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Corporate Culture and Innovation:An International Perspective

Monday 12th April 2010

Stephen Spring

sfspring@mac.com

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Culture?

“. . . 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.

“Culture is to a human collectivity what personality is to an individual.”

Hofstede 1981

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The stabilizing of cultural patterns

OUTSIDE INFLUENCESOUTSIDE INFLUENCESForces of NatureForces of NatureForces of ManForces of Man

ORIGINSORIGINSEcological FactorsEcological Factors

SOCIETAL NORMSSOCIETAL NORMSValue systems of Value systems of major groups of major groups of populationpopulation

CONSEQUENCESCONSEQUENCESStructure and Structure and functioning of functioning of institutionsinstitutions

Hofstede 2001

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Organizational Culture• Organizations exist because human behavior can be

controlled• Culture influences a leader’s provision of -

1. Organizational goals and objectives2. Decision making processes3. Organizational structure and formal procedures 4. Reward systems

• Culture influences actions of majority -1. Reasons for compliance 2. Required regulations and control processes 3. Zone of manageability4. Accuracy of communication5. Support for competing elites

Hofstede 1981

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How do organizational cultures begin?. . . The role of the founder

• Ideology rooted in a sense of mission– Group bands around a leader with a sense of mission– Individuals coalesce because they share some values with

organization– Leader often ‘charismatic’

• Developed through tradition and sagas– Behaviours reinforced over time – role of myths

• Reinforcement through identification– Natural – attracted to organization’s system of beliefs– Selected – new members choose to ‘fit-in’– Evoked - by informal processes of socialization or indoctrination

to reinforce– Calculated – individuals conform because it pays

Schein, 1983

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Embedding and Transmission of Culture

1. Formal statements2. Design of physical environment3. Role modeling, teaching and coaching4. Reward and promotion criteria5. Stories, legends & myths6. Focus of leaders7. Reactions of leaders to crisis8. Organizational design9. Organizational systems and procedures10. Criteria for personnel management

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Schein, 1983

Basic Underlying Assumptions around which Cultural Paradigms Form

• Organization’s relationship to its environmentIs the relationship as one of dominance, submission, harmonizing or finding an appropriate niche?

• Nature of reality and truthLinguistic and behavioural rules that define what is real and what is not-fact, truth, time, space, property etc.

• Nature of human natureWhat does it mean to be human? Attributes? Good, evil or neutral? Perfect or not?

• Nature of human activityWhat is the right things for human beings to do? What is work and what is play?

• Nature of human relationshipsWhat is the “right’ way for people to relate to each other. Co-operate or compete, individual, group, communal!

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Business Strategy ⇔ Corporate Culture

“There are characteristic ways of making decisions, relating to bosses and choosing people to fill key jobs.

These mundane routines buried deep in companies’ cultures (and subcultures) may be the most accurate reflections of why things work the way they do, and of why some firms succeed with their strategies where others fail”

Schwarts & Davis 1981:31

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The Evolving Focus of Strategy

Bartlett & Ghoshal 2002

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Business Strategy ⇔ Corporate Culture- Major Bank

• International banking division of major bank developed a strategy to grow its off-shore correspondent banking.

• Strategy relies on co-ordination of numerous foreign branches with money center branches

• Plan postulated eight major changes– Dedicated organization– Matrix structure– Regional autonomy– Inter-group team– Inter-unit systems coordination– MIS for account profitability– Relationship continuity– Attract superior people

Schwarts & Davis 1981

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Business Strategy ⇔ Corporate Culture- Major Bank: Culture wrt Relationships

• Companywide– Profitability gives autonomy

• Boss-subordinate– Avoid confrontation– Support the boss

• Peer– Guard information, it is power– Be a gentleman or lady

• Inter-department– Protect department’s bottom line– Form alliances around specific issues– Guard your turf

Schwarts & Davis 1981

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Business Strategy ⇔ Corporate Culture- Major Bank: Culture wrt Tasks

• Innovation– Minimize risk, be a quick

second• Decision making

– Handle on merits– Consensus with sign-offs– Involve the right people– Seize the opportunity

• Communicating– Withhold information– Avoid confrontations

Schwarts & Davis 1981

• Organizing– Centralize power– Be autocratic

• Monitoring– Meet short-term profit

goals• Appraising & Rewarding

– Reward the faithful– Choose the best bankers as

managers– Seek safe jobs

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Business Strategy ⇔ Corporate Culture- Major Bank: Assessing Cultural Risk

Schwarts & Davis 1981

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Organizational Shift Dynamics:A Feedback Loop

Motivation

BehaviourCulture

Zohar & Marshall 2004

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National Culture

• In a study reported in 2001, Geert Hofstede compared national cultures across 40 countries

• He identified five dimensions– Power Distance – extent of human inequality.– Uncertainty Avoidance – bias toward structure– Individualism – individuals vs collectives– Masculinity/Femininity – tough vs tender– Long vs. Short-Term - acceptance of delayed

gratification

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Power Distance vs Uncertainty Avoidance

Hofstede 1980

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Uncertainty Avoidance Index vs Masculinity

Hofstede 1980

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Individualism vs National Wealth

National Wealth in 1979 (GNP/Capita in US$10)

$400

Individualism

Low

High USAAUL

JPN

GBR

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Consequences for Policy

Management theories developed in one country may not work in others– National culture may erect barriers to entrepreneurial behaviour– Identical personnel policies may have very different effects in

different countries - and within countries for different sub-groups– Policies that may work out quite differently in different countries

are those dealing with financial incentives, promotion paths and grievance channels

– The dilemma is whether to adapt to the local culture or try to change it

Hofstede 1980

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How stable are cultural differences in face of economic change and cross cultural contact?

• Globalization prompts this question• Cultural values held by Chinese and Taiwanese

entrepreneurs are compared to determine relationship to these differences – China & Taiwan share Chinese heritage– Fundamentally different from USA(western)– For 50 years – different ideological pressures on

Taiwan and China

Gunther,McGrath, McMillan, Yang, & Tsai, 1992

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Hypotheses

Where culture predominates and endures:• Chinese and American entrepreneurs should show

different patterns of response;• Taiwanese responses should be similar to Chinese.

Where culture is eroded rapidly by ideological forces, and is thus relatively malleable:

• Taiwanese and American entrepreneurs should show similar patterns of response;

• Taiwanese responses should be more similar to American responses.

Gunther,McGrath, McMillan, Yang, & Tsai, 1992

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Observations

1. Despite 50 years of ideological pressure there has been little shift in the basic collectivist values and attitudes to the role of work in the two groups of Chinese;

2. After 50 years of capitalism, some values of the Taiwanese entrepreneurs have shifted significantly –

they have largely moved away from traditional Chinese acceptance of high power distance and

Uncertainty avoidance does not appear to have moved in the direction of a Western model; rather, the Taiwanese have adopted ancient Confucian beliefs into a dynamic, future-orientated set of values that has been identified as highly conducive to entrepreneurship

Gunther,McGrath, McMillan, Yang, & Tsai, 1992