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Ch3 Influenc es on Organisational Culture

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Chapter 3 BPP ACCA F1 Slide

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  • Ch3 Influences on Organisational Culture

    2004 Fall ACCA Paper 1.3

  • Study guide The formal and informal organisationTheir relationships impactsOrganisational cultureDefinitionFactorsvarious theoriesStakeholders of business organisationInternal and external stakeholdersMain stakeholder groups and their objectivesInteractions and conflicts between different stakeholders

    2004 Fall ACCA Paper 1.3

  • 1 What is culture?Culture is the ways of behaving, understanding, that are shared by a group of people.Spheres of culture:Nation, regionGenderSocial classProfession or occupationType of businessorganisation

    2004 Fall ACCA Paper 1.3

  • Elements and levels of culture (Schein)Observable behaviourBehaviourArtifactsAttitudes Values and beliefsIncluding slogans, strategies and goalsAssumptions Most difficult to understand and change*The link between culture and leadership is very strong.

    2004 Fall ACCA Paper 1.3

  • 2 Organisational cultureThe collection of traditions, values, policies, beliefs and attitudes that constitute a pervasive context for everything we do and think in an organisation. (Mullins)A pattern of beliefs and expectations shared by the organisations members, and which produce norms which powerfully shape the behaviour of individuals and groups in the organisation. (Schwartz & Davies)*The way we do things around here. (Handy & ACCA)

    2004 Fall ACCA Paper 1.3

  • Manifestation of cultureHow formal the organisation structure isCommunicationOffice layoutType of people employedSymbolsManagement styleFreedom for subordinatesAttitudes to qualityAttitudes to riskAttitudes to customerAttitudes to technology

    2004 Fall ACCA Paper 1.3

  • What shapes organization culture?Organizations founderHistoryLeadership and management styleOrganizations environment* The cultural values can be used to guide process, motivate employees, drive changes or preserve the status quo.Kaplan:6 factorsSize, technology, diversify, age, history, ownership

    2004 Fall ACCA Paper 1.3

  • Culture and structure (Handy& Harrison)

    2004 Fall ACCA Paper 1.3

  • Culture and structureTypes of culture do not necessarily equate to specific organisation types.Some styles of organisation culture may accompany particular organisation structure.It is quite possible for different cultures to prevail in different parts of the same organisation.

    *Pilot paper: p36 #4*question bank: p562 #7

    2004 Fall ACCA Paper 1.3

  • Culture and managerial activityStrategic management suits power culture.Tactical management suits task culture.Operational management suits role culture.

    2004 Fall ACCA Paper 1.3

  • The impact of national culture(Hofstede model)Power distanceUnequal distribution of power; extent of centralisation; subordinates participation in decision-makingUncertainty avoidancePreference for security, order and control; need for written rules and consensus; tolerant for riskIndividualityPreference for living and work in individualist; emphasis on autonomy, individual initiative; concern on personal relationshipMasculinityDistinct social gender roles; different values*Confucianism vs. dynamism- attitude to change over the long term

    2004 Fall ACCA Paper 1.3

  • Main dimensions of difference between national culturesPower distanceHigh PD: Latin, near east, less developed Asian countriesLow PD: Germanic, Anglo and Nordic countriesUncertainty avoidanceHigh UA: Latin, near east, Germanic and JapanLow UA: Anglo and Nordic countriesIndividualismHigh individualism: Anglo, more developed Latin and Nordic countriesLow individualism: less developed Latin, near east and less developed Asian countriesMasculinityHigh Masculinity: Japan, Germanic and Anglo countriesLow Masculinity: Nordic countries

    2004 Fall ACCA Paper 1.3

  • 4 Informal organizationAn informal organization exists side by side with the formal one. It is loosely structured, flexible and spontaneous.Its mechanisms:Social relationships and groupings Informal communicationBehavioural norms Power/influence structures

    2004 Fall ACCA Paper 1.3

  • Influences on organisationsInformal organisation may be beneficial or detrimental to the organisation:Benefits:Employee commitmentKnowledge sharingSpeedResponsivenessCo-operationProblems:Social groupings may act collectively against organisational interestsInformal communication may be inaccurateMay be too important in fulfilling employees needsInformal work practice may cut corners

    2004 Fall ACCA Paper 1.3

  • Minimise the problems ofinformal organisationMeeting employees needs as far as possible via the formal organisationHarnessing the dynamics of the informal organisationInvolving managers themselves in the informal structure

    * Question bank: p562 #8

    2004 Fall ACCA Paper 1.3

  • Group normsA work group establishes norms to which all members of the group are expected to conform.Individuals may react to group norms in the following ways:ComplianceInternalisationCounter-conformityNorms may be reinforced by:IdentificationSanctions

    2004 Fall ACCA Paper 1.3

  • 5 Stakeholders goals and objectivesStakeholders are those individuals or groups that potentially have an interest in what the organisation does.Types of stakeholders:Internal stakeholdersEmployees, managementConnected stakeholdersShareholders, customers, suppliers, financiersExternal stakeholdersCommunity, government, pressure groupsPrimary stakeholdersSecondary stakeholdersP132 another approach

    2004 Fall ACCA Paper 1.3

  • Stakeholders and interests

    internalManagers and employeesJob security, pay, promotion, benefits, working conditionsconnectedshareholdersShareholder wealth, riskbankersSecurity on loansuppliersProfitable sales, payment, long-term relationshipcustomersGoods as promisedexternalgovernmentJobs, tax, legislation Pressure groupsPollution, rights, etc.Professional bodiesMembers ethics

    2004 Fall ACCA Paper 1.3

  • Stakeholders conflictSince their interests may be widely different, conflict between stakeholders can be quite common.Conflict between managers and shareholders is a typical exampleVehicle for managerial skillsDividend stream, value of sharesConflict can be detrimental to the companys stability

    2004 Fall ACCA Paper 1.3

  • Stakeholder dependencyA firm might depend on a stakeholder group at any particular timeBankers, customers, etc.Degree of dependency can be analysed by:Disruption, replacement, uncertaintyRelationship between company and stakeholders is a function of parties relative bargaining strength

    2004 Fall ACCA Paper 1.3

  • Stakeholder mapping (Mendelow) Level of interest

    2004 Fall ACCA Paper 1.3

  • Implication for the organisationStakeholder mapping is used to assess the significance of stakeholder groupsThe framework of corporate governance should recognise stakeholders level of interest and powerSometimes, repositioning of certain stakeholders may be appropriateBlockers and facilitators of change should be identifiedStakeholder groups may choose loyalty, exit and voice.

    2004 Fall ACCA Paper 1.3

  • Strategic value of stakeholdersFirm can make strategic gains from managing stakeholder relationshipsEmployee loyalty and customer loyaltyContinuity and stability in relationships with employees (customers, suppliers) and capability of responding to changes.

    2004 Fall ACCA Paper 1.3

  • Measuring stakeholder satisfactionMeasuring the stakeholder satisfaction may be difficult, cause its difficult to quantifyEmployeesStaff turnover; pay and benefits relative to market rate; job vacanciesGovernmentPollution measures; promptness of filing annual returns; accident rate; energy efficiencyDistributorsShare of joint promotions paid for; rate of running out of inventory

    2004 Fall ACCA Paper 1.3

  • Pilot paper: p36-37 #7,8Question bank: p562 #9

    2004 Fall ACCA Paper 1.3