Eamonn O Raghallaigh Effect Of Culture On An Organisations Ability To Adapt To Change


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Culture and IT-Driven Strategic Change

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Eamonn O Raghallaigh Effect Of Culture On An Organisations Ability To Adapt To Change

  1. 1. Effect of Culture on an Organisation’s Ability to Adapt to IT-Driven Strategic Change Introduction  Culture plays a pivotal, yet often under-recognised role in organisations in the modern world. By gaining a discrete understanding of the individual and group psychology within an organisation, management can plan change in an effective manner based upon the culture of the organisation. An understanding of the prevailing culture, and indeed micro-cultures within different business units, allows IT-driven change to take place in an efficient and effective manner, reducing resistance and increasing compliance. IT- driven change, as opposed to change in general (e.g. restructuring after redundancies, acquisition etc.), has its own unique fingerprint and requires an intrinsic understanding of the requirements and expectations of each business unit effected. For example when implementing a new Enterprise Resource Planning (ERP) system, each business unit’s requirements must be ascertained, management needs to be bought-in, champion’s identified and timelines set. Knowledge of the existing culture of the organisation will allow the elucidation of the best strategy for achieving change and predict how the organisation will adapt to these changes. Understanding Organisational Culture  A number of different definitions of organisational culture have being put forward by thought leaders in the field. According to Becker and Geer (1960), culture can be defined as “a set of common understandings around which action is organized which finds expression in language whose nuances are peculiar to the group”, while Ouchi (1981) describes culture as “a set of symbols, ceremonies and myths that communicate the underlying values and beliefs of the organisation to its employees”. Thus culture can be viewed as the intrinsic fabric of the organisation, the common vision shared by all employees or the group mentality. There are a number of key characteristics by which organisations differ, outlined as follows: individual initiative, the degree to which employees are given freedom of choice and responsibility and the ability to make independent decisions, e.g. a management consultancy; risk tolerance, the degree to which employees are encouraged to be creative, innovative, aggressive or risk-seeking, e.g. an investment bank; direction, the degree to which organisations sets clear goals and performance expectations, e.g. a online sales company; integration, the degree to which the organisation is encouraged to operated in a coordinated manner, e.g. as in a high-output manufacturing environment and a number of other
  2. 2. characteristics including management support, control identity, reward system, conflict tolerance and communication patterns. Several methods have being used to describe different organisation cultures. According to Handy (1985), the four main organisational cultures are as follows: the power culture, where a small minority are in possession of the majority of the power. These organisations are characterised by centralised control mechanisms, little if any bureaucracy and rapid decision making processes; the role culture, where there are clear lines in terms of delegation of authority. These organisations are characterised by hierarchical bureaucracies, where multiple layers are involved in the decision making process; the task culture, where business units and teams are created to carry out particular functions or solve problems. These organisations often are characterised by a matrix structure, with multiple reporting lines; and the person culture, where individuals within the organisations believe themselves superior to the organisation as a whole. These types of organisations are characterised usually by their difficulty in survival, as each stakeholder doesn’t embrace the goals of the organisation, rather individual goals. A useful complimentary set of dimensions in addition to those of Handy are Hofstede’s five dimensions of culture – Power Distance, Uncertainty Avoidance, Masculinity, Time Orientation and Individualism (Hofstede, 2001). Power distance (PD) is characterised by the degree to which unequal distributions of power are accepted. A high PD score within an organisation implies that large status differences between employees and management are acceptable and management tends to be autocratic and dictatorial with employees being submissive and compliant. Uncertainty avoidance (UA) reflects the degree of acceptance of ambiguous situations and the extent to which strategies are adopted to minimise or avoid these situations. Managers in high UA cultures tend to depend extensively on rules and regulations. Comprehensive strategies are adopted to plan for and even control the future. Masculinity (MAS) reflects the degree to which tough and assertive behaviour is encouraged. Conversely, femininity (FEM) encourages tender and nurturing behaviour. Time Orientation reflects the degree to which short-term pain is accepted in return for long-term gain. Organisations with a short-term orientation (STO) will be more likely to seek out immediate gratification than those with a long term orientation (LTO), but they are less likely to plan or invest for the future. Individualism (IND) reflects the degree to which personal independence is valued over group membership. An organisation scoring high on IND values personal goals, initiative, autonomy and privacy. Conversely, collectivistic (low IND) societies value group goals and objectives over individual preferences (Martinsons et. al, 2009).
  3. 3. The foundations of corporate culture lie in a number of factors which are instilled at the formation of the organisation or develop over time. The founding member(s) of an organisation play an important role is setting out the mission and vision of the organisation and often the organisations culture develops from the beliefs and values set out by the founder(s). For example, a founder may have split from a previous organisation because of inhibitory bureaucracy; hence the prevailing culture that will form in the new company will be one where little bureaucracy exists. The cultural and social setting of the organisation will also have an impact on culture – in Ireland, an organisation founded outside the main metropolis of Dublin may have a different culture that one formed in a regional city. Culture will also naturally develop based upon the nature of the business – a relaxed, consultative culture may form where intellectual activities are core to the business, while an achievement culture may form where metrics and performance goals are set by management, as in a sales environment. IT­Driven Strategic Change and Organisational Culture  IT-driven strategic change can be a daunting prospect for management within an organisation because of the significant risks involved if not implemented properly. Change can be reactive, due to problems or insufficiencies in existing legacy systems, or process driven, as part of quality improvement programs for example. Whatever the reason for change, expert planning and implementation is required to mitigate the risk of detrimental effects to the business as IT systems often form a critical part of many organisations. When planning IT-driven change, a discrete understanding of the prevailing corporate culture is required. One of the greatest predictors of implementation success is whether the existing culture is adaptive or un-adaptive. Adaptive corporate cultures are characterised by employees who care deeply about customers, shareholders and each other. They value any process which creates useful change and which improves the organisation and hence its service to others. In contrast, un-adaptive corporate cultures are characterised by management who care mainly for themselves and their business unit. They place value in processes which reduce risk and may see change, especially IT driven change, as unnecessary and as a threat to the happy equilibrium they exist in. Corporate cultures which inhibit strong long-term performance are common, especially here in Ireland. A legacy of the ‘Celtic Tiger’ is the pervasion of many such organisations, where the boom years, characterised by unprecedented success and growth, allowed the development of negative cultural elements, especially among top performing companies. These toxic corporate cultures developed slowly
  4. 4. and silently over a number of years, even when employees were reasonable and intelligent (Kotter and Heskett, 1992). Such cultures can be very resistant to change as the toxicity of the prevailing culture can be invisible to both management and employees. A prime example of this can be seen in a company I previously worked for as a scientific HR consultant. The company was exceptionally successful during the boom years, with strong growth and turnover. The organisation was a mix between a power culture and an achievement culture. IT was seen as a cost of business and not as a strategic driver. Prior to the recession of 2008, the company had seen little value in the use of internet technologies as a strategic driver for their business, even though from the outside it was a logical progression to utilise internet marketing strategies, and as such top management forcibly inhibited any suggestions from employees and middle-management with regard to the utilisation of such technologies. The Managing Director believed that internet technologies and marketing would taint the brand of the company as he believed them to be perceived as ‘cheap’ in the industry. This resistance to change was very detrimental to the company as once the recession hit, 90% of the workforce was made redundant as competition from new entrants using the significantly more cost effective internet technologies took business from them. Effecting successful change within organisations can be achieved if a number of cultural factors are considered, and if applicable modified, in the planning and early implementation phases of an IT system. The literature surrounding implementation of information technology and software projects clearly demonstrates that if the project is to succeed, buy-in and support from top management is critical (Johnson, 1995). If top management are clearly seen to embrace the change, the rest of the organisation will find it easier to adapt to the change. Another critical factor is engaging middle- management, as they act as the functional bridge between top management and the employee on the ground. Middle-managers are more approachable, and as such can entertain queries and concerns about the new system without fear of reprisals, as which may be the case with top management. Middle-managers also possess knowledge of key influencers within the organisation and have the ability to bring these key personnel on board, leading to the rest of the employees following suit. Other critical success factors in effecting IT-driven change include forming a culture of inclusion and collaboration with all potential stakeholders in the new system and the provision of tangible benefits within an acceptable timeframe, usually 2 years.
  5. 5. A critical precursor to any implementation is the identification of attributes that have the potential to slow or prevent a successful IT implementation, while concurrently instilling cultural attributes that support successful implementation. Furthermore, identification and knowledge of the adaptability of different cultures allows pre-emptive strategies to enable successful change. Table 1 describes the different effects of culture on IT-driven strategic change (adapted from Martinsons et. al, 2009) Table 1. Effect of Culture on IT­Driven Strategic Change  Uncertainty  Time  Power Distance  Masculinity  Individualism  Avoidance  Orientation  IT used to Emphasis on reduce material rewards uncertainty and Firms in STO of IT Managers tend to Centralised make forecasts. cultures accept implementation. feel lacking in authority leads to Significant radical IT Managers tend personal authority easy authorisation planning change easier. to view the or strategic and initiation of High  change, however involved in IT Rapid results implementation relationships change involving promised were as a battle to be required to drive can be difficult to multiple attractive to won. change. Difficult complete stakeholders. managers due Manageable to form cohesive implementation. Potential for to fiscal gains. levels of teams. ‘paralysis by resistance analysis’ experienced. Difficult to initiate Culture of due to repeated LTO companies Managers tend to incrementalism. revisions and Tend to be more preferred work together with Cautious multiple flexible and smooth and cohesive progress Low  stakeholders planning tends to steady progress philosophy to leadership. involved but once be more loose rather that quick Consensus prototype, test initiated and directional. fixes which may necessary to and implement implementation be disruptive. avoid conflict. new IT systems. proceeds rapidly Conclusion  As outlined in this paper, culture has a significant effect on an organisations ability to adapt to IT-driven strategic change. The implementation project champion or change manager has multiple factors to take into account when planning the implementation including prevailing culture and indeed sub-cultures within the organisation. Management needs to be engaged and key influencers identified. Given the broad range of cultural intricacies that exist, no one standard system of change will apply. The change manager must analyse the culture and plan the implementation based upon their analysis, always leaving flexibility for unforeseen events.
  6. 6. References  Becker, H.S. and Geer, B. (1960).“Latent Culture: A Note on the Theory of Latent Social Roles”. Administrative Science Quarterly, Vol. 5, No. 2 (Sep., 1960), pp. 304-313. Handy, C.B. (1985) “Understanding Organizations”, 3rd Edn, Harmondsworth, Penguin Books Hofstede, G. (2001) Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations across Nations. Sage, London Johnson, J. (1995) ‘Chaos: The Dollar Drain of IT Project Failures’. Application Development Trends, January pp. 41-48. Kotter, J. and Heskett, L. (1992) “Organisational Culture and Performance” New York, NY. Free Press Martinsons, M.G., Davison, R., Martinsons, V. (2009) “How Culture Influences IT-enabled Organizational Change and Information Systems” Communications of the ACM. 118(6). Ouchi, William G (1981). “Theory Z: How American Business can meet the Japanese Challenge”. Reading, MA: Addison-Wesley.