The External Environment:
Those factors and forces outside the organization
that affect its performance
Despite the fact that appliance sales are expected
to climb for the first time in four years,
Whirlpool Corporation, which already shut down 10
percent of its production capacity,
continues to cut costs and scale down capacity
even more.7 And it’s not alone in its protective,
defensive actions. The decade from 2000 to 2009
was a challenging one for
organizations. For instance, some well-known
stand-alone businesses at the beginning
of the decade were acquired by other companies
during this time, including Compaq (now
a part of Hewlett-Packard), Gillette (now a part
of Procter & Gamble), Anheuser-Busch
(now a part of Anheuser-Busch InBev), and Merrill
Lynch (now a part of Bank of
America); others disappeared altogether, including
Lehman Brothers, Circuit City, and
Steve & Barry’s (all now bankrupt) and
WorldCom and Enron (both done in by ethics
scandals).8 Anyone who doubts the impact the
external environment has on managing just
needs to look at what’s happened during the last
decade.
The term external environment refers to factors and forces outside the organization
that affect its performance. As shown in Exhibit
2-2, it includes several different components.
The economic component encompasses factors such as
interest rates, inflation,
changes in disposable income, stock market
fluctuations, and business cycle stages. The
demographic component is concerned with trends in
population characteristics such as
age, race, gender, education level, geographic
location, income, and family composition.
The political/legal component looks at federal,
state, and local laws, as well as global laws
and laws of other countries. It also includes a
country’s political conditions and stability.
The sociocultural component is concerned with
societal and cultural factors such as
values, attitudes, trends, traditions, lifestyles,
beliefs, tastes, and patterns of behavior. The
technological component is concerned with
scientific or industrial innovations. And the
global component encompasses those issues
associated with globalization and a world
economy. Although all these components pose
potential constraints on managers’ decisions
and actions, we’re going to take a closer look at
two of them—the economic and
demographic aspects. Then, we’ll look at how
changes taking place in those components
constrain managers and organizations. We’ll wrap
up this section by examining environmental
uncertainty and stakeholder relationships.
The Economic Environment
You know the economic context has changed when a blue-ribbon
company like General
Motors declares bankruptcy; the Organization for Economic
Cooperation and Development
predicts some 25 million unemployed individuals globally; 8.4
million jobs in the
United States vanish; and the economic vocabulary includes
terminology such as toxic
assets, collateralized debt
obligations, TARP, bailouts, economic stabilization, wraparound
mortgages, and stress
tests.9 To understand what this economic environment is like, we
need to look at the changes that have taken place and the
impact of those changes on the
way organizations are managed.
The economic crisis—called the “Great Recession” by some
analysts—began with
turmoil in home mortgage markets in the United States when
many homeowners found
themselves unable to make their payments. The problems soon
affected businesses as credit
markets collapsed. All of a sudden, credit was no longer
readily available to fund business
activities. It didn’t take long for these economic troubles to
spread worldwide.
What caused these massive problems? Experts cite a long list
of factors that include
excessively low interest rates for a long period of time,
fundamental flaws in the U.S. housing
market, and massive global liquidity. Businesses and consumers
became highly leveraged,
which wasn’t an issue when credit was easily available.10
However, as liquidity dried
up, the worldwide economic system sputtered and very nearly
collapsed. Now, massive
foreclosures, a huge public debt burden in many countries, and
continuing widespread
social problems from job losses signal clear changes in the
U.S. and global economic
environments. Even as global economies began the slow process
of recovery, most experts
believed that the economic environment facing managers and
organizations would not be
as it was and would continue to constrain organizational
decisions and actions.
The Demographic Environment
Baby Boomers. Gen Y.
Post-Millennials. Maybe you’ve heard or seen these terms
before.
Population researchers refer to three of the more well-known
age groups found in the U.S.
population by these terms. Baby Boomers are those individuals
born between 1946 and 1964.
So much is written and reported about “boomers” because there
are so many of them. The
sheer numbers of people in that cohort means they’ve
significantly affected every aspect of
the external environment (from the educational system to
entertainment/lifestyle choices to
the Social Security system and so forth) as they cycle through
the various life stages.
Gen Y (or the “Millennials”) is typically considered to
encompass those individuals
born between 1978 and 1994. As the children of the Baby
Boomers, this age group is also
large in number and making its imprint on external
environmental conditions as well. From
technology to clothing styles to work attitudes, Gen Y is
affecting organizational workplaces.
Then, we have the Post-Millennials—the youngest identified age
group—basically
teens and middle-schoolers.11 This group has also been called
the iGeneration, primarily
because they’ve grown up with technology that customizes
everything to the individual.
Population experts say it’s too early to tell whether
elementary school-aged children and
younger are part of this demographic group or whether the
world they live in will be so
different that they’ll comprise a different demographic
cohort.
Demographic age cohorts are important to our study of
management because, as we said
earlier, large numbers of people at certain stages in the life
cycle can constrain decisions and
actions taken by businesses, governments, educational
institutions, and other organizations.
But demographics doesn’t only look at current statistics, it
also looks to the future. For instance,
recent analysis of birth rates shows that more than 80 percent
of babies being born
worldwide are from Africa and Asia.12 And here’s an
interesting fact: India has one of the
world’s youngest populations with more males under the age of
5 than the entire population
of France. And by 2050, it’s predicted that China will have
more people age 65 and older
than the rest of the world combined.13 Consider the impact of
such population trends on
organizations and managers in the future.
How the External Environment Affects Managers
Knowing what the
various components of the external environment are and examining
certain aspects of that environment are important to managers.
However, understanding how
the environment affects managers is equally as important.
We’re going to look at three ways
the environment constrains and challenges managers—first,
through its impact on jobs and
employment; next, through the environmental uncertainty that
is present; and finally, through
the various stakeholder relationships that exist between an
organization and its external
constituencies.
JOBS AND EMPLOYMENT As any
or all external environmental conditions (economic,
demographic, technological, globalization, etc.) change, one
of the most powerful constraints
managers face is the impact of such changes on jobs and
employment—both in
poor conditions and in good conditions. The power of this
constraint became painfully
obvious during the recent global recession as millions of jobs
were eliminated and unemployment
rates rose to levels not seen in many years. Economists now
predict that about a
quarter of the 8.4 million jobs eliminated in the United
States during this most recent
economic downturn won’t be coming back and will instead be
replaced by other types of
work in growing industries.14 Other countries face the same
issues. Although such readjustments
aren’t bad in and of themselves, they do create challenges for
managers who must
balance work demands and having enough of the right types of
people with the right skills
to do the organization’s work.
Not only do changes in external conditions affect the types of
jobs that are available,
they affect how those jobs are created and managed. For
instance, many employers use
flexible work arrangements to meet work output demand.15 For
instance, work tasks may
be done by freelancers hired to work on an as-needed basis or
by temporary workers who
work full-time but are not permanent employees or by
individuals who share jobs. Keep in
mind that such responses have come about because of the
constraints from the external
environment. As a manager, you’ll need to recognize how these
work arrangements affect
the way you plan, organize, lead, and control. This whole
issue of flexible work arrangements
has become so prevalent and part of how work is done in
organizations that we’ll,
ASSESSING ENVIRONMENTAL
UNCERTAINTY Another constraint posed by external
environments is the amount of uncertainty found in that
environment, which can affect
organizational outcomes. Environmental uncertainty refers
to the degree of change and
complexity in an organization’s environment.
The first dimension of uncertainty is the degree of change. If
the components in an organization’s
environment change frequently, it’s a dynamic
environment.
If change is minimal,
it’s a stable one. A
stable environment might be one with no new competitors, few technological
breakthroughs by current competitors, little activity by
pressure groups to influence
the organization, and so forth. For instance, Zippo
Manufacturing, best known for its Zippo
lighters, faces a relatively stable environment, with few
competitors and little technological
change. The main external concern for the company is probably
the declining numbers of
tobacco smokers, although the company’s lighters have other
uses and global markets remain
attractive. In contrast, the recorded music industry faces a
dynamic (highly uncertain and
unpredictable) environment. Digital formats and
music-downloading sites turned the industry
upside down and brought high levels of uncertainty.
If change is predictable, is that considered dynamic? No.
Think of department stores
that typically make one-quarter to one-third of their sales in
November and December. The
drop-off from December to January is significant. But because
the change is predictable, the
environment isn’t considered dynamic. When we talk about
degree of change, we mean
change that’s unpredictable. If change can be accurately
anticipated, it’s not an uncertainty
for managers.
The other dimension of uncertainty describes the degree of environmental
complexity,
which looks at the number of components in an organization’s
environment and the extent of
the knowledge that the organization has about those
components. An organization with fewer
competitors, customers, suppliers, government agencies, and so
forth faces a less complex
and uncertain environment. Organizations deal with
environmental complexity in various ways. For example, Hasbro Toy Company
simplified its environment
by acquiring many of its competitors.
Complexity is also measured in terms of the knowledge
an organization needs about its environment. For instance,
managers at E*Trade must know a great deal about their
Internet service provider’s operations if they want to ensure
that their Web site is available, reliable, and secure for
their
customers. On the other hand, managers of college bookstores
have a minimal need for sophisticated knowledge about their
suppliers.
How does the concept of environmental uncertainty
influence managers. Because uncertainty poses a threat
to an organization’s effectiveness, managers try to minimize
it. Given a choice, managers would prefer to operate
in the least uncertain environments. However, they rarely
control that choice. In addition, the nature of the external
environment today is that most industries today are facing
more dynamic change, making their environments more
uncertain.
MANAGING STAKEHOLDER
RELATIONSHIPS What makes
MTV a popular cable channel for young adults year after
year? One factor is its success in building relationships with
its various stakeholders: viewers,
music celebrities, advertisers, affiliate TV stations, public
service groups, and others.
The nature of stakeholder relationships is another way in which
the environment influences
managers. The more obvious and secure these relationships, the
more influence managers
will have over organizational outcomes.
Stakeholders are any constituencies in the
organization’s environment that are
affected by an organization’s decisions and actions. These
groups have a stake in or are significantly
influenced by what the organization does. In turn, these
groups can influence the
organization. For example, think of the groups that might be
affected by the decisions and
actions of Starbucks—coffee bean farmers, employees, specialty
coffee competitors, local
communities, and so forth. Some of these stakeholders also, in
turn, may influence decisions
and actions of Starbucks’ managers. The idea that organizations
have stakeholders is now
widely accepted by both management academics and practicing
managers. identifies some of an organization’s most common
stakeholders. Note that
these stakeholders include internal and external groups. Why?
Because both can affect what
an organization does and how it operates.
Why should managers even care about managing stakeholder
relationships?18 For
one thing, it can lead to desirable organizational outcomes
such as improved predictability
of environmental changes, more successful innovations, greater
degree of trust
among stakeholders, and greater organizational flexibility to
reduce the impact of
change. But does it affect organizational performance? The
answer is yes! Management
researchers who have looked at this issue are finding that
managers of high-performing
companies tend to consider the interests of all major
stakeholder groups as they make
decisions.19
Another reason for managing external stakeholder relationships
is that it’s the “right”
thing to do. Because an organization depends on these external
groups as sources of inputs
(resources) and as outlets for outputs (goods and services),
managers need to consider their interests as they make decisions. We’ll address
this issue in more detail in the chapter on
corporate social responsibility.
Organizational Culture:
Each of us has a unique personality—traits and characteristics
that influence the way we
act and interact with others. When we describe someone as
warm, open, relaxed, shy, or
aggressive, we’re describing personality traits. An
organization, too, has a personality,
which we call its culture. And
that culture influences the way employees act and interact
with others.
What Is Organizational Culture?
Like JetBlue in our chapter opener, W. L. Gore &
Associates, a company known for its
innovative and high-quality fabrics used in outdoor wear and
other products, also understands
the importance of organizational culture. Since its founding
in 1958, Gore has used employee
teams in a flexible, nonhierarchical organizational
arrangement to develop its innovative products.
Associates (employees) at Gore are committed to four basic
principles articulated by
company founder Bill Gore: (1) fairness to one another and
everyone you come in contact
with; (2) freedom to encourage, help, and allow other
associates to grow in knowledge, skill,
and scope of responsibility; (3) the ability to make your own
commitments and keep them; and
(4) consulting other associates before taking actions that
could affect the company’s reputation.
After a visit to the company, one analyst reported that an
associate told him, “If you tell
anybody what to do here, they’ll never work for you again.”
That’s the type of independent,
people-oriented culture Bill Gore wanted. And it works well
for the company—it’s earned a
position on Fortune’s
annual list of “100 Best Companies to Work For” every year since the
list began in 1998, one of only three companies to achieve
that distinction.
Organizational culture has been described as the
shared values, principles, traditions,
and ways of doing things that influence the way organizational
members act. In most
organizations, these shared values and practices have evolved
over time and determine, to
a large extent, how “things are done around here.”21
Our definition of culture implies three things. First, culture
is a perception. It’s not
something that can be physically touched or seen, but
employees perceive it on the basis of
what they experience within the organization. Second,
organizational culture is descriptive.
It’s concerned with how members perceive the culture and
describe it, not with whether they
like it. Finally, even though individuals may have different
backgrounds or work at different
organizational levels, they tend to describe the
organization’s culture in similar terms.
That’s the shared aspect
of culture.
Research suggests seven dimensions that can be used to
describe an organization’s culture.
22 These dimensions (shown in Exhibit 2-5) range from low to
high, meaning it’s not
very typical of the culture (low) or is very typical of the
culture (high). Describing an organization
using these seven dimensions gives a composite picture of the
organization’s culture.
In many organizations, one cultural dimension often is
emphasized more than the others
and essentially shapes the organization’s personality and the
way organizational members
work. For instance, at Sony Corporation the focus is product
innovation (innovation and
risk taking). The company “lives and breathes” new product
development and employees’
work behaviors support that goal. In contrast, Southwest
Airlines has made its employees a
central part of its culture (people orientation). how the dimensions
can create significantly different cultures.
Strong Cultures
All organizations have cultures, but not all cultures equally
influence employees’ behaviors
and actions. Strong cultures—those
in which the key values are deeply held
and widely shared—have a greater influence on employees than
do weaker cultures.
The more employees accept the organization’s
key values and the greater their commitment to those values,
the stronger the
culture is. Most organizations have moderate to strong
cultures; that is, there is relatively
high agreement on what’s important, what defines “good”
employee behavior, what it
takes to get ahead, and so forth. The stronger a culture
becomes, the more it affects the
way managers plan, organize, lead, and control.
Why is having a strong culture important? For one thing, in
organizations with strong
cultures, employees are more loyal than are employees in
organizations with weak cultures.24
Research also suggests that strong cultures are associated
with high organizational performance.
25 And it’s easy to understand why. After all, if values are
clear and widely accepted,
employees know what they’re supposed to do and what’s expected
of them, so they can act
quickly to take care of problems. However, the drawback is
that a strong culture also might
prevent employees from trying new approaches especially when
conditions are changing
rapidly.26
Where Culture Comes From and How It Continues
The original source of the culture usually reflects the vision of the
founders. For instance, as we
described earlier, W. L. Gore’s culture reflects the values of
founder Bill Gore. Company
founders are not constrained by previous customs or approaches
and can establish the early
culture by articulating a vision of what they want the
organization to be. Also, the small
size of most new organizations makes it easier to instill that
vision with all organizational
members.
Once the culture is in place, however, certain organizational
practices help maintain it.
For instance, during the employee selection process, managers
typically judge job candidates
not only on the job requirements, but also on how well they
might fit into the organization.
At the same time, job candidates find out information about
the organization and determine
whether they are comfortable with what they see.
The actions of top managers also have a major impact on the
organization’s culture.
For instance, at Best Buy, the company’s chief marketing
officer would take groups of
employees for “regular tours of what the company called its
retail hospital.” Wearing white
lab coats, employees would walk into a room with a row of real
hospital beds and patient
charts describing the ills affecting each of the company’s
major competitors. Now that
each of those competitors has “succumbed to terminal illness”
and is no longer in business,
the room is darkened. Just think of the powerful message such
a display would have
on employees and their work.27 Through what they say and how
they behave, top managers
establish norms that filter down through the organization and
can have a positive effect
on employees’ behaviors. For instance, IBM’s CEO Sam Palmisano
wanted employees to
value teamwork so he chose to take several million dollars
from his yearly bonus and give
it to his top executives based on their teamwork. He said, “If
you say you’re about a team,
you have to be a team. You’ve got to walk the talk, right?”28
However, as we’ve seen in numerous
corporate ethics scandals, the actions of top managers also
can lead to undesirable
outcomes.
Finally, organizations help employees adapt to the culture
through socialization, a
process that helps new employees learn the organization’s way
of doing things. For instance,
new employees at Starbucks stores go through 24 hours of
intensive training that helps turn
them into brewing consultants (baristas). They learn company
philosophy, company jargon,
and even how to assist customers with decisions about beans,
grind, and espresso machines.
One benefit of socialization is that employees understand the
culture and are enthusiastic and
knowledgeable with customers.29 Another benefit is that it
minimizes the chance that new
employees who are unfamiliar with the organization’s culture
might disrupt current beliefs
and customs.
How Employees Learn Culture
Employees “learn” an organization’s culture in a number of
ways. The most common are stories,
rituals, material symbols, and language.
STORIES Organizational
“stories” typically contain a narrative of significant events or
people including such things as the organization’s founders,
rule breaking, reactions to
past mistakes, and so forth.30 Managers at Southwest Airlines
tell stories celebrating
employees who perform heroically for customers.31 Such stories
help convey what’s
important and provide examples that people can learn from. At
3M Company, the product
innovation stories are legendary. There’s the story about the
3M scientist who spilled
chemicals on her tennis shoe and came up with Scotchgard.
Then, there’s the story about
Art Fry, a 3M researcher, who wanted a better way to mark the
pages of his church hymnal
and invented the Post-It Note. These stories reflect what made
3M great and what it
will take to continue that success.32 To help employees learn
the culture, organizational
stories anchor the present in the past, provide explanations
and legitimacy for current
practices, exemplify what is important to the organization,
and provide compelling
pictures of an organization’s goals.33
RITUALS In the
early days of Facebook, founder Mark Zuckerberg had an artist paint a
mural at company headquarters showing children taking over the
world with laptops. Also,
he would end employee meetings by pumping his fist in the air
and leading employees in a
chant of “domination.” Although the cheering ritual was
intended to be something simply
fun, other company executives suggested he drop it because it
made him seem silly and
they feared that competitors might cite it as evidence of
monopolistic goals.34 That’s the
power that rituals can have in shaping what employees believe
is important. Corporate
rituals are repetitive sequences of activities that express
and reinforce the important values
and goals of the organization. One of the best-known corporate
rituals is Mary Kay
Cosmetics’ annual awards ceremony for its sales
representatives. Looking like a cross
between a circus and a Miss America pageant, the ceremony
takes place in a large auditorium,
on a stage in front of a large, cheering audience, with all
the participants dressed in
glamorous evening clothes. Salespeople are rewarded for sales
goal achievements with an
array of expensive gifts including gold and diamond pins, furs,
and pink Cadillacs. This
“show” acts as a motivator by publicly acknowledging
outstanding sales performance. In
addition, the ritual aspect reinforces late founder Mary Kay’s
determination and optimism,
which enabled her to overcome personal hardships, start her
own company, and achieve
material success. It conveys to her salespeople that reaching
their sales goals is important
and through hard work and encouragement, they too can achieve
success. The contagious
enthusiasm and excitement of Mary Kay sales representatives
make it obvious that this
annual “ritual” plays a significant role in establishing
desired levels of motivation and
behavioral expectations, which is, after all, what management
hopes an organization’s culture
does.
MATERIAL ARTIFACTS AND SYMBOLS When
you walk into different businesses, do you
get a “feel” for what type of work environment it is—formal,
casual, fun, serious, and so
forth? These reactions demonstrate the power of material
symbols or artifacts in creating
an organization’s personality.35 The layout of an
organization’s facilities, how employees dress, the types of automobiles
provided to top executives, and the availability of corporate
aircraft are examples of material symbols. Others include the
size of offices, the elegance
of furnishings, executive “perks” (extra benefits provided to
managers such as health club
memberships, use of company-owned facilities, and so forth),
employee fitness centers or
on-site dining facilities, and reserved parking spaces for
certain employees. At WorldNow,
a business that helps local media companies develop new online
distribution channels and
revenue streams, an important material symbol is an old dented
drill that the founders purchased
for $2 at a thrift store. The drill symbolizes the company’s
culture of “drilling down
to solve problems.” When an employee is presented with the
drill in recognition of outstanding
work, he or she is expected to personalize the drill in some
way and devise a new
rule for caring for it. One employee installed a Bart Simpson
trigger; another made the drill
wireless by adding an antenna. The company’s “icon” carries on
the culture even as the
organization evolves and changes.36
Material symbols convey to employees who is important and the
kinds of behavior (for
example, risk taking, conservative, authoritarian,
participative, individualistic, and so forth)
that are expected and appropriate.
LANGUAGE Many
organizations and units within organizations use language as a way
to identify and unite members of a culture. By learning this
language, members attest to
their acceptance of the culture and their willingness to help
preserve it. For instance, at
Cranium, a Seattle board game company, “chiff ” is used to
remind employees of the
need to be incessantly innovative in everything they do.
“Chiff ” stands for “clever, highquality,
innovative, friendly, fun.”37 At Build-A-Bear Workshop stores,
employees are
encouraged to use a sales technique called “Strive for Five,”
in which they work to sell
each customer five items. The simple rhyming slogan is fast
becoming a powerful tool to
drive sales.38
Over time, organizations often develop unique terms to
describe equipment, key
personnel, suppliers, customers, processes, or products related
to its business. New employees
are frequently overwhelmed with acronyms and jargon that,
after a short period of time,
become a natural part of their language. Once learned, this
language acts as a common
denominator that bonds members.
How Culture Affects Managers
Houston-based Apache Corp. has become one of the best
performers in the independent oil
drilling business because it has fashioned a culture that
values risk taking and quick decision
making. Potential hires are judged on how much initiative
they’ve shown in getting projects done at other
companies. And company employees are handsomely rewarded if
they meet profit and production goals.40 Because
an organization’s culture constrains what
they can and cannot do and how they manage, it’s
particularly relevant to managers. Such
constraints are rarely explicit. They’re not
written down. It’s unlikely they’ll even be spoken.
But they’re there, and all managers quickly learn
what to do and not do in their organization.
For instance, you won’t find the following values
written down, but each comes from
a real organization.
_ Look busy even if you’re not.
_ If you take risks and fail
around here, you’ll pay dearly for it.
_ Before you make a decision, run
it by your boss so that he or she is never surprised.
_ We make our product only as
good as the competition forces us to.
_ What made us successful in
the past will make us successful in the future.
_ If you want to get to the top
here, you have to be a team player.
EXHIBIT 2-9
Managerial Decisions Affected
by Culture
Planning
• The degree of risk that plans should contain
• Whether plans should be developed by individuals
or teams
• The degree of environmental scanning in which
management will engage
Organizing
• How much autonomy should be designed into
employees’ jobs
• Whether tasks should be done by individuals or in
teams
• The degree to which department managers interact
with each other
Leading
• The degree to which managers are concerned with
increasing employee job satisfaction
• What leadership styles are appropriate
• Whether all disagreements—even constructive
ones—should be eliminated
Controlling
• Whether to impose external controls or to allow
employees to control their own actions
• What criteria should be emphasized in employee
performance evaluations
• What repercussions will occur from exceeding
one’s budget
The link between values such as these and
managerial behavior is fairly straightforward.
Take, for example, a so-called “ready-aim-fire”
culture. In such an organization,
managers will study and analyze proposed projects
endlessly before committing
to them. However, in a “ready-fire-aim” culture,
managers take action and then analyze
what has been done. Or, say an organization’s
culture supports the belief that profits
can be increased by cost cutting and that the
company’s best interests are served by
achieving slow but steady increases in quarterly
earnings. Managers are unlikely to
pursue programs that are innovative, risky, long
term, or expansionary. In an organization
whose culture conveys a basic distrust of
employees, managers are more likely
to use an authoritarian leadership style than a
democratic one. Why? The culture
establishes for managers appropriate and expected
behavior. For example, Banco
Santander, whose headquarters are located 20
kilometers from downtown Madrid, has
been described as a “risk-control freak.” The
company’s managers adhered to “banking’s
stodgiest virtues—conservatism and patience.”
However, it’s those values that
triggered the company’s growth from the sixth
largest bank in Spain to the largest bank
in the euro zone.41
a manager’s decisions are
influenced by the culture in which
he or she operates. An organization’s culture,
especially a strong one, influences and constrains
the way managers plan, organize, lead, and
control.
Current Issues in Organizational Culture
Nordstrom, the specialty retail chain, is renowned
for its attention to customers. Nike’s
innovations in athletic shoe and apparel
technology are legendary. Tom’s of Maine is known
for its commitment to doing things ethically and
spiritually. How have these organizations
achieved such reputations? Their organizational
cultures have played a crucial role. Let’s
look at three current cultural issues: creating an
innovative culture, creating a customerresponsive
culture, and nurturing workplace spirituality.
Creating an Innovative Culture
You may not recognize IDEO’s name, but you’ve
probably used a number of its products.
As a product design firm, it takes the ideas that
corporations bring it and turns those ideas
into reality. Some of its creations range from the
first commercial mouse (for Apple) to the
first standup toothpaste tube (for Procter &
Gamble) to the handheld personal organizer
(for Palm) to the Contour USB glucose meter (for
Bayer AG). It’s critical that IDEO’s culture
support creativity and innovation.42 And you might
actually own and use products from
another well-known innovative organization—Apple.43
From its founding in 1976 to today,
Apple has been on the forefront of product design
and development. They’ve brought us
Mac, iPod, iTunes, iPhone, and the iPad tablet
device that is changing the way you read
materials such as this textbook. Although both
these companies are in industries where
innovation is critical to success, the fact is
that any successful organization needs a culture
that supports innovation. How important is culture
to innovation? In a recent survey of senior
executives, over half said that the most important
driver of innovation for companies
was a supportive corporate culture.44
What does an innovative culture look like?
According to Swedish researcher Goran
Ekvall, it would be characterized by the
following:
_ Challenge and involvement
– Are employees involved in, motivated by, and committed
to long-term goals and success of the
organization?
_ Freedom – Can employees independently define their work, exercise
discretion, and
take initiative in their day-to-day activities?
_ Trust and openness – Are employees supportive and respectful to each other?
_ Idea time – Do individuals have time to elaborate on new ideas before taking
action?
_ Playfulness/humor – Is the workplace spontaneous and fun?
_ Conflict resolution – Do individuals make decisions and resolve issues based on the
good of the organization versus personal interest?
_ Debates – Are employees allowed to express opinions and put forth ideas
for consideration
and review?
_ Risk-taking – Do managers tolerate uncertainty and ambiguity, and are
employees
rewarded for taking risks?45
Creating a Customer-Responsive Culture
Harrah’s Entertainment, the world’s largest gaming
company, is fanatical about customer
service and for good reason. Company research
showed that customers who were satisfied
with the service they received at a Harrah’s
casino increased their gaming expenditures
by 10 percent and those who were extremely
satisfied increased their gaming
expenditures by 24 percent. When customer service
translates into these types of results,
of course managers would want to create a
customer-responsive culture!46
What does a customer-responsive culture look
like?47 Exhibit 2-10 describes five characteristics
of customer-responsive cultures and offers
suggestions as to what managers can
do to create that type of culture.
Spirituality and Organizational Culture
What do Southwest Airlines, Chick-fil-A, Ford,
Xerox, Timberland, and Hewlett-
Packard have in common? They’re among a growing
number of organizations that have
y
A culture where organizational values promote
a sense of purpose through meaningful work
that takes place in the context of community
Characteristics of
Customer-Responsive Culture Suggestions for
Managers
Type of employee Hire people with personalities and
attitudes consistent with
customer service: friendly, attentive,
enthusiastic, patient,
good listening skills
Type of job environment Design jobs so employees
have as much control as possible
to satisfy customers, without rigid rules and
procedures
Empowerment Give service-contact employees the
discretion to make
day-to-day decisions on job-related activities
Role clarity Reduce uncertainty about what
service-contact employees can
and cannot do by continual training on product
knowledge,
listening, and other behavioral skills
Consistent desire to satisfy
and delight customers
Clarify organization’s commitment to doing whatever
it takes,
even if it’s outside an employee’s normal job
requirements
Since starting Build-A-Bear Workshop in 1997,
company founder Maxine Clark has worked to
create a supportive corporate culture that would
inspire employee creativity and innovation. At
company headquarters in Overland, Missouri, the
work environment is playful, spontaneous, and fun.
It’s a place where dogs are welcome, bringing joy
to employees like Katie Cernuto shown in this
photo
watching Jack, her yellow lab mix, play tug with
Smash, another employee’s dog. For a company
whose mission is “to bring the Teddy Bear to
life,”
a relaxed dress code and flexible work schedules
add to a culture that employees describe as
upbeat, happy, busy, and fun.
embraced workplace spirituality. What is workplace spirituality? It’s a culture in
which organizational values promote a sense of
purpose through meaningful work taking
place in the context of community.48 Organizations
with a spiritual culture recognize
that people have a mind and a spirit, seek to find
meaning and purpose in their
work, and desire to connect with other human
beings and be part of a community. And
such desires aren’t limited to workplaces, as a
recent study showed that college students
also are searching for meaning and purpose in
life.49
Workplace spirituality seems to be important now
for a number of reasons. Employees
are looking for ways to cope with the stresses and
pressures of a turbulent pace of life.
Contemporary lifestyles—single-parent families,
geographic mobility, temporary jobs,
technologies that create distance between
people—underscore the lack of community that
EXHIBIT 2-10
Creating a Customer-Responsive Culture
many people feel. As humans, we crave involvement
and connection. In addition, as baby
boomers navigate mid-life issues, they’re looking
for something meaningful, something
beyond the job. Others wish to integrate their
personal life values with their professional
lives. For others, formalized religion hasn’t
worked and they continue to look for anchors
to replace a lack of faith and to fill a growing
sense of emptiness. What type of culture
can do all these things? What differentiates
spiritual organizations from their nonspiritual
counterparts? Research shows that spiritual
organizations tend to have five cultural
characteristics.50
1. Strong sense of
purpose. Spiritual organizations build their cultures
around a
meaningful purpose. While profits are important,
they’re not the primary
values of the organization. For instance,
Timberland’s slogan is “Boots, Brand,
Belief,” which embodies the company’s intent to
use its “resources, energy, and
profits as a publicly traded footwear-and-apparel
company to combat social
ills, help the environment, and improve conditions
for laborers around the
globe . . . and to create a more productive,
efficient, loyal, and committed employee
base.”51
2. Focus on individual
development. Spiritual organizations recognize the worth and
value of individuals. They aren’t just providing
jobs; they seek to create cultures in
which employees can continually grow and learn.
3. Trust and openness. Spiritual organizations are characterized by mutual trust,
honesty, and openness. Managers aren’t afraid to
admit mistakes. And they tend
to be extremely upfront with employees, customers,
and suppliers.
4. Employee empowerment. Managers trust employees to make thoughtful and conscientious
decisions. For instance, at Southwest Airlines,
employees—including flight
attendants, baggage handlers, gate agents, and
customer service representatives—are
encouraged to take whatever action they deem
necessary to meet customer needs or
help fellow workers, even if it means going
against company policies.
5. Toleration of employee
expression. The final characteristic that differentiates
spiritually based organizations is that they don’t
stifle employee emotions. They
allow people to be themselves—to express their
moods and feelings without guilt
or fear of reprimand.
Critics of the spirituality movement have focused
on two issues: legitimacy (Do organizations
have the right to impose spiritual values on their
employees?) and economics (Are
spirituality and profits compatible?).
An emphasis on spirituality clearly has the
potential to make some employees uneasy.
Critics might argue that secular institutions,
especially businesses, have no business imposing
spiritual values on employees. This criticism is
probably valid when spirituality is defined
as bringing religion into the workplace.52
However, it’s less valid when the goal is helping
employees find meaning in their work. If concerns
about today’s lifestyles and pressures truly
characterize a growing number of workers, then
maybe it is time for organizations to help
employees find meaning and purpose in their work
and to use the workplace to create a sense
of community.
The issue of whether spirituality and profits are
compatible is certainly important.
Limited evidence suggests that the two may be
compatible. One study found that
companies that introduced spiritually based
techniques improved productivity and
significantly reduced turnover.53 Another found
that organizations that provided their
employees with opportunities for spiritual
development outperformed those that didn’t.54
Others reported that spirituality in organizations
was positively related to creativity,
ethics, employee satisfaction, job involvement,
team performance, and organizational
commitment.55
