culture comparison and culture change case study of abb vietnam and abb singapore

Different dominant cultures but same major culture types .... Purpose The thesis focuses on the following points: - Base on Organizational Culture Assessment Instrument to find out the

TABLE OF CONTENT

ACKNOWLEDEMENTS i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENT vi

LIST OF TABLES ix

LIST OF FIGURES x

INTRODUCTION 1

CHAPTER 1: LITERATURE REVIEW 3

1.1 Definitions 3

1.1.1 Culture 3

1.1.2 Organizational Culture 5

1.2 Cultural layers & cultural diversity 6

1.2.1 The out layer (Explicit Products/Artifacts) 8

1.2.2 The middle layer (Norms and Beliefs/Espoused Beliefs and Values) 10

1.2.3 The core (Basic Assumptions/Underlying Assumptions) 11

1.3 Sub-culture 15

1.4 The importance of organizational culture 15

1.4.1 Coordination 16

1.4.2 Integration 17

1.4.3 Motivation 18

1.4.4 How well can organizational culture do its functions? 18

1.5 Culture analysis – OCAI method 19

1.5.1 General about culture analysis methods 19

1.5.2 Advantages of OCAI method 24

1.5.3 Dimensions in OCAI 25

1.5.4 Questionnaire applied in OCAI 27

1.5.5 Scoring the OCAI 28

1.5.6 What can be found from OCAI result 28

1.6 Methodology applied in the thesis 37

1.6.1 OCAI method 37

1.6.2 Interview method 37

1.6.3 Other analysis methods 38

1.6.4 Focused points 38

CHAPTER 2: CULTURE ANALYSIS IN ABB PP DIVISIONS 39

2.1 Introduction about ABB Singapore and ABB Vietnam 39

2.1.1 Introduction about ABB Group 39

2.1.2 Introduction about ABB Vietnam (VNABB) and ABB Singapore (SGABB)

42

2.2 Organizational culture comparison between SGABB’s and VNABB’s PP Division 45

2.2.1 Different dominant cultures but same major culture types 45

2.2.2 The current dominant culture gains cultural congruence in both countries 48

2.2.3 Differences in expected dominant culture types 53

2.2.4 Less cultural congruence for the expected dominant cultures & the inevitable emergence of Clan and Adhocracy 54

2.2.5 Diversity in expectation of employee groups 58

2.3 Factors influencing organizational cultures in the two Divisions 60

2.3.1 The vital role of standardization in ABB‟s operation 60

2.3.2 Market situation and market orientation in ABB Group 62

2.3.3 Asian culture – a strong factor supporting for Clan Culture 66

2.3.4 Adhocracy Culture – an answer to the dilemmas 66

2.3.5 Business nature & the major sub-groups 66

CHAPTER 3: RECOMMENDATIONS 68

3.1 The importance of defining culture profile 68

3.2 Culture incongruence requires leadership involvement 68

3.2.1 Leaders are to listen and respect the needs of employees 69

3.2.2 Vision the future culture to pursuit 69

3.2.3 Define the culture transformation process 70

3.3 Visioning the transformation 70

3.3.1 ABB Vietnam – PP Division 71

3.3.2 ABB Singapore – PP Division 75

3.4 Operational change for the cultural change 79

3.4.1 In ABB Vietnam – PP Division 79

3.4.2 In ABB Singapore – PP Division 83

3.5 International cooperation and global resource utilization 88

CONCLUSION 91

REFERENCE 93

APPENDIX 1: VARIOUS CATEGORIES USED TO DESCRIBE CULTURE 97

APPENDIX 2: ENVIRONMENTAL VARIABLES AFFECTING MANAGEMENT FUCTIONS 99

APPENDIX 3: DENISON ORGANIZATIONAL CULTURE SURVEY 100

APPENDIX 4: QUESTIONAIRE SAMPLE 101

APPENDIX 5: CULTURE PROFILE COMPARISION VIETNAM VS SINGAPORE 105

LIST OF TABLES

TABLE 1-1: BONUS PERSPECTIVE IN INDIVIDUALISM AND COLLECTIVISM 13

TABLE 1-2: AMERICA VALUES AND POSSIBLE ALTERNATIVES 14

TABLE 1-3: COMPARISION BETWEEN OCAI METHOD AND OTHER METHODS 24 TABLE 1-4: EXAMPLE OF SCORING FOR CATEGORY DOMINANT CHARACTERISTIC 28

TABLE 1-5: SAMPLE SIZE IN THE TWO DIVISIONS 37

TABLE 2-1: ABB GROUP‟S KEY INFORMATION 39

TABLE 2-2: CHARACTERISTIC OF EACH EMPLOYEE GROUP 43

TABLE 2-3: DATA TABLE - VIETNAM PP DIVISION - PRESENT CULTURE AND PREFERED CULTURE THROUGH 6 CATEGRIES 55

TABLE 2-4: DATA TABLE - SINGAPORE PP DIVISION - PRESENT CULTURE AND PREFERED CULTURE THROUGH 6 CATEGRIES 57

TABLE2-5: COMPARISION BETWEEN SGABB PP DIVISION & VNABB 67

TABLE 3-1: VIETNAM PP DIVISION - EXPECTATION FOR MAJOR CHANGE 72

TABLE 3-2: SINGAPORE PP DIVISION - EXPECTATION FOR MAJOR CHANGE 76

TABLE 3-3: ACTION PLAN FOR VIETNAM PP DIVISION 81

TABLE 3-4: ACTION PLAN FOR SINGAPORE PP DIVISION 86

LIST OF FIGURES

FIGURE 1-1: MODEL OF CULTURE – FONS TROMPENAARS 7

FIGURE 1-2: LEVEL OF CULTURE - SCHEIN 7

FIGURE 1-3: ICE-BERG MODEL 18

FIGURE 1-4: INDIVIDUALISM RANKING 21

FIGURE 1-5: THE COMPETING VALUES FRAMEWORK 26

FIGURE 1-6: THE COMPETING VALUES OF LEADERSHIP, EFFECTIVENESS, AND ORGANIZATIONAL THEORY 33

FIGURE 1-7: ERICSSON'S CULTURAL PROFILE 36

FIGURE 2-1: ABB STRUCTURE 41

FIGURE 2-2: PROPORTION OF EACH EMPLOYEE GROUP IN THE TWO PP DIVISIONS 44

FIGURE 2-3: NUMBER OF EMPLOYEES IN VNABB PP DIVISION AND SGABB PP DIVISION 45

FIGURE 2-4: VIETNAM PP DIVISION‟S CULTURE PROFILE 46

FIGURE 2-5: SINGAPORE PP DIVISION‟S CULTURE PROFILE 47

FIGURE 2-6: PRESENT ASSESSMENT THROUGH 6 CATEGORIES IN VIETNAM PP DIVISION 48

FIGURE 2-7: PRESENT ASSESSMENT THROUGH 6 CATEGORIES IN SINGAPORE PP DIVISION 49

FIGURE 2-8: SAMPLE DESCRIPTIVE ANALYSIS VIETNAM PP DIVISION 50

FIGURE 2-9: CURRENT ASSESSMENT OF EACH EMPOYEE GROUP 51

FIGURE 2-10: SAMPLE DESCRIPTIVE ANALYSIS SINGAPORE PP DIVISION 51

FIGURE 2-11: CURRENT ASSESSMENT OF EACH EMPOYEE GROUP 52

FIGURE 2-12: VIETNAM PP DIVISION - PRESENT CULTURE AND PREFERED

CULTURE THROUGH 6 CATEGRIES 55

FIGURE2-13: ABB SINGAPORE PP DIVISION - PRESENT CULTURE AND PREFERED CULTURE THROUGH 6 CATEGRIES 56

FIGURE 2-14: ABB VIETNAM PP DIVISION - PRESENT ASSESSMENT AND FUTURE EXPECTATION OF EMPLOYEE GROUPS 58

FIGURE 2-15: SINGAPORE PP DIVISION - PRESENT ASSESSMENT AND FUTURE EXPECTATION OF EMPLOYEE GROUPS 59

FIGURE 2-16: OVERVIEW OF 2011 – 2015 DIVISIONAL TARGETS 62

FIGURE 2-17: REVENUES AND OPERATIONAL EBITDA BY DIVISION 63

FIGURE 2-18: ABB‟S BUSINESSES BY DIVISION AND REGION 2011 63

FIGURE 2-19: ORDER GROWTH BY REGION 2010 VS 2011 64

FIGURE 2-20: GROWTH RATES ACROSS ALL DIVISIONS 65

FIGURE 3-1: VNABB PP DIVISION - MANAGEMENT APPROACH 71

FIGURE 3-2: SGABB PP DIVISION - MANAGEMENT APPROACH COMPARED WITH GENERAL APPROACH 75

INTRODUCTION

1 Purpose

The thesis focuses on the following points:

- Base on Organizational Culture Assessment Instrument to find out the cultural similarities and differences in the two Divisions in ABB Vietnam and ABB Singapore in terms of dominant cultures, culture congruence, expected dominant culture and factors that drives the needs for culture change

- Define predominant factors that should be taken into consideration for culture change so as to increase business performance

- Give recommendation for cultural change including action plan for each Division

2 The research scope

There are two defined research scope dimensions in this thesis to distribute a solid analysis and practical recommendation

- The factors to compare between the two Divisions are concentrated on six categories: (1) Dominant Characteristic, (2) Leadership Style, (3) Management of Employees, (4) Organizational Glue, (5) Strategy Emphases and (6) Criteria of Success

- The cultural comparison units are ABB Singapore‟s and ABB Vietnam‟s Power Product Division

Structure of the thesis

Literature

Review

Culture analysis

in ABB PP Divisions

ABB Vietnam

Applied methods in the thesis

Organizational Culture comparison

Factors influencing the organizational cultures

The importance of defining culture profile

As culture incongruence occurs, leadership involves

Visioning the transformation

Operational change for the culture change

International cooperation and global resource utilization Sub-culture

CHAPTER 1: LITERATURE REVIEW 1.1 Definitions

1.1.1 Culture

Culture is a concept has had a long and checkered history and because of its broad meaning, it has been used by numerous ways The layman can use culture as a word to indicate sophistication, as when we say that someone is very

“cultured.” Anthropologists use it for referring to the customs and rituals that societies develop over the course of their history In the last several decades it has been used by some organizational researchers and managers to refer to the climate and practices that organizations develop around their handling of people, or to the espoused values and credo of an organization

In a common sense, culture is defined in the Cambridge Dictionary as “the way

of life, especially the general customs and beliefs, of a particular group of people at

a particular time”1 It can be interpreted from the above definition by the following points:

 The way of life, general customs and belief: in that term, culture influences people‟s behaviors so deeply that hardly can a member who lives in this culture can

be aware of that

 Particular group of people: culture is always related to a group of people, not individual

 Particular time: upon periods of times, culture haves different contents

A further step to enlarge the concept of culture beyond “custom” and “belief” is

given by Edward B.Tylor who stated culture is “complex whole which includes

knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society" 2 There are critical points in the

definition:

1 Cambridge Online Dictionary, http://dictionary.cambridge.org/dictionary/british/culture_1

2 Truman State University, Invitation to Cultural Evolutionism, Founding Figures, Edward Tylor,

http://www2.truman.edu/~rgraber/cultev/malthus.html

 Complex whole: Culture is not a set of discrete things, it is a system

 Capabilities and habits acquired: Culture includes of capabilities and habits which belong to a member of society

 Member of society: Similar to the above definition, culture always attaches to a group of people, not an individual

As the above definitions can show the wide connotation of culture, however, they just stop mainly at enumerating culture‟s elements without figuring out which

is the culure‟s core impact Come to Geert Hosfstede‟s time, the concept of culture

is generalized and given a solid understanding Geert Hosfstede3 is a well-know pioneer for his research of cross-cultural groups and organizations He has played a major role in developing a systematic framework for assessing and differentiating

national cultures and organizational cultures According to his definition, “Culture

is the collective programming of the human mind that distinguishes the members of one human group from those of another Culture in this sense is a system of collectively held values.” Following are remarkable notes in his definitions:

 Collective programming of the human mind: culture is mentioned as a mindset which is shared among a group of people It is like “programming” or unwritten rules whereby the members of this group have a common way of receiving and processing information

 Distinguishes human group: Culture is different from each group to another group Culture itself is a tool to distinguish human groups And once again, culture

is a concept attaching to a group of human, not an individual

 System of collectively held values: Culture is not just a set of common things; it

is a system of values which is collectively held for a period of time "Culture" is how we call these unwritten rules about how to be a good member of the group Culture provides moral standards about how to be an upstanding group member; it defines the group as a "moral circle".4

3 http://changingminds.org/explanations/culture/what_is_culture.htm

4 http://www.geerthofstede.nl/

1.1.2 Organizational Culture

From the above definitions, it can be understood that the most intriguing aspect

of culture as a concept is that it points us to phenomena that are below the surface, that are powerful in their impact but invisible and to a considerable degree unconscious Culture as a concept will be most useful if it helps us to better understand the hidden and complex aspects of life in groups, organizations, and occupations

Based on that concept, many researcher have been focusing on culture within an organization, hence the concept of “organizational culture” has been established

For example, H.Schwartz and S.Davis stated culture as “a pattern of beliefs and

expectations shared by organization‟s members These beliefs and expectations produce norms that powerfully shape the behaviour of individuals and groups” 5

Another definition is from Deal and Kennedy who pointed culture as “espoused

values” - the articulated, publicly announced principles and values that the group

claims to be trying to achieve, such as “product quality” or “price leadership” In general, numerous of terms are used such as “shared meanings”, “root metaphors”,

“rules of the game”, “group norms”… (Appendix 1: VARIOUS CATEGORIES USED

TO DESCRIBE CULTURE) and all of these manifest the strong impact of culture and organizational culture

This thesis used the definition of Edgar H.Schein for Organizational Culture:

The culture of a group can now be defined as a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems 6

With the definition, there are critical points to understand about organizational culture:

 Pattern of shared basic assumptions: This is the critical aspect of culture, it means that certain things in groups are shared or held in common but they are so deep that all the members of that group just take it for granted

 Group: it is noticeable that “group” not “crowd” or “collection of people” is used

It follows that any group needs a certain level of stability in membership and a history of shared learning to develop some level of culture, but a group that has had either considerable turnover of members and leaders or a history lacking in any kind

of challenging events may well lack any shared assumptions

 Learned by a group as it solved its problems of external adaptation and internal integration: All group and organizational theories distinguish two major sets of problems that all groups, no matter what their size, must deal with: (1) survival, growth, and adaptation in their environment; and (2) internal integration that permits daily functioning and the ability to adapt and learn Both of these areas of group functioning will reflect the larger cultural context in which the group exists and from which are derived broader and deeper basic assumptions, for examples, about the nature of reality, time, space, human nature, and human relationships

1.2 Cultural layers & cultural diversity

Culture is like gravity: you do not experience it

until you jump six feet into the air 7

Fons Trompenaars and Charles Hampden- Turner

As mentioned in the Definitions part, culture is “collective programming” or

“shared basic assumptions” so it is taken for granted by people absorbing this

culture People normally just realize their culture when they jump into another culture and realize how different between their familiar culture and the new one Cultures differ from each other in many levels, from absolutely visible points to deeply profound factors Researchers categories cultures into many levels For examples, Fons Trompenaars divides culture into 3 levels which are the out layer -

7

Fons Trompenaars & Charles Hampden-Turner, “Riding the waves of cultures – Understanding cultural diversity in business”, Nicholas Brealey Publishing, London, 2nd edition, 1998, pg.5

Explicit Products, the middle layer - Norms and Values, the core - Basis Assumptions while Schein categorizes culture into 3 level: Artifacts, Espoused Beliefs and Values, Underlying Assumptions

FIGURE 0-1: MODEL OF CULTURE – FONS TROMPENAARS 8

FIGURE 0-2: LEVEL OF CULTURE - SCHEIN 9

While the two researchers used different terms to categorize layers of culture, there are critical common points in their view

8

Fons Trompenaars & Charles Hampden-Turner, “Riding the waves of cultures – Understanding cultural

diversity in business”, Nicholas Brealey Publishing, London, 2nd edition, 1998, pg.21

9 Edgar H Schein, “Organizational Culture and Leadership”, Jossey-Bass, USA, 3rd edition, 2004, pg 26

Artifacts

Espoused Beliefs

and Values

Underlying Assumptions

Visible organizational structures and processes

Basic Assumptions

Explicit Products Norms and Values

First, about the influences and how easy to realize one layer, the out layer of

culture is easy to realize but difficult to decipher as it is the outcome of deeper layers The deeper of the layer, the stronger influence it has but it is more difficult

to be realized When it comes to the core layer, there are few profound assumptions which are taken for granted and decode all the factors in remaining layers For example, why staff in a hospital always stick with rules and procedures when designers in an IT company just talk about new ideas, new concepts? Dig down into

a deeper layer, we can see that with a hospital, its professional standard is hygiene, safe and secure where people lives can be taken with one slight mistake, therefore, rules and procedures are strictly follow to minimize the risk In contrary, IT company defines success as high speed in giving new products or service that motivates its employee to be creative and innovative for new concepts and ideas

Second, in term of cultural diversity and how can people accept culture differences, the level of diversity and acceptance varies through cultural layers The

diversity in every single layer, then the combination of all the differences in all layers leads to cultural diversity and cultural conflicts also In the out layer, with its apparentness, the layer shows numerous obvious and incoherent differences between cultures and can make a new comer easily feel overwhelmed Luckily, to a certain level, people still can accept these differences when they are aware of that For example, if a person changes his job from a financial institute to an entertainment company, he can change his style from tie and vest to T-shirt and jeans or he can enjoy a flexible working time instead of a fixed working time However, to deeper level, even when the differences are figured out or verbalized, they are still difficult to be accepted as they already became “philosophy”, “rules”,

“correct or wrong” in mindset of people This difference in the level is indeed the factor lead to cultural conflicts

1.2.1 The out layer (Explicit Products/Artifacts)

At the surface is the level of artifacts, which includes all the phenomena that one sees, hears, and feels when one encounters a new group with an unfamiliar culture Artifacts include the visible products of the group, such as the architecture of its

physical environment; its language; its technology and products; its artistic creations; its style, as embodied in clothing, manners of address, emotional displays, and myths and stories told about the organization; its published lists of values; its observable rituals and ceremonies; and so on

The “climate” of the group is an artifact of the deeper cultural levels, as is the visible behavior of its members Artifacts also include, for purposes of cultural analysis, the organizational processes by which such behavior is made routine, and structural elements such as charters, formal descriptions of how the organization works, and organization charts

The most important point about this level is that it is easy to observe and very difficult to decipher

Example 1- Silent is good? Western society has a predominantly verbal culture

They communicate with paper, film and conversation They become nervous and uneasy once they stop talking But they have very different styles of discussion For the Anglo-Saxons, when A stops, B starts It is not polite to interrupt The even more verbal Latins integrate slightly more than this; B will frequently interrupt A and vice versa to show how interested each is in what the other is saying In contrary, in Asia countries, there are usually moments of silence during discussion which really frightens the Westerner who thinks such moments are interpreted as a failure to communicate However, in Asia countries, it is a sign of respect for the other person if you take time to process the information without talking yourself

Example 2 – Representative, how many is enough? For a meeting, Japanese‟s,

Singaporeans, Nigerians and French usually send a group of representative which are microcosms of the interests of their entire national subsidiaries In the face of unexpected demands, they will wish to confer with those back home Yet to Anglo-Saxons, they usually send a single representative whose vote is on his or her private conscience on behalf of constituents

1.2.2 The middle layer (Norms and Beliefs/Espoused Beliefs and Values)

The middle layer can be considered to include of “lessons” learned and shared between members of a group which are already empirically tested and continue to work reliably in solving the group‟s problems

Another interesting point of this layer is that it includes “norms” and “values” According to Fons Trompenaars:

Norms are the mutual sense a group has of what is “right” and

“wrong” Norms can develop on a formal level as written laws, and on

an informal level as social control Values, on the other hand, determine the definition of “good and bad”, and are therefore closely related to the ideals shared by a group.

A culture is relatively stable when the norms reflect the values of the group When this is not the case, there will most likely be a destabilizing tension While the norms, consciously or subconsciously, give us a feeling of “this is how I normally should behave”, values give us a feeling of “this is how I aspire or desire to behave” 10

Example 1: Some Japanese might say that they bow because they like to greet

people: that is a value Other might say they do not know why except that they do it because the others do it too Then we are talking about a norm

Example 2: In one culture people might agree with the value: “Hard work is

essential to a prosperous society.” Yet the behavioral norm may be: “Do not work harder than the other members of the group because then we would all be expected

to do more and would end up worse off.” Here the norm differs from the value

Not using the terms of “Norm” and “Value”, however, H.Schein also explained the difference between “what people say” and “what people do” by arguing that:

Beliefs and values at this conscious level will predict much of the behavior that can be observed at the artifacts level But if those beliefs

10 Fons Trompenaars & Charles Hampden-Turner, “Riding the waves of cultures – Understanding cultural diversity in business”, Nicholas Brealey Publishing, London, 2nd edition, 1998, pg 22

and values are not based on prior learning, they may also reflect only what Argyris and Schön (1978) have called “espoused theories,” which predict well enough what people WILL SAY in a variety of situations but which may be out of line with what they WILL ACTUALLY DO in situations in which those beliefs and values should, in fact, be operating 11

1.2.3 The core (Basic Assumptions/Underlying Assumptions)

To answer questions about basic differences in values between cultures it is necessary to go back to the core of human existence

We see that a specific organizational culture or functional culture is nothing more than the way in which groups have organized themselves over the years to solve the problems and challenges presented to them Groups of people organize themselves in such a way that they increase the effectiveness of their problem-solving processes Because different groups of people have developed in different geographic regions, they have also formed different sets of logical assumptions The assumptions have such strong influence that people within a culture just

take them for granted, that we call “self-reference criteria” – an unconscious

reference to one‟s own culture values; understanding and relating to others only from one‟s own cultural frame of reference 12

It is the difference between the basic assumptions combined with self-reference criteria to create culture conflicts

Example 1: Pay-on-performance, prospect or disaster? This is the story from

Missouri Computational Company (MCC) Since the late 1970s MCC has been operating in more than 20 countries As its foreign sales have grown, top management has become increasingly concerned about international coordination The company has therefore decided to coordinate the processes of measuring and

rewarding achievement which is called “pay-on-performance” Accordingly, the basic salary of all sales people were decreased by 10%, instead of that, the bonus will be paid based on performance which is subject to how many percentage of the target they can achieve

This method has worked really well in USA and the management expected that

it would bring them satisfactory results when applying to other countries So, how is about the result?

In Western and Northern Europe: everything has been on smooth progress with positive feedback for that method

In contrary, the situation has been more complicated in Italy, Spain and Middle East For the first 3 months, the result could be said to be above expectation, however, things has been going worse for the next 6 months The best sales man in previous months has dropped his sales, even below his average performance

What has happened to the excellent sales people?

In Western and Northern Europe: the employees take this reward system as a motivation and a chance for them to contribute and develop They put more effort, get more success and admiration from the colleges, it is exactly “nothing succeeds like success”

In Italy, Spain and Middle East: The best sales man began to feel “guilty” when

he took the chance away from his colleges, so he tried extremely hard not to get the reward in the next periods

From the case, we can see that the management unintentionally has been imposing three “self-reference criteria” without knowing the alternative criteria:

TABLE 0-1: BONUS PERSPECTIVE IN INDIVIDUALISM AND

With affiliates in Italy, Spain and Middle East, it is clear that…

Everything must follow a

Pay-on-performance must be applied worldwide

It is a must to take consideration for a specific situation It cannot

be applied arbitrarily with on-performance in Italy

The individual can

influence the future

(where there is a will,

there is a way)

Human action is determined by the will of God

Planning and scheduling

We must work hard to

accomplish our objectives

Hard work is not the only prerequisite for success, wisdom, luck are time are also required

Motivation and reward system

Commitments should be

honored (people will do

what they say they will

do)

A commitment may be superseded by a

conflicting request, or an agreement may only signify intention and have little or no relationship to the capacity for

performance

Negotiating and bargaining

One should effectively use

one‟s time (time is money

that can be saved or

wasted)

Schedule are important but only in relation with other priorities

Long and short-range planning

13 Helen Deresky, “International Management – Managing Across Borders and Cultures”, Pearson Prentice

Hall, 5th edition, 2006, pg 86

1.3 Sub-culture

Many organizations or communities comprise diverse subcultures whose constituents conform only in varying degrees to the community‟s character

For example, in one company there can be subcultures depending on many

factors including job natures A group of sales people can be seen as target oriented people, flexible and strongly customer focused while a group of engineers, especially in heavy industry will express themselves as structured, highly aware of policies and procedure or standard and mainly internal focused

Therefore, it should be taken into consideration that generalizations in culture profiles will produce only an approximation, or stereotype of community or organization character To have a deeper understanding about an organizational culture, it is necessary to have an insight about its subcultures as well as their attribution to the organization‟s culture

1.4 The importance of organizational culture

Organizational culture is an enigma which has held the attention of practitioners and researchers alike worldwide Extensive research and publications focus on a large variety of links between organizational culture on one hand and organizational outcomes and functions on the other Topics include: personal productivity (Akin and Hopelain 1987, Welch 1990) financial performance (Denison 1984), strategic planning and implementation (Arogyaswamy and Byles 1987, Schwartz and Davis 1981), strategic success (Bluedorn and Lundgren 1993), recruitment and selection (Gross and Shichman 1987) as well as self-selection (Soeters and Schreuder 1988), innovation (Jassawalla and Sashittal 2002), marketing (Arnold et al 1987) or sales (Tinsley 1988)

Contributing to the numerous researches is an approach by Heinen in which organizational culture is viewed from a functionalist perspective The functions include coordination, integration and motivation

1.4.1 Coordination

In a company, the need for coordination derives from internal separation and specialization of tasks, and interdependency of the behaviors and decisions of organizational members This need escalates with levels of task separation, task-related interdependency among organizational units Besides, coordination helps reduce the risk that granted freedom of decision-making in the sense of autonomy and delegation may lead to ineffective results There are two types of coordination possibilities

On one hand, coordination can be implemented by structural instruments of including plans or programs, and can function in either a centralized or decentralized organization However, these structural means of coordination show inherent weaknesses They can leave room for interpretation and only express certain expectations for the target group‟s behavior Motivational and creativity deficiencies might be a key consequence if structural coordination is imposed without creating shared values and an understanding for them in order to make them operate properly

On the other hand, a major complementary instrument of coordination is found

in organizational culture Two concepts of non-structural coordination mechanism: markets and clans Thereby, markets function through negotiations between demand- and supply-side parties without the need for extensive structural coordination, and clans solve coordination problems by creating an orientation for organizational members through shared values and norms

By this effect, the importance of organizational culture is underlined by the aforementioned drawbacks of utilizing only a formal, structural coordination mechanism, especially in regard to more dynamic and complex tasks and environments where formal coordination does not satisfy all coordination needs In short, a gain in speed and increased effectiveness as well as efficiency can be major consequences, and the aspects of the coordinating function an organizational culture are fulfilled

Research into the transformation towards new forms of organizing indicates that cultural programs have the potential to replace the previously existing vertical command and control systems Martinez and Jarillo (1989, p 489) claim that informal and social modes of control emerge in multinational companies as a necessary result to counter international dispersion of organizational units Organizational culture represents a crucial means of the coordination and control of multinational companies (Jaeger 1983), in addition to accounting-based mechanisms (Shapiro 1978), human resource management (Edstrom and Galbraith 1977), and specific decision-making patterns (Egelhoff 1988)14

1.4.2 Integration

In addition to the important coordination function, organizational culture contributes to the solution of another tension field of organizing between centrifugal and centripetal forces, or the right degree of integration

Centrifugal forces are created in organizations for various reasons Increasing international activities, increasing autonomy and decentralization of organizational sub-parts result in its members and units becoming more focused on their particular functional and divisional goals Through corporate growth either via internal growth

or M&A, the need for differentiated sub-units to keep productivity and efficiency high is created Besides, dominating interaction with their unit's colleagues and an appraisal system focusing on job performance within the units foster the development of corporate sub-cultures

In contrast to these centrifugal forces, organizational culture can act as a “social glue” (Albert and Silvermann 1984, p 13, Smith and Simmons 1983, p 377) to keep the corporation together Organizational culture reminds employees of corporate higher goals, of the big picture In view of the tendency to delegate, decentralize, internationalize, empower, and to rely on trust, this glue that organizational culture represents will assume an even more crucial role in the future

14

Wolfgang Amann, Dissertation on “The impact of internationalization on organizational culture a

comparative study of international US and German companies”, University of St.Gallen, German, 2003,

pg.40

1.4.3 Motivation

A strong system of clear values can endow employees with an appreciation of the value of their work that may often otherwise be lacking due to the extensive separation and specialization of tasks in addition to automation

For example, some organizational cultures allow and foster self-actualization through entrepreneurship in profit center structures or implementation of an employee‟s own ideas by providing either additional time or financial resources for their own research efforts beyond the set research plan

1.4.4 How well can organizational culture do its functions?

Obviously, how well the functions can be performed by organizational culture depends on the correlation between the organization‟s target and goals, strategies

with its culture, meaning the culture can be either a vital contributor or a deadly

constraint for the organization on the way to aim at its goals It can be

illustrated by the figure below which is developed by Brain Bacon:

FIGURE 0-3: ICE-BERG MODEL 15

According to the Ice-berg model, we can see:16

The floating part of the ice-berg is easily recognizable but it is just a minor proportion with 10-20% of the total weight, in contrary, the sunk part is difficult to

15 Brain Bacon, “Aligning People with Stratergy”, www.Oxfordleadership.com

16 Dr Novak Summersemester, “Multicultural Management”, International Technology Transfer

Management, 2004, p.2

Strategy

Wind

Flow Culture

realize but it occupies 80-90% of the total weight which stands for the inertia or the difficulties in movement changing

Thus, it is the sunk part not the floating part which needs influencing if we want the ice-berg to move Moreover, it is understandable when the wind and the flow influence the ice-berg with opposite direction, the iceberg will move following the flow

Culture is beneath awareness in the sense that no one bothers to verbalize it, yet it forms the roots of action This made one anthropologist liken it to an iceberg, with its largest implicit part beneath the water 17

Similarly, in an organization, it is easy to see plans, strategies, structure, goals… but they are just the floating part which is quickly changeable However, the sunk part including norms, values, underlying assumptions…which has a total impact on the organization is visible as well as difficult to change Therefore, a complete change requires both culture and strategy, goals to have correlation with each other (Appendix 3: ENVIRONMENTAL VARIABLES AFFECTING MANAGEMENT FUCTIONS)

1.5 Culture analysis – OCAI method

1.5.1 General about culture analysis methods

To understand the basic underlying drives that influence the operation and development of an organization, it is critical to capture its culture However, if only analyzing culture by collecting its incoherent signs in many layers, it is just a discrete finding, not a systemic comprehension Consequently, it is difficult to understand it as a whole system and inevitably impossible to predict its responds or

to change it

17 Fons Trompenaars & Charles Hampden-Turner, “Riding the waves of cultures – Understanding cultural

diversity in business”, Nicholas Brealey Publishing, London, 2nd edition, 1998, pg 24

Obviously, it is not easy to capture an organizational culture in some specific words because organizational culture is extremely broad and inclusive in scope However, categorizing culture into types can help a company‟s cultural tendency interpreted, analyzed and changed

There are various methods to categorize culture because it comprises a complex, interrelated, comprehensive and ambiguous set of factors For examples, Deal & Kennedy proposed a dimension based on Speed of Feedback (high speed to low speed) and a Degree of Risk dimension (high risk to low risk), Ernst argued for People Orientation (participative versus non-participative) and Response to the Environment (reactive versus proactive) while Hofstede focused on Power Distance, Uncertainty Avoidance, Individualism, and Masculinity, then broaden to Long-term orientation

 Power distance: a measure of the inequality between „bosses‟ and inferiors, the extent to which this is accepted

 Uncertainty avoidance: the degree to which one is comfortable with or feels threatened by ambiguous, uncertain situations, the extent one can or cannot tolerate uncertainty and tries to avoid it by establishing more structure

 Individualism – Collectivism: the degree to which a culture relies on and has llegiance to the self or the group In other words, it is the degree to which one thinks

in terms of „I‟ versus „we‟; either ties between individuals are loose or people are part of a cohesive group throughout their lives

 Masculinity – Femininity (also known as achievement versus nurturance orientation): the degree to which a culture values such behaviour as assertiveness, achievement, cquisition of wealth or caring for others, social support and quality of life

 Confucian dynamism: this fifth dimension was later added following Hofstede‟s work with Michael Bond (Hofstede & Bond 1988) which was meant to explain the rapid economic development of many Asian countries This dimension refers to the selective promotion of particular set of ethics found in Confucian teachings Particular teachings that lead to economic development include thrift,

perseverance, a sense of shame, and following a hierarchy Other Confucian teachings are less emphasised such as tradition and protecting face

The impact of long-term or short-term orientation is also studied as part of this dimension

Example 1: Individualism vesus Collectivism (categorized by Hofstede)

One of the main point of Asian culture is Collectivism, in contrary with Western culture individualism Hofstede stated collectivism is the degree to which individuals are integrated into groups On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself and his/her immediate family On the collectivist side, we find societies

in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families (with uncles, aunts and grandparents) which continue protecting them in exchange for unquestioning loyalty

Through Hofstede‟s research about main dimensions between countries, we can see the interesting figure below for Collectivism ranking

FIGURE 0-4: INDIVIDUALISM RANKING 18

18

http://www.geerthofstede.nl/

Through the Scale of Hofstede, Sweden and Switzerland can be considered as individualistic with a relatively high score (71 points and 68 points relatively) In such countries, people emphasize on personal achievements and individual rights They expect from each other to fulfill their own needs Group work is important, but everybody has the right of his own opinion and is expected to reflect those In

an individual country people tend to have more loose relationships than countries where there is collectivism

In contrary, Singapore and Vietnam as other Asian countries have low ranking for Individualism The low Individualism ranking is manifested in a close and committed member 'group', be that a family, extended family, or extended relationships Loyalty in a collectivist culture is paramount The society fosters strong relationships where everyone takes responsibility for fellow members of their group

National culture differences are reflected not only in solutions to organisation problems in different countries, but also in the validity of management theories in these countries

Different national cultures have different preferred ways of structuring organisations and different patterns of employee motivation For example, they limit the options for performance appraisal, management by objectives, strategic management and humanisation of work In his research into organisation cultures, Hofstede identified six independent dimensions of practices:

• process-oriented versus results-oriented;

• job-oriented versus employee-oriented;

• professional versus parochial;

• open systems versus closed systems;

• tightly versus loosely controlled; and

• pragmatic versus normative

The position of an organisation on these dimensions is determined in part by the business or industry the organisation is in Scores on the dimensions are also related

to a number of other „hard‟ characteristics of the organisations These lead to conclusions about how organisational cultures can be and cannot be managed In the case of international business, it means handling both national and organisational culture differences at the same time Hofstede argued that „organisational cultures are somewhat manageable while national cultures are given facts for management; common organisational cultures across borders are what keep multinationals together While defining culture as „the collective programming of the mind which distinguishes the members of one human group from another‟, Hofstede (1991, 1997) emphasises that culture is not a property of the individuals, but of groups The Denison organisational culture survey (Appendix 4: DENISON ORGANIZATIONAL CULTURE SURVEY) (Denison 1990) is another instrument for which evidence of sensitivity to organisational change has been presented This tool assesses organisational culture along the four basic cultural traits, which are presented by certain organisational dimensions The tool consists of 60 items, which are used to assess and measure the dimensions

Denison‟s Organisational culture survey offers a quantitative multi-dimensional assessment of the main organisational cultural traits The assessment has also been correlated with organisational performance measures Denison (1990) argues that this approach allows for assessment of the ways in which organisations (or sub-groups within organisations) deal with seemingly contradictory or paradoxical goals and demands Denison regards the understanding of such conflicts as essential to developing sustainable adaptive organisational behaviour, and a number of studies have reported that the pattern of cultural traits of high-performance organisations can be clearly distinguished from those with lower performance (Denison 1984; Denison & Mishra 1995; Fisher & Alford 2000) Under such a model, organisational culture might be viewed as the system that permits organisations to make coordinated adaptive responses to the numerous competing and even paradoxical demands

1.5.2 Advantages of OCAI method

This thesis bases on categorize method of Kim S.Cameron & Robert E.Quinn19

called Organizational Culture Assessment Instrument (OCAI) with main

benefits and advantages like following:

TABLE 0-3: COMPARISION BETWEEN OCAI METHOD AND OTHER

METHODS OCAI Method Hofstede’s method Denison’s method

 Focus on organizational

culture

 Focus on national culture

 Focus on organizational culture

 The first intervention to

initiate change

 Base on competing

values framework that

argues each company can

pick up a proportion

among 4 categories as

their strength to deal with

internal integration and

external adaptation

 Not mentioned  To explain how

organisations deal with seemingly

contradictory or paradoxical goals and demands

 Not only point out the

current culture profile

but also focus on culture

change by defining

preferred culture in an

organization

 People become aware of

the current and of the

preferred culture

“Where are we now and

where do we want to or

have to go?” This can

generate momentum for

 Focus on defining only the current culture but not preferred culture

 Point out the current culture profile

19 Kim S.Cameron & Robert E.Quinn, “Diagnosing and Changing Organizational Culture: based on the competing values framework”, Jossey Bass, Revised Edition, 2006

change

 Based on 6 specific

categories, it is easier to

predict which measures

of change will turn out to

be effective

Management will get

more grips on change

 Resistance to change can

be anticipated, it will not

happen completely

unexpected

 Categories are not pointed out specifically to define where the effects come



 It offers starting points to

encourage employees

and thus use their energy

and creativity that leads

to more support for

 Not mentioned

 Easy & user friendly

form to survey for a large

sample

survey to be implemented

Based on the questions, a list of 39 indicators was created from statistical analysis, then, 2 major dimensions were summarized which divide organizational culture into four major clusters Following is the two major dimensions:

1 Internal Focus and Integration versus External Focus and

Differentiation To the left in the graph, the organization is internally

focused: what is important for us, and how do we want to work? To the right the organization is externally focused: what is important for the outside world, the clients, and the market?

2 Stability and Control versus Flexibility and Discretion At the top of

the graph, the organization desires flexibility and discretion, while at the bottom the organization values the opposite: stability and control

FIGURE 0-5: THE COMPETING VALUES FRAMEWORK 20

The two dimensions create four quadrants each of them represents a distinct set

of organizational effectiveness indicators These indicators of effectiveness represent what people value about an organization‟s performance They define what

is seen as good and right and appropriate The four clusters of criteria, in other words, define the core values on which judgments about organizations are made

Flexibility & Discretion

Stability & Control

What is notable about these four core values is that they represent opposite or competing assumptions Each continuum highlights a core value that is opposite from the value on the other end of the continuum – flexibility versus stability, internal versus external

1.5.4 Questionnaire applied in OCAI

In OCAI method, Cameron and Quinn based on a questionnaire with six categories to capture an organization‟s culture profile The purpose of OCAI is to assess six key categories of organizational culture which are:

The response will produce two independence ratings of the organization‟s culture – one as it currently exists and one as it is wished to be in the future

Following is an example of scoring for category (1) Dominant Characteristic

TABLE 0-4: EXAMPLE OF SCORING FOR CATEGORY DOMINANT

CHARACTERISTIC

A The company is a very personal place It is like an

extended family People seem to share a lot of them 40 50

B

The company is a very dynamic and entrepreneurial

place People are willing to stick their necks out and

take risks

C

The company is very result-oriented A major concern is

with getting the job done People are very competitive

and achievement-oriented

D The company is a very controlled and structured place

1.5.5 Scoring the OCAI

Scoring the OCAI based on simple arithmetic calculations As each alternative name A, B, C, D represents each culture type through 6 categories, it is to take the average of each alternative (A, B, C, D) in NOW and PRESENT to capture the organization‟s culture

1.5.6 What can be found from OCAI result21

1.5.6.1 Four culture types based on the OCAI method

Each quadrant in the above figure has been given a label to distinguish its most notable characteristics – Clan, Adhocracy, Market and Hierarchy The dimensions and quadrant appear to be very robust in explaining the different orientations as well

21 www.ocai-online.com, Report on Organizational Culture Assessment Instrument for Public Administration, May 31, 2010

as the competing values that characterize human behavior The robustness of the dimensions and the richness of the resulting quadrants led us to identify each quadrant as a culture type

(1) THE HIERARCHY CULTURE

The significant point in the Hierarchy Culture is a very formalized and structured place to work Procedures govern what people do The leaders pride themselves on being good coordinators and organizers who are efficiency-minded Maintaining a smooth-running organization is most critical Formal rules and policies hold the organization together The long-term concern is stability and performance with efficient, smooth operations Success is defined in terms of dependable delivery, smooth scheduling and low cost The management of employees is concerned with secure employment and predictability

Leader Type: coordinator, monitor, organizer

Value Drivers: efficiency, punctuality, consistency and uniformity

Theory for Effectiveness: control and efficiency with appropriate processes produce effectiveness

Quality Strategies: error detection, measurement, process control, systematic problem solving, quality tools

Prototypical examples: fast-food restaurant like McDonald, major conglomerates like Ford Motor and government agencies such as Justice Department In McDonald, a hallmark of the business is the uniformity of products

in all outlets Key values center on maintaining efficient, reliable, fast, flowing production New employees begin by doing only a specific job and almost

smooth-no discretion is provided by the job The rules manual, which every employee studies and is tested on, is over 350 pages long and covers most aspects of employee dress and on-the-job behavior

(2) THE MARKET CULTURE

It is easy to see that Market Culture has a result-oriented organization whose major concern is getting the job done People are competitive and goal-oriented The leaders are hard drivers, producers, and competitors They are tough and demanding The glue that holds the organization together is an emphasis on winning Reputation and success are common concerns The long-term focus is on competitive actions and achievement of measurable goals and targets Success is defined in terms of market share and penetration Competitive pricing and market leadership are important The organizational style is hard-driving competitiveness Leader Type: hard driver, competitor, producer

Value Drivers: market share, goal achievement, profitability

Theory for Effectiveness: aggressive competition and customer focus produce effectiveness

Quality Strategies: measuring customer preferences, improving productivity, creating external partnerships, enhancing competitiveness, involving customers and suppliers

Basic assumptions: external environment is not benign but hostile, consumers are choosy and interested in value, the organization is in the business of increasing its competitive position and the major task of management is to drive the organization toward productivity, results, and profits In the words of General George Patton (1944)22, market organizations “are not interested in holding on to their positions Let the enemy do that They are advancing all the time, defeating the oppositions, marching constantly toward the goal”

Prototypical example: General Electric General Electric‟s former CEO, Jack Welch, made it clear in the late 1980s that if GE businesses were not number one or number two in their markets, they would be sold Welch bought and sold over 300

22 Kim S.Cameron & Robert E.Quinn, “Diagnosing and Changing Organizational Culture: based on the competing values framework”, Jossey Bass, Revised Edition, 2006, page 40

businesses during hjs 21 year tenure as CEO The GE under Welch was known as a highly competitive, result-or-else type of culture

(3) THE CLAN CULTURE

Clan Culture can be describe as a very pleasant place to work, where people share a lot of personal information, much like an extended family The leaders or heads of the organization are seen as mentors and perhaps even parent figures The organization is held together by loyalty or tradition Commitment is high The organization emphasizes the long-term benefit of human resources development and attaches great importance to cohesion and morale Success is defined in terms of sensitivity to customers and concern for people The organization places a premium

on teamwork, participation, and consensus

Leader Type: facilitator, mentor, team builder

Value Drivers: commitment, communication, development

Theory for Effectiveness: human development and participation produce effectiveness

Quality Strategies: empowerment, team building, employee involvement, Human Resource development, open communication

Basic assumptions: the environment can best be managed through teamwork and employee development, customers are best thought of as partners, the organization

is in the business of developing a humane work environment, and the major task of management is to empower employees and facilitate their participation, commitment and loyalty

Prototypical example: Japanese firms

(4) THE ADHOCRACY CULTURE

In Adhocracy Culture, a dynamic, entrepreneurial, and creative place to work is what expected People stick out their necks and take risks The leaders are considered innovators and risk takers The glue that holds the organization together

is commitment to experimentation and innovation The emphasis is on being on the

leading edge The organization‟s long term emphasis is on growth and acquiring new resources Success means gaining unique and new products or services Being

a product or service leader is important The organization encourages individual initiative and freedom

Leader Type: innovator, entrepreneur, visionary

Value Drivers: innovative outputs, transformation, and agility

Theory for Effectiveness: innovativeness, vision and new resources produce effectiveness

Quality Strategies: surprise and delight, creating new standards, anticipating needs, continuous improvement, finding creative solutions

Prototypical examples: companies in software development, aerospace, tank consulting and filmmaking industries

think-FIGURE 0-6: THE COMPETING VALUES OF LEADERSHIP,

EFFECTIVENESS, AND ORGANIZATIONAL THEORY 23

Mentor Team builder Commitment Communication Development Human development and participation

ADHOCRACY

CREATIVE Innovator Entrepreneur Visionary Innovative output Transformation Agility

Innovativeness, vision new resources

HIERACHY

CONTROLLING Coordinator Monitor Organizer Efficiency Timeliness Consistency &

Uniformity Control and efficiency with capable process

MARKET

COMPETING Hard driver Competitor Producer Market share Goal achievement Profitability

Aggressively competing and customer focus

Flexibility & Discretion

Stability & Control

1.5.6.2 Dominant culture type in an organization

From Quinn and Cameron‟s extensive research it was found that most organizations have developed a dominant culture-style but an organization rarely has only one culture type

The strength of your culture is determined by the number of points awarded to a particular cultural type The higher the score, the more dominant the cultural type has Research has shown that strong cultures correspond with homogeneity of efforts, a clear sense of direction, an unambiguous environment and services

The extent to which a company needs a strong, homogenous culture (instead of a varied, balanced mix of cultures) often depends on the environment: is the environment complex, how flexible should the organization be in order to respond effectively to a changing situation? If a culture is strong, changes will require more efforts.24

Often there is a mix of the four organizational cultures, however, those that do not have a dominant culture type either tend to be unclear about their culture or emphasize the four different culture types nearly equally

Conflicts within the Competing Values Framework may be caused by the fact that the values and the corresponding organizational cultures compete with each other This is because organizations can spend their money, attention and time only once

1.5.6.3 Which culture type is the most effective?

Quinn and Cameron found that organizations which are flexible in their structure are most effective, which sometimes leads to contradictions within the organization The „best‟ organizations can handle competition within this framework well Every culture type works best in the activities domain corresponding to that particular culture type So sometimes there is no ultimate „best‟ organizational culture, although a specific type may be better than others in particular situations

24

Organizational Culture Assessment Instrument, Public administration, May 31, 2010