportive. ______
3. My instructor encourages me to question and challenge
him or her as well as other students. ______
4. My instructor clearly expresses his or her expectations to
the class. ______
5. I think the grading system used by my instructor is based
on clear standards of performance. ______

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☛ 1316 ☛
 6. My instructor’s behavior during examinations demonstrates
his or her belief that students are honest and trustworthy. ______
7. My instructor provides regular and rapid feedback on my
performance. ______
8. My instructor uses a strict bell curve to allocate grades. ______
9. My instructor is open to suggestions on how the course
might be improved. ______
10. My instructor makes me want to learn. ______

Turn to page 1485 for scoring directions and key.

Ethical Dilemma Exercise

Cultural Factors and Unethical Behavior
An organization’s culture socializes people. It subtly conveys to
members that certain actions are acceptable, even though they are
illegal. For instance, when executives at General Electric, Westing-
house, and other manufacturers of heavy electrical equipment ille-
gally conspired to set prices in the early 1960s, the defendants
invariably testified that they came new to their jobs, found price
fixing to be an established way of life, and simply entered into it as
they did into other aspects of their job. One GE manager noted that

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☛ 1317 ☛
every one of his bosses had directed him to meet with the compe-
tition: “It had become so common and gone on for so many years
that I think we lost sight of the fact that it was illegal.”*
The strength of an organization’s culture has an influence on
the ethical behavior of its managers. A strong culture will exert
more influence on managers than a weak one. If the culture is
strong and supports high ethical standards, it should have a very
powerful positive influence on a manager’s ethical behavior.
However, in a weak culture, managers are more likely to rely on
subculture norms to guide their behavior. So work groups and
departmental standards will more strongly influence ethical behav-
ior in organizations that have weak overall cultures.
It is also generally acknowledged that the content of a culture
affects ethical behavior. Assuming this is true, what would a culture
look like that would shape high ethical standards? What could top
management do to strengthen that culture? Do you think it’s pos-
sible for a manager with high ethical standards to uphold those
standards in an organizational culture that tolerates, or even
encourages, unethical practices?
*As described in P.C. Yeager, “Analyzing Corporate Offenses: Progress and Prospects,” in W.C.
Frederick and L.E. Preston (eds.), Business Ethics: Research Issues and Empirical Studies (Greenwich,
CT:JAI Press, 1990), p. 174.

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☛ 1318 ☛
Cultural Change Efforts at the U.S. Postal Service C A S E
When Marvin Runyon was appointed Postmaster General in 1992, he INCIDENT 1
promised to transform the U.S. Postal Service’s culture. He said all the
right things: streamlining management, moving away from author-
ity-based leadership, empowering employees, holding postal man-
agers and workers more accountable for their performance, and intro-
ducing cross-functional work teams to encourage formerly disparate
operations to work more closely together. Runyon noted the need for
change to overcome the public’s perception that the Postal Service
was inefficient. And he drove home the threat of competition from
United Parcel Service, Federal Express, and electronic mail.
Good intentions aside, Runyon has essentially had no impact
on changing the Postal Service culture. “Absolutely nothing has
changed,” says the national president of one labor union that rep-
resents about 240,000 active letter carriers. “Employee empower-
ment seemed like a good idea for about 60 days, until management
figured out that it meant actually giving up some of their power and
letting workers have a say.”
The Postal Service has long had labor problems with its work
force of more than 700,000 career employees. Workers routinely file
grievances over such things as denied requests for time off or unre-
quested overtime assignments. While union – management rela-
tions have been strained for decades, they seem to have reached
new lows in recent years. Grievances are at all time highs. For

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☛ 1319 ☛
instance, in 1995, 73,300 grievances could not be resolved at the
workplace level. By contrast, the United Auto Workers, which rep-
resents about 800,000 employees, had only a thousand grievances
that failed to get resolved at the plant level.
An example of the severe actions management is taking against
workers, according to labor union officials, was a letter carrier with a
spotless ten-year record who was fired for refusing to work overtime
on a day when he had to pick up his child at school. Management at
the Postal Service claims it is just getting tough with employees who
abuse the system. It admits that efforts to revamp the service’s
authoritarian culture have not been as successful as it had hoped but
that the number of grievances filed by workers should not be used as
evidence that efforts to change the Postal Service have failed. Union
leaders see things differently. They believe management is
entrenched in its command-and-control style, wants to remind
employees who’s boss, and seeks to lessen the power of the unions.
Three notable sets of events seem to be at the heart of current
labor – management tensions at the Postal Service. First is automa-
tion. The average salary for bargaining-unit employees was $45,000
in 1995. Over time, the service wants to cut labor costs through the
use of letter-sorting equipment and bar code readers. Disruption of
current jobs and anxiety about future jobs worry the unions. For
instance, automation at the San Francisco Mail Processing and
Distribution Center forced 600 of 2,400 unionized workers to

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☛ 1320 ☛
change shifts or jobs. In some cases, workers had to move to jobs at
lower pay levels. The second set of events revolve around contract
negotiations. The 1994 round of negotiations with the Postal
Service’s four unions may have set an all-time record for intransi-
gence. Only one of the four unions reached an agreement with the
service without going to arbitration. In one set of negotiations, the
letter carriers’ union had requested a moderate pay and benefits
increase, arguing that its members performed jobs comparable to
UPS and Federal Express delivery personnel and therefore deserved
comparable pay hikes. Management countered with a demand for a
pay cutback, arguing that the job performed by letter carriers was
comparable to that of “uniformed delivery personnel such as pizza
deliverers,” a phrase that infuriated the union and its membership.
An arbitrator eventually awarded carriers a 1.2 percent salary
increase with a $950 lump-sum increase the first year. Finally, there
are problems related to downsizing. Soon after becoming Postmaster
General, Runyon offered managers an attractive early retirement
package. He hoped to cut some 30,000 managers from what critics
had long characterized as a bloated organization structure. But craft
workers, the people who actually move the 180 billion pieces of mail
each year, fought to be included in the retirement package. The end
result was that 48,000 workers retired, many of them experienced
craft workers and front-line supervisors, and overtime hours nearly
doubled as remaining workers were forced to take up the slack.

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☛ 1321 ☛
Questions
1. Describe the Postal Service’s current culture.
2. How might cultural change efforts be different in public-sector
organizations than in for-profit business firms?
3. What suggestions would you have for top management that
could help it enlist the unions in their cultural change efforts?
4. Discuss the specific suggestions you would make to top manage-
ment that could help it succeed in changing the Postal Service’s
culture into the one originally described by Runyon.

Source: Based on D. Stamps, “Going Nowhere: Cultural Change at the Postal Service Fizzles,”
Training, July 1996, pp. 26 – 34.

When Good Cops Go Bad C A S E

Michael Dowd is a corrupt cop. This case is about Dowd and the cul- INCIDENT 2
ture within the New York Police Department that allowed him to
abuse his authority position for six years.
Michael Dowd tells his story: “When you’re a cop, you’re the
boss in the street. Who in their right mind, if they’re doing some-
thing wrong, is going to say to a cop, ‘You can’t do this, you can’t
do that?’ Nobody. You feel indestructible. I figured, ‘If they
haven’t caught me by now, forget it.’ I could do anything. I could
do anything.”

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☛ 1322 ☛
 Dowd worked a tough neighborhood where drug deals were
regularly going down. “You see money in wads in their pockets,
you know, hundreds, thousands of dollars at a time, you know,
and I’m taking home $340 a week at a time, so, you know, you
notice those things.”
But Dowd did more than notice. He joined the other side. He
became a drug dealer himself. Starting slow — drinking on the job
as a rookie, fixing traffic tickets — it escalated to the point where he
was making as much as $8,000 to $10,000 a week through illegal
activities. He stole money from corpses at crime scenes, robbed drug
dealers, and dealt cocaine.
Didn’t anyone pick up on Dowd’s underworld activities? Yes,
Joe Trimboli did. He was an investigator in the NYPD Internal
Affairs (IA) Department. Trimboli suspected that as many as 15 to
20 cops were involved with Dowd and requested help in his inves-
tigation. He was turned down by his bosses. After continually press-
ing IA to pursue what Trimboli felt sure was a group of corrupt cops,
IA shut down all of Trimboli’s investigations and removed him from
the Dowd case. Why? The best answer seems to lie in the history of
the NYPD. It had suffered a major corruption scandal in 1986. It
didn’t want another scandal. The word from the mayor’s office was
“keep corruption out of the headlines.”
Dowd and others like him were able to engage in corrupt
practices for years largely because of the underwritten code of

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☛ 1323 ☛
silence. When asked why other police officers in his command,
who knew what he was doing, didn’t turn him in, Dowd said,
“Because I’m still a cop. Cops don’t turn on other cops. Cops
don’t want to be labeled as rats. Cops depend on one another to
survive out there.”
Questions
1. How can an organization’s culture condone or discourage illegal
activities?
2. What, in the NYPD’s culture, do you think supported bad cops?
3. If you were the new police chief in New York, what could you
do to change the culture to make it less tolerant of unlawful
activities?

Source: Based on “The Tarnished Shield,” ABC News Turning Point; aired on September 14, 1994.

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☛ 1324 ☛
 PROGRESSIVE CASE
◆ PA R T F O U R ◆ ROB PANCO: WORKING WITHIN
THE ORGANIZATION SYSTEM THE ORGANIZATION SYSTEM
great deal of weight in the selection decision. During

“T
he structures of AT&T and Aslett were as
different as night and day,” Rob Panco the past decade, AT&T has undergone major changes
said. “AT&T was pure hierarchy. Everyone as a result of deregulation. Tens of thousands of peo-
was very cognizant of your rank in the organization. ple have been laid off. In contrast to past practices,
It wasn’t unusual for someone to say to me, for new hires have often come from the outside to fill
instance, ‘Your’re only second level. Be careful about middle- and upper-level managerial slots because the
challenging fourth levels in a meeting.’ Rank was necessary skills and perspectives weren’t available
everything. In fact, I remember traveling with a inside AT&T. For instance, in 1990, the company
higher level manager one time. When we picked up hired Richard Bodman, president of Washington
our rent-a-car at the airport, he said, ‘You’re the grunt. National Insurance, to become AT&T’s senior vice
You drive.’ At AT&T, they never let you forget where president in charge of corporate strategy and devel-
you are in the pecking order. In contrast, Aslett was opment. In 1991, Alex Mandl, former chairman of
very informal. We were a flat organization. People Sea-Land Service, joined AT&T as its chief financial
could come to me and not get their heads cut off. I officer; and Jerre Stead, chairman of Square D Co.,
didn’t pay much attention to rank. Then again, I’m was brought in as president of AT&T’s Business
was in charge. If I had been Bob Allen [CEO of AT&T], Communications Systems unit. More recently, AT&T
I might have thought that AT&T was a lot less hierar- chose John R. Walter, a printing executive at R.R.
chical. My perspective was from down below.” Donnelley & Sons with no expertise in telecommuni-
Most people are familiar with how large companies cations, to become corporate president and chief
like AT&T go about the selection process. These com- operating officer in 1996.
panies historically hired young people for entry-level Aslett’s small size and project form of structure
positions and let them grow up through the ranks. allowed Rob Panco to hire in a much more informal
College grades and aptitude test scores were given a and direct way. About half of Aslett’s new hires came

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☛ 1325 ☛
from current employee referrals. Once hired, the newest employees go first? Would I keep a high per-
referral typically becomes the new employee’s spon- forming part-timer over a poorer performing full-
sor. That is, the sponsor helps the new employee timer? I chose to use two factors in guiding my deci-
adjust to his or her job. Most other new hires came sion — what skills were most critical and who were
from the pool of freelancers that the company used. the most competent.
When an opening came up, the best freelancers were When asked if Aslett’s culture changed when the
usually looked at first as possible full-time employ- growth stopped, Rob replied, “Yeah, I think so. The
ees. By hiring from this pool, Rob says he already had operating people took more ownership. They were
first-hand evidence of their performance capability more focused. They pulled together and took more
so he didn’t have to do much screening. Their prior initiative. During growth, we surpressed ownership.
work became the test. But among referrals, Rob relied There was psuedo-empowerment, but I wasn’t really
on work samples. For instance, candidates for jobs as letting go. Maybe if we had let employees partici-
designers and electronic page makers had to take a pate sooner, business might have been better.”
half-hour test where they could demonstrate their The way that AT&T and Aslett conducted perfor-
skills. Rob noted that all new hires from the free- mance evaluations also provides a good illustration
lancers pool also had sponsors. They were usually the of the differences between the two organizations.
team leader from the freelancer’s previous project. According to Rob, “evaluations are a game at AT&T.
All new employees were told explicitly what was They have great tools but they don’t teach managers
expected of them. They were then on probation for how to use them.” The evaluation procedure is fairly
six months. At the end of six months, they were standardized: Individuals are rated by their boss and
reviewed. Performance reviews after that were on ranked from 1 to n in their group. A modified bell
their service anniversary. curve is used. Ten percent are allocated to the high-
When business slowed in 1995, hiring was cur- est category (outstanding performers), with five per-
tailed. When natural attrition wasn’t enough to get cent having to be labeled as low performers and
the payroll down, Rob’s challenge became deciding placed on probation. Of course, there is considerable
whom to let go. “Actually the hiring and layoff deci- politicking and negotiating over rankings. Time in
sions were very similar. For instance, should I let the rank, for instance, carries a lot of weight.”

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☛ 1326 ☛
 “I’m a wimp. I don’t like rating people,” confides Questions
Rob. “I used a metric system of ratings because its
better than subjective appraisals, but I don’t like 1. Is it a law of structural design that large
ranking people.” Rob then described the standard- size (like AT&T) must result in a hierarchi-
ized form he used, which breaks employee perfor- cal-driven organization? Discuss.
mance down into four categories: personal (individ- 2. Assess the pros and cons of filling job
ual) performance; teammanship; contribution to vacancies with referrals made by current
quality; and personal development. “The first three employees.
were about equal — they were worth about 30 per- 3. Contrast the ways that structure constrains
cent each. Personal development was a tiebreaker.” low-level employees at AT&T with operat-
Within each category, Rob made a list and rated ing personnel at Aslett.
people on (1) accomplishments made during the 4. Evaluate the effectiveness of the perfor-
period and (2) areas for improvement. “I’ll admit mance appraisal system Rob put in place at
that I might have handled the process wrong. I did- Aslett. Did it help or hinder employee
n’t ask employees for their input until the end of the motivation? Discuss.
review session. I should have begun by asking peo-
ple for a self-appraisal.” 5. How can “sponsors” influence the atti-
Aslett’s small size created very different problems tudes and behavior of new hires?
for Rob than for managers at AT&T. “At a company 6. Some researchers note a “layoff-survivor
the size of AT&T, no one person makes that much of syndrome” following downsizing: Those
a difference,” Rob stated. “But in a small company people who remain complain of fatigue
like Aslett, each person is critical. If someone does- and exhibit increased levels of anxiety and
n’t come to work, it can really effect the whole orga- stress. Why didn’t this happen at Aslett?
nization. This makes each person at Aslett close to
the heart. My people needed to buy into the organi-
zation more than is necessary at an AT&T.”

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☛ 1327 ☛