Organizational Effectiveness and Powerful Leadership (updated Jan 2011)


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Organizational culture has been extensively studied over recent decades. “... culture isn’t just one aspect of the game – it is the game” said Gerstner (2002) the former CEO of IBM who lead the company in its historic turnaround in the late 90s. Culture is a set of values, beliefs, common understanding, thinking and norms for behaviors that are shared by all members of a society. You cannot precisely define it, but you can sense it and feel it. This paper will show that corporate culture has a strong influences on the organizational effectiveness, incl. its financial performance. An organizational culture model developed by Daniel Denison (1990) of IMD business school, Switzerland will be introduced to have a better understanding how corporate culture works in effective organizations in contras with ineffective organizations. Some best practice examples from China, Japan and a global cross-cultural study will be introduced. Finally the national culture issues in implementing the model that developed in western culture context in Asia will be discussed.

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Organizational Effectiveness and Powerful Leadership (updated Jan 2011)

  1. 1. Hangzhou, January 2011 Prof. Dr. Hora Tjitra, Zhejiang University Change that Makes Results Organizational  Culture   and  Powerful  Leadership  
  2. 2. Organiza(onal  Culture  and  Powerful  Leadership 2 Agenda 1. Why  does  organiza1onal  culture  ma7er? 2. What  is  organiza1onal  culture? 3. Measuring  organiza1onal  culture:   The  Denison  organiza1onal  culture  survey 4. Corporate  culture  and  organiza1onal  effec1veness 5. Best  prac1ce  examples  from  China and  across  na1onal  study 6. Is  Asia  differ  from  the  rest  of  the  world?
  3. 3. Organiza(onal  Culture  and  Powerful  Leadership 3 14  years  in  Germany 7  years  in  China Born  and  grew  up   in  Indonesia Prof.Dr.Hora Tjitra - Cross-cultural and Business Psychology Dipl.-Psych.,Technical University of Braunschweig Organizational Psychology and Human Resource Management Dr.Phil.,University of Regensburg Intercultural Psychology and Strategic Management Executive Education,INSEAD HR Management in Asia
  4. 4. Organiza(onal  Culture  and  Powerful  Leadership 4
  5. 5. Organiza(onal  Culture  and  Powerful  Leadership 5 I  came  to  see  in  my  1me  at  IBM,  that  culture  isn’t  just  one   aspect  of  the  game  –  it  IS  the  game.     In  the  end,  an  organiza1on  is  no  more  than  the  collec1ve   capacity  of  its  people  to  create  value.     Vision,  strategy,  marke1ng,  financial  management  –  any   management  system,  in  fact  –  can  set  you  on  the  right   path  and  can  carry  you  for  a  while.     But  no  enterprise  –  whether  in  business,  government,   educa1on,  health  care,  or  any  area  of  human  endeavor  –   will  succeed  over  the  long  haul  if  those  elements  aren’t   part  of  its  DNA.                
  6. 6. Organiza(onal  Culture  and  Powerful  Leadership 6 Why does corporate culture matter? Culture  ma7ers  because  decisions  made  without  awareness  of  the  opera1ve  cultural  forces   may  have  unan1cipated  and  undesirable  consequences. Culture  is  a  powerful,  latent,  and  o2en  unconscious  set  of  forces  that  determine   both  our  individual  and  collec8ve  behavior,  way  of  perceiving,  thought  pa;erns,  and   values. Organiza8onal  culture  in  par8cular  ma;ers  because  cultural  elements  determine   strategy,  goals,  and  modes  of  opera8ng.. The  values  and  thought  pa;erns  of  leaders  and  senior  managers  are  par8ally   determined  by  their  own  cultural  backgrounds   and  their  shared  experience. Schein,  1999
  7. 7. Organiza(onal  Culture  and  Powerful  Leadership 7 What is Corporate Culture? The way we do things around here What  really  drives  the  culture  -  its  essence   -  is  the  learned,  shared,  tacit  assump1ons   on  which  people  base  their  daily  behavior. Culture is deep Culture  controls  you  more  than  you  control  culture.  You  develop  beliefs  and   assump8ons  that  eventually  drop  out  of  awareness  and  become  tacit  rules  of   how  to  do  things,  how  to  think  about  things,  and  how  to  feel Culture is broad As  a  group  learns  to  survive  in  its  environment,  it  learns  about  all  aspects  of  its   external  and  internal  rela8onships.  Deciphering  culture  can  therefore  be  an   endless  task. Culture is stable Culture  provides  meaning  and  make  life  predictable.  Humans  do  not  like   chao8c,  unpredictable  situa8ons  and  work  hard  to  stabilize  and  „normalize“   them. Schein,  1999
  8. 8. Organiza(onal  Culture  and  Powerful  Leadership 8 Working Definition of Organizational Culture A Pattern of basic assumptions, values, beliefs and norms shared by members of an organization. It is: – Guides  behavior  inside  the  organiza8on – Reduces  ambiguity  and  need  for  formal  control  mechanisms – Facilitates  an  organiza8onal  ability  to  adapt  to  changes  in  the  external  environment   and  to  integrate  internally. Source:  Mobley,  2005;  See  e.g.  Schein,  1999;  Denison  et   al,  2004;  Ko;er  &  Hasket,  1992
  9. 9. Organiza(onal  Culture  and  Powerful  Leadership 9 Understanding Organizational,National and Industrial Culture Organizational Culture Industrial CultureNational Culture
  10. 10. Organiza(onal  Culture  and  Powerful  Leadership 10 Measuring Organizational Culture Adaptability   Pattern..Trends..Market Translating the demands of the business environment into action “Are we listening to the marketplace?” Mission Direction..Purpose..Blueprint Defining a meaningful long-term direction for the organization “Do we know where we are going?” Involvement Commitment..Ownership Responsibility   Building human capability, ownership, and responsibility “Are our people aligned and engaged?“ Consistency Systems…Structures… Processes   Defining the values and systems that are the basis of a strong culture “Does our system create leverage?”
  11. 11. Organiza(onal  Culture  and  Powerful  Leadership 11 Linking Organizational Culture and Business Performance
  12. 12. Organiza(onal  Culture  and  Powerful  Leadership 12 Return on Shareholder’s Equity Low Performing Culture High Performing Culture Average ROE = 6% Average ROE = 21% • Study of 161 publicly traded companies from a broad range of industries • Contrasts the performance of the 10% of the organizations with the best culture scores with the 10% of the organization with the worst culture scores • Average ROE for the organizations with the lowest culture scores is 6%, average ROE for organizations with high culture scores is 21% • Highly similiar results for return on total investment
  13. 13. Organiza(onal  Culture  and  Powerful  Leadership 13 Satisfying Your Customers • Study of Automotive Service Centers in the USA • Total of 338 dealerships and over 12,000 employees • Compares organizational culture and customer satisfaction Below 50% Highly Satisfied Above 80% Highly Satisfied N = 554 N = 1232
  14. 14. Organiza(onal  Culture  and  Powerful  Leadership 14 Growing Your Business • Study of retail supermarkets in the USA • Includes 12,000 Individuals in 2500 stores • Compares culture profiles with growth rates Over 5% Sales Decrease Over 5% Sales Increase N = 1305 N = 424
  15. 15. Organiza(onal  Culture  and  Powerful  Leadership 15 Organizational Culture Profile for a Global Office Furniture Company in China Mobley  et  al.,  2005
  16. 16. Organiza(onal  Culture  and  Powerful  Leadership 16 Organizational Culture Profile for a Chinese Insurance Company in China Mobley  et  al.,  2005
  17. 17. Organiza(onal  Culture  and  Powerful  Leadership 17 Is Asia Different from the Rest of the World? Denison  et  al.,  2004
  18. 18. Organiza(onal  Culture  and  Powerful  Leadership 18 References • Denison,  D.  R.  (1990).  Corporate  Culture  and  Organiza8onal   Effec8veness.  New  York:  Willey. • Denison,  D.  R.,  Haaland,  S.  &  Goelzer,  P.  (2004).  Corporate  Culture  and   Organiza8onal  Effec8veness:  Is  Asia  Different  from  the  rest  of  the   World?  Organiza8onal  Dynamics.  33-­‐1:  98-­‐108.   • Denison,  D.  R.  &  Mishra,  A.  H.  (1995).  Toward  a  Theory  of   Organiza8onal  Culture  and  Effec8veness.  Organiza8onal  Science.  6:   204-­‐223. • Mobley,  W.  H.,  Wang,  L.  &  Fang,  K.  (2005).  Organiza8onal  Culture:  Its   Defini8on  and  Measurement.  Harvard  Business  Review  China.  March;   128-­‐139. • Schein,  E.  H.  (1999).  The  Corporate  Culture:  Survival  Guide.  San   Francisco:  Jossey-­‐Bass. • Schein,  E.  H.  (2004).  Organiza8onal  Culture  and  Leadership  (3rd  Ed.).   San  Francisco:  Jossey-­‐Bass.
  19. 19. Thank  You Contact us via … Mail: Follow: twitter@htjitra Website: Zhejiang  University,  Hangzhou  (China)