ORGANIZATIONAL CULTURE

ORGANIZATIONAL CULTURE

THE GLUING FACTOR

SUBMITTED TO

Prof Mousami BhattacharyaampDr Nilanjan Sengupta

SUBMITTED BY

Group No 6

Arun Aggarwal(6)

Krishna Kant(12)

Nithya Sridhar(18)

Preeti Jaiswal(24)

SachinV(30)

Shashank(36)

Sobhonson(42)

Swagatika(48)

VDeepika(54)

Yatindra(60)

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ORGANIZATIONAL CULTURE

ACKNOWLEDGEMENT

We wish to convey our heartiest thanks to ProfMousumi Bhattacharya amp Dr Nilanjan sengupta who has given us all an opportunity to work on this project We are grateful to them for their constant guidance throughout the project It was a fight in the beginning to gather all the information from various organizations about their cultures however through the constant efforts of our team members we made this project a success Working on this project has given us an insight about how the various organizations formulate their cultural values We have been able to connect our theoretical knowledge with the practical working conditions of various organizations It has been a boon working on the following project and we once again wish to thank our faculty members and the team without whom this project would not have been a success

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ORGANIZATIONAL CULTURE

ORGANIZATIONAL CULTURE

Organizational culture is defined as a pattern of basic assumptions invented discovered or developed by a given group as it learns to cope with the problems of external adaption and internal investigation that has worked well enough to be considered valid and therefore is to be taught to the new members as the correct way to perceive think and feel in relation to those problems Organizational culture is a set of shared understandings norms values attitudes and beliefs of an organization which can foster or impede change

When people join an organization they bring with them the values and beliefs that they have been taught Quite often however these values and beliefs are insufficient for helping the individual succeed in the organization The person needs to learn how the particular enterprise does things

A common misconception is that an organization has a uniform culture However at least as anthropology uses the concept it is probably more accurate to treat organizations ldquoas ifrdquo they had a uniform culture ldquoAll organizations have culture in the sense that they are embedded in specific societal cultures and are part of themrdquo According to this view organization culture is a common perception held by the organizationrsquos members Everyone in the organization would have to share this perception However all may not do so to the same degree As a result there can be a dominant culture as well as subcultures throughout a typical organization

A dominant culture is a set of core values shared by a majority of the organizationrsquos members The values that create dominant cultures in organizations help guide the day-to-day behavior of the employees Important but often overlooked are the subcultures in an organization A subculture is a set of values shared by a minority usually a small minority of the organizationrsquos members Subcultures typically are a result of problems or experiences that are shared by members of a department or unit Subcultures can weaken and undermine an organization if they are in conflict with the dominant culture and overall objectives Successful firms however find that this is not the case always Most subcultures are formed to help the members of a particular group deal with the specific day-to-day problems with which they are confronted The members may also support many if not all of the core values of the dominant culture

A NEW CONCEPT WHISTLE BLOWING

Whistle blowing is commonly defined as the disclosure by organization members (former or current) of illegal immoral or illegitimate practices under the control of their employers to persons or organizations that may be able to effect action While whistleblowing includes

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ORGANIZATIONAL CULTURE

disclosures both internal and external to the organization organizations benefit when employees choose to report internally Internal reporting facilitates early detection of misconduct and creates opportunity for timely investigation and corrective action Internal reporting also positions organizations to proactively manage or even avoid public embarrassment government scrutiny costly fines and litigation

To encourage internal reporting organizational ethics and compliance programs often include the availability of an anonymous or confidential reporting channel that enables employees the opportunity to report without fear of retaliation their concerns regarding organizational conduct ranging from slight indiscretions and unprofessional behaviors to criminal acts warranting felony convictions Employee utilization of these reporting channels however is limited and it has been found that the majorities of employees who become aware of individual or corporate wrongdoing never report or disclose their observations to anyone

Numerous variables have been studied in the literature for their relationship to whistleblowing An employees decision to report individual or organizational misconduct is a complex phenomenon that is based upon organizational situational and personal factors

A FEW DIMENSIONS OF ORGANIZATIONAL CULTURE

VIGILANCE

Prior to pondering whether or not to communicate an ethical compliance or legal concern an employee must first be in a position to detect violations What are the standards in this organization What is my role in upholding these standards Accordingly the first step in supporting employee communication and reporting behaviors is to influence a culture that promotes not only awareness of an organizations commitment to integrity but a shared understanding of organizational standards A look out for threats to organizational integrity also must be cultivated among organization members

Thoughtful attention to training employees on the values and standards outlined in the organizations code of conduct will facilitate awareness building However the most fundamental and powerful values of an organization are not written down and exist only in the shared norms beliefs and assumptions reflected in the organizations culture These norms beliefs and assumptions guide how organization members think and act The organizational culture informs members how to relate to each other and to outsiders how to analyze problems and how to respond to situations encountered in the organization To promote a shared understanding of which code to follow the formal code of conduct or the unwritten code of culture the dynamics of organizational culture on an employees ability to accurately interpret the ethical standards of the organization must be addressed

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To support a culture of vigilance employees also must be educated on the relationship between organizational integrity and the organizations strategic positioning Employees who observe wrongdoing may not report it because they cannot fully estimate the resulting damage Therefore the organization should ensure employees are in a position to identify the potential consequences of ethical compliance and legal breaches including opportunity costs and harm to the organization its reputation and stakeholders

ENGAGEMENT

The cultural dimension of engagement is multifaceted and complex Engagement is concerned with organizational and individual factors that contribute to a personal state of authentic involvement in the organization Organizational processes used to recruit orient socialize and manage employees influence engagement Employeersquos sense making psychological contracts and perceptions of fairness in organizational dealings influence the degree of authentic involvement by them Managing these organizational processes and individual perceptions to facilitate high degrees of organizational commitment and identification encourages a culture of engagement that supports internal whistle blowing

If an organization member is not committed to high ethical standards there may be a tendency to rationalize questionable behavior as a common or even necessary practice in performing job duties On the other hand if an employee has high ethical standards that are not supported by the organization there is a tendency for the employee to experience internal conflict Such conflict will arise when organizational demands on employees are inconsistent with personal or professional values The result is decreased commitment and an unwillingness to exert effort on behalf of the organization

Once employees enter the organization socialization methods including training on ethical standards can be used to deepen employee commitment to organizational values and norms

CREDIBILITY

A culture of engagement that supports organizational commitment and identification however may not be sufficient for prompting employee disclosures An employee will also seek to test the organizations commitment to integrity Leadership behavior is a key determinant of employee perceptions and beliefs

The most powerful strategy that can be relied upon to facilitate credibility is employee belief in espoused ethics and values including organizational expectations for employee disclosure attending to and monitoring congruence in the organizational culture The role of leadership is central to this strategy

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ORGANIZATIONAL CULTURE

Aligning leadership behaviors with formal policies and consistent modeling of espoused values are important practices for fostering credibility Demonstrating personal commitment to organizational values builds trust and creates a safe environment for employees to come forward and report concerns

ACCOUNTABILITY

Accountability for communicating knowledge of wrongdoing will be carefully judged by employees Is it my job to report Isnt this someone elses responsibility Why should I get involved After all I am not the only one aware of what is going on here Again values beliefs and norms embedded in the organizational culture and picked up by employees will influence employee reflections

HOW DID ORGANIZATIONAL CULTURE START

While organizational cultures developed in different ways the process usually involves some version of the following steps

A single person (founder) has an idea for a new enterpriseThe founder brings in one or more other key people and creates a core group that shares a common vision with the founderThe founding core group begins to act in concert to create an organization by raising funds obtaining patents incorporating locating space building and so onAt this point others are brought into the organization and a common history begins to be built

Most of todayrsquos successful corporate giants in all industries basically followed these steps Three well-known representative examples are Motorola McDonaldrsquos and Wal-Mart

McDonaldrsquos Ray Kroc worked for many years as a salesperson for a food supplier He learned how retail food operations were conducted He also had an entrepreneurial streak and began a sideline business with a partner They sold multimixers machines that were capable of mixing up to six frozen shakes at a time One day Kroc received a large order for multimixers from the McDonald brothers The order intrigued Kroc and he decided to look in on the operation the next time he was in their area When he did Kroc became convinced that the McDonaldrsquos fast food concept would sweep the nation He bought the rights to franchise McDonaldrsquos units and eventually bought out the brothers At the same time he built the franchisee on four basic concepts quality cleanliness service and price In order to ensure that each unit offers the customer the best product at the best price franchisees are required to attend McDonald

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ORGANIZATIONAL CULTURE

University where they are taught how to manage their business Here they learn the McDonald cultural values and the proper way to run the franchisee This training ensures that the franchisees all over the world are operating their units in the same way Kroc died several years ago but the culture he left behind is still very much alive in McDonaldrsquos franchisees across the globe In fact new employees receive videotaped messages from the late Mr Kroc

Wal-Mart Sam Walton founder of Wal-Mart Stores Inc opened his first Wal-Mart store in 1962 Focusing on the sale of discounted name brand merchandise in small town markets he began to set up more and more stores in the Sun Belt At the same time he began developing effective inventory control systems and marketing techniques Today Wal-Mart has not only become the largest retailer but also one of the biggest firms in the country Although Sam died a few years ago his legacy and cultural values continue To ensure that these values get out to all the associates the company has a communication network worthy of the Pentagon It includes everything from a six-channel satellite system to a private air force of numerous planes Everyone is taught this culture and is expected to operate according to the core cultural values of hard work efficiency and customer service

LEVELS OF CULTURE

ARTIFACTSVALUESBASIC ASSUMPTIONS

ARTIFACTS

Artifacts are the most visible and accessible level of culture It is symbol of culture in the physical and social work environment of the organization

Artifacts of culture are

PERSONAL ENACTMENT RITES AND CEREMONIESSTORIES AND LEGENDSRITUALSSYMBOLS

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PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

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ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

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ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

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RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

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ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

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twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

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ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

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Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

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movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

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ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

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ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

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ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

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ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

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ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

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ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

ACKNOWLEDGEMENT

We wish to convey our heartiest thanks to ProfMousumi Bhattacharya amp Dr Nilanjan sengupta who has given us all an opportunity to work on this project We are grateful to them for their constant guidance throughout the project It was a fight in the beginning to gather all the information from various organizations about their cultures however through the constant efforts of our team members we made this project a success Working on this project has given us an insight about how the various organizations formulate their cultural values We have been able to connect our theoretical knowledge with the practical working conditions of various organizations It has been a boon working on the following project and we once again wish to thank our faculty members and the team without whom this project would not have been a success

2 | P a g e

ORGANIZATIONAL CULTURE

ORGANIZATIONAL CULTURE

Organizational culture is defined as a pattern of basic assumptions invented discovered or developed by a given group as it learns to cope with the problems of external adaption and internal investigation that has worked well enough to be considered valid and therefore is to be taught to the new members as the correct way to perceive think and feel in relation to those problems Organizational culture is a set of shared understandings norms values attitudes and beliefs of an organization which can foster or impede change

When people join an organization they bring with them the values and beliefs that they have been taught Quite often however these values and beliefs are insufficient for helping the individual succeed in the organization The person needs to learn how the particular enterprise does things

A common misconception is that an organization has a uniform culture However at least as anthropology uses the concept it is probably more accurate to treat organizations ldquoas ifrdquo they had a uniform culture ldquoAll organizations have culture in the sense that they are embedded in specific societal cultures and are part of themrdquo According to this view organization culture is a common perception held by the organizationrsquos members Everyone in the organization would have to share this perception However all may not do so to the same degree As a result there can be a dominant culture as well as subcultures throughout a typical organization

A dominant culture is a set of core values shared by a majority of the organizationrsquos members The values that create dominant cultures in organizations help guide the day-to-day behavior of the employees Important but often overlooked are the subcultures in an organization A subculture is a set of values shared by a minority usually a small minority of the organizationrsquos members Subcultures typically are a result of problems or experiences that are shared by members of a department or unit Subcultures can weaken and undermine an organization if they are in conflict with the dominant culture and overall objectives Successful firms however find that this is not the case always Most subcultures are formed to help the members of a particular group deal with the specific day-to-day problems with which they are confronted The members may also support many if not all of the core values of the dominant culture

A NEW CONCEPT WHISTLE BLOWING

Whistle blowing is commonly defined as the disclosure by organization members (former or current) of illegal immoral or illegitimate practices under the control of their employers to persons or organizations that may be able to effect action While whistleblowing includes

3 | P a g e

ORGANIZATIONAL CULTURE

disclosures both internal and external to the organization organizations benefit when employees choose to report internally Internal reporting facilitates early detection of misconduct and creates opportunity for timely investigation and corrective action Internal reporting also positions organizations to proactively manage or even avoid public embarrassment government scrutiny costly fines and litigation

To encourage internal reporting organizational ethics and compliance programs often include the availability of an anonymous or confidential reporting channel that enables employees the opportunity to report without fear of retaliation their concerns regarding organizational conduct ranging from slight indiscretions and unprofessional behaviors to criminal acts warranting felony convictions Employee utilization of these reporting channels however is limited and it has been found that the majorities of employees who become aware of individual or corporate wrongdoing never report or disclose their observations to anyone

Numerous variables have been studied in the literature for their relationship to whistleblowing An employees decision to report individual or organizational misconduct is a complex phenomenon that is based upon organizational situational and personal factors

A FEW DIMENSIONS OF ORGANIZATIONAL CULTURE

VIGILANCE

Prior to pondering whether or not to communicate an ethical compliance or legal concern an employee must first be in a position to detect violations What are the standards in this organization What is my role in upholding these standards Accordingly the first step in supporting employee communication and reporting behaviors is to influence a culture that promotes not only awareness of an organizations commitment to integrity but a shared understanding of organizational standards A look out for threats to organizational integrity also must be cultivated among organization members

Thoughtful attention to training employees on the values and standards outlined in the organizations code of conduct will facilitate awareness building However the most fundamental and powerful values of an organization are not written down and exist only in the shared norms beliefs and assumptions reflected in the organizations culture These norms beliefs and assumptions guide how organization members think and act The organizational culture informs members how to relate to each other and to outsiders how to analyze problems and how to respond to situations encountered in the organization To promote a shared understanding of which code to follow the formal code of conduct or the unwritten code of culture the dynamics of organizational culture on an employees ability to accurately interpret the ethical standards of the organization must be addressed

4 | P a g e

ORGANIZATIONAL CULTURE

To support a culture of vigilance employees also must be educated on the relationship between organizational integrity and the organizations strategic positioning Employees who observe wrongdoing may not report it because they cannot fully estimate the resulting damage Therefore the organization should ensure employees are in a position to identify the potential consequences of ethical compliance and legal breaches including opportunity costs and harm to the organization its reputation and stakeholders

ENGAGEMENT

The cultural dimension of engagement is multifaceted and complex Engagement is concerned with organizational and individual factors that contribute to a personal state of authentic involvement in the organization Organizational processes used to recruit orient socialize and manage employees influence engagement Employeersquos sense making psychological contracts and perceptions of fairness in organizational dealings influence the degree of authentic involvement by them Managing these organizational processes and individual perceptions to facilitate high degrees of organizational commitment and identification encourages a culture of engagement that supports internal whistle blowing

If an organization member is not committed to high ethical standards there may be a tendency to rationalize questionable behavior as a common or even necessary practice in performing job duties On the other hand if an employee has high ethical standards that are not supported by the organization there is a tendency for the employee to experience internal conflict Such conflict will arise when organizational demands on employees are inconsistent with personal or professional values The result is decreased commitment and an unwillingness to exert effort on behalf of the organization

Once employees enter the organization socialization methods including training on ethical standards can be used to deepen employee commitment to organizational values and norms

CREDIBILITY

A culture of engagement that supports organizational commitment and identification however may not be sufficient for prompting employee disclosures An employee will also seek to test the organizations commitment to integrity Leadership behavior is a key determinant of employee perceptions and beliefs

The most powerful strategy that can be relied upon to facilitate credibility is employee belief in espoused ethics and values including organizational expectations for employee disclosure attending to and monitoring congruence in the organizational culture The role of leadership is central to this strategy

5 | P a g e

ORGANIZATIONAL CULTURE

Aligning leadership behaviors with formal policies and consistent modeling of espoused values are important practices for fostering credibility Demonstrating personal commitment to organizational values builds trust and creates a safe environment for employees to come forward and report concerns

ACCOUNTABILITY

Accountability for communicating knowledge of wrongdoing will be carefully judged by employees Is it my job to report Isnt this someone elses responsibility Why should I get involved After all I am not the only one aware of what is going on here Again values beliefs and norms embedded in the organizational culture and picked up by employees will influence employee reflections

HOW DID ORGANIZATIONAL CULTURE START

While organizational cultures developed in different ways the process usually involves some version of the following steps

A single person (founder) has an idea for a new enterpriseThe founder brings in one or more other key people and creates a core group that shares a common vision with the founderThe founding core group begins to act in concert to create an organization by raising funds obtaining patents incorporating locating space building and so onAt this point others are brought into the organization and a common history begins to be built

Most of todayrsquos successful corporate giants in all industries basically followed these steps Three well-known representative examples are Motorola McDonaldrsquos and Wal-Mart

McDonaldrsquos Ray Kroc worked for many years as a salesperson for a food supplier He learned how retail food operations were conducted He also had an entrepreneurial streak and began a sideline business with a partner They sold multimixers machines that were capable of mixing up to six frozen shakes at a time One day Kroc received a large order for multimixers from the McDonald brothers The order intrigued Kroc and he decided to look in on the operation the next time he was in their area When he did Kroc became convinced that the McDonaldrsquos fast food concept would sweep the nation He bought the rights to franchise McDonaldrsquos units and eventually bought out the brothers At the same time he built the franchisee on four basic concepts quality cleanliness service and price In order to ensure that each unit offers the customer the best product at the best price franchisees are required to attend McDonald

6 | P a g e

ORGANIZATIONAL CULTURE

University where they are taught how to manage their business Here they learn the McDonald cultural values and the proper way to run the franchisee This training ensures that the franchisees all over the world are operating their units in the same way Kroc died several years ago but the culture he left behind is still very much alive in McDonaldrsquos franchisees across the globe In fact new employees receive videotaped messages from the late Mr Kroc

Wal-Mart Sam Walton founder of Wal-Mart Stores Inc opened his first Wal-Mart store in 1962 Focusing on the sale of discounted name brand merchandise in small town markets he began to set up more and more stores in the Sun Belt At the same time he began developing effective inventory control systems and marketing techniques Today Wal-Mart has not only become the largest retailer but also one of the biggest firms in the country Although Sam died a few years ago his legacy and cultural values continue To ensure that these values get out to all the associates the company has a communication network worthy of the Pentagon It includes everything from a six-channel satellite system to a private air force of numerous planes Everyone is taught this culture and is expected to operate according to the core cultural values of hard work efficiency and customer service

LEVELS OF CULTURE

ARTIFACTSVALUESBASIC ASSUMPTIONS

ARTIFACTS

Artifacts are the most visible and accessible level of culture It is symbol of culture in the physical and social work environment of the organization

Artifacts of culture are

PERSONAL ENACTMENT RITES AND CEREMONIESSTORIES AND LEGENDSRITUALSSYMBOLS

7 | P a g e

ORGANIZATIONAL CULTURE

PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

8 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

ORGANIZATIONAL CULTURE

Organizational culture is defined as a pattern of basic assumptions invented discovered or developed by a given group as it learns to cope with the problems of external adaption and internal investigation that has worked well enough to be considered valid and therefore is to be taught to the new members as the correct way to perceive think and feel in relation to those problems Organizational culture is a set of shared understandings norms values attitudes and beliefs of an organization which can foster or impede change

When people join an organization they bring with them the values and beliefs that they have been taught Quite often however these values and beliefs are insufficient for helping the individual succeed in the organization The person needs to learn how the particular enterprise does things

A common misconception is that an organization has a uniform culture However at least as anthropology uses the concept it is probably more accurate to treat organizations ldquoas ifrdquo they had a uniform culture ldquoAll organizations have culture in the sense that they are embedded in specific societal cultures and are part of themrdquo According to this view organization culture is a common perception held by the organizationrsquos members Everyone in the organization would have to share this perception However all may not do so to the same degree As a result there can be a dominant culture as well as subcultures throughout a typical organization

A dominant culture is a set of core values shared by a majority of the organizationrsquos members The values that create dominant cultures in organizations help guide the day-to-day behavior of the employees Important but often overlooked are the subcultures in an organization A subculture is a set of values shared by a minority usually a small minority of the organizationrsquos members Subcultures typically are a result of problems or experiences that are shared by members of a department or unit Subcultures can weaken and undermine an organization if they are in conflict with the dominant culture and overall objectives Successful firms however find that this is not the case always Most subcultures are formed to help the members of a particular group deal with the specific day-to-day problems with which they are confronted The members may also support many if not all of the core values of the dominant culture

A NEW CONCEPT WHISTLE BLOWING

Whistle blowing is commonly defined as the disclosure by organization members (former or current) of illegal immoral or illegitimate practices under the control of their employers to persons or organizations that may be able to effect action While whistleblowing includes

3 | P a g e

ORGANIZATIONAL CULTURE

disclosures both internal and external to the organization organizations benefit when employees choose to report internally Internal reporting facilitates early detection of misconduct and creates opportunity for timely investigation and corrective action Internal reporting also positions organizations to proactively manage or even avoid public embarrassment government scrutiny costly fines and litigation

To encourage internal reporting organizational ethics and compliance programs often include the availability of an anonymous or confidential reporting channel that enables employees the opportunity to report without fear of retaliation their concerns regarding organizational conduct ranging from slight indiscretions and unprofessional behaviors to criminal acts warranting felony convictions Employee utilization of these reporting channels however is limited and it has been found that the majorities of employees who become aware of individual or corporate wrongdoing never report or disclose their observations to anyone

Numerous variables have been studied in the literature for their relationship to whistleblowing An employees decision to report individual or organizational misconduct is a complex phenomenon that is based upon organizational situational and personal factors

A FEW DIMENSIONS OF ORGANIZATIONAL CULTURE

VIGILANCE

Prior to pondering whether or not to communicate an ethical compliance or legal concern an employee must first be in a position to detect violations What are the standards in this organization What is my role in upholding these standards Accordingly the first step in supporting employee communication and reporting behaviors is to influence a culture that promotes not only awareness of an organizations commitment to integrity but a shared understanding of organizational standards A look out for threats to organizational integrity also must be cultivated among organization members

Thoughtful attention to training employees on the values and standards outlined in the organizations code of conduct will facilitate awareness building However the most fundamental and powerful values of an organization are not written down and exist only in the shared norms beliefs and assumptions reflected in the organizations culture These norms beliefs and assumptions guide how organization members think and act The organizational culture informs members how to relate to each other and to outsiders how to analyze problems and how to respond to situations encountered in the organization To promote a shared understanding of which code to follow the formal code of conduct or the unwritten code of culture the dynamics of organizational culture on an employees ability to accurately interpret the ethical standards of the organization must be addressed

4 | P a g e

ORGANIZATIONAL CULTURE

To support a culture of vigilance employees also must be educated on the relationship between organizational integrity and the organizations strategic positioning Employees who observe wrongdoing may not report it because they cannot fully estimate the resulting damage Therefore the organization should ensure employees are in a position to identify the potential consequences of ethical compliance and legal breaches including opportunity costs and harm to the organization its reputation and stakeholders

ENGAGEMENT

The cultural dimension of engagement is multifaceted and complex Engagement is concerned with organizational and individual factors that contribute to a personal state of authentic involvement in the organization Organizational processes used to recruit orient socialize and manage employees influence engagement Employeersquos sense making psychological contracts and perceptions of fairness in organizational dealings influence the degree of authentic involvement by them Managing these organizational processes and individual perceptions to facilitate high degrees of organizational commitment and identification encourages a culture of engagement that supports internal whistle blowing

If an organization member is not committed to high ethical standards there may be a tendency to rationalize questionable behavior as a common or even necessary practice in performing job duties On the other hand if an employee has high ethical standards that are not supported by the organization there is a tendency for the employee to experience internal conflict Such conflict will arise when organizational demands on employees are inconsistent with personal or professional values The result is decreased commitment and an unwillingness to exert effort on behalf of the organization

Once employees enter the organization socialization methods including training on ethical standards can be used to deepen employee commitment to organizational values and norms

CREDIBILITY

A culture of engagement that supports organizational commitment and identification however may not be sufficient for prompting employee disclosures An employee will also seek to test the organizations commitment to integrity Leadership behavior is a key determinant of employee perceptions and beliefs

The most powerful strategy that can be relied upon to facilitate credibility is employee belief in espoused ethics and values including organizational expectations for employee disclosure attending to and monitoring congruence in the organizational culture The role of leadership is central to this strategy

5 | P a g e

ORGANIZATIONAL CULTURE

Aligning leadership behaviors with formal policies and consistent modeling of espoused values are important practices for fostering credibility Demonstrating personal commitment to organizational values builds trust and creates a safe environment for employees to come forward and report concerns

ACCOUNTABILITY

Accountability for communicating knowledge of wrongdoing will be carefully judged by employees Is it my job to report Isnt this someone elses responsibility Why should I get involved After all I am not the only one aware of what is going on here Again values beliefs and norms embedded in the organizational culture and picked up by employees will influence employee reflections

HOW DID ORGANIZATIONAL CULTURE START

While organizational cultures developed in different ways the process usually involves some version of the following steps

A single person (founder) has an idea for a new enterpriseThe founder brings in one or more other key people and creates a core group that shares a common vision with the founderThe founding core group begins to act in concert to create an organization by raising funds obtaining patents incorporating locating space building and so onAt this point others are brought into the organization and a common history begins to be built

Most of todayrsquos successful corporate giants in all industries basically followed these steps Three well-known representative examples are Motorola McDonaldrsquos and Wal-Mart

McDonaldrsquos Ray Kroc worked for many years as a salesperson for a food supplier He learned how retail food operations were conducted He also had an entrepreneurial streak and began a sideline business with a partner They sold multimixers machines that were capable of mixing up to six frozen shakes at a time One day Kroc received a large order for multimixers from the McDonald brothers The order intrigued Kroc and he decided to look in on the operation the next time he was in their area When he did Kroc became convinced that the McDonaldrsquos fast food concept would sweep the nation He bought the rights to franchise McDonaldrsquos units and eventually bought out the brothers At the same time he built the franchisee on four basic concepts quality cleanliness service and price In order to ensure that each unit offers the customer the best product at the best price franchisees are required to attend McDonald

6 | P a g e

ORGANIZATIONAL CULTURE

University where they are taught how to manage their business Here they learn the McDonald cultural values and the proper way to run the franchisee This training ensures that the franchisees all over the world are operating their units in the same way Kroc died several years ago but the culture he left behind is still very much alive in McDonaldrsquos franchisees across the globe In fact new employees receive videotaped messages from the late Mr Kroc

Wal-Mart Sam Walton founder of Wal-Mart Stores Inc opened his first Wal-Mart store in 1962 Focusing on the sale of discounted name brand merchandise in small town markets he began to set up more and more stores in the Sun Belt At the same time he began developing effective inventory control systems and marketing techniques Today Wal-Mart has not only become the largest retailer but also one of the biggest firms in the country Although Sam died a few years ago his legacy and cultural values continue To ensure that these values get out to all the associates the company has a communication network worthy of the Pentagon It includes everything from a six-channel satellite system to a private air force of numerous planes Everyone is taught this culture and is expected to operate according to the core cultural values of hard work efficiency and customer service

LEVELS OF CULTURE

ARTIFACTSVALUESBASIC ASSUMPTIONS

ARTIFACTS

Artifacts are the most visible and accessible level of culture It is symbol of culture in the physical and social work environment of the organization

Artifacts of culture are

PERSONAL ENACTMENT RITES AND CEREMONIESSTORIES AND LEGENDSRITUALSSYMBOLS

7 | P a g e

ORGANIZATIONAL CULTURE

PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

8 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

disclosures both internal and external to the organization organizations benefit when employees choose to report internally Internal reporting facilitates early detection of misconduct and creates opportunity for timely investigation and corrective action Internal reporting also positions organizations to proactively manage or even avoid public embarrassment government scrutiny costly fines and litigation

To encourage internal reporting organizational ethics and compliance programs often include the availability of an anonymous or confidential reporting channel that enables employees the opportunity to report without fear of retaliation their concerns regarding organizational conduct ranging from slight indiscretions and unprofessional behaviors to criminal acts warranting felony convictions Employee utilization of these reporting channels however is limited and it has been found that the majorities of employees who become aware of individual or corporate wrongdoing never report or disclose their observations to anyone

Numerous variables have been studied in the literature for their relationship to whistleblowing An employees decision to report individual or organizational misconduct is a complex phenomenon that is based upon organizational situational and personal factors

A FEW DIMENSIONS OF ORGANIZATIONAL CULTURE

VIGILANCE

Prior to pondering whether or not to communicate an ethical compliance or legal concern an employee must first be in a position to detect violations What are the standards in this organization What is my role in upholding these standards Accordingly the first step in supporting employee communication and reporting behaviors is to influence a culture that promotes not only awareness of an organizations commitment to integrity but a shared understanding of organizational standards A look out for threats to organizational integrity also must be cultivated among organization members

Thoughtful attention to training employees on the values and standards outlined in the organizations code of conduct will facilitate awareness building However the most fundamental and powerful values of an organization are not written down and exist only in the shared norms beliefs and assumptions reflected in the organizations culture These norms beliefs and assumptions guide how organization members think and act The organizational culture informs members how to relate to each other and to outsiders how to analyze problems and how to respond to situations encountered in the organization To promote a shared understanding of which code to follow the formal code of conduct or the unwritten code of culture the dynamics of organizational culture on an employees ability to accurately interpret the ethical standards of the organization must be addressed

4 | P a g e

ORGANIZATIONAL CULTURE

To support a culture of vigilance employees also must be educated on the relationship between organizational integrity and the organizations strategic positioning Employees who observe wrongdoing may not report it because they cannot fully estimate the resulting damage Therefore the organization should ensure employees are in a position to identify the potential consequences of ethical compliance and legal breaches including opportunity costs and harm to the organization its reputation and stakeholders

ENGAGEMENT

The cultural dimension of engagement is multifaceted and complex Engagement is concerned with organizational and individual factors that contribute to a personal state of authentic involvement in the organization Organizational processes used to recruit orient socialize and manage employees influence engagement Employeersquos sense making psychological contracts and perceptions of fairness in organizational dealings influence the degree of authentic involvement by them Managing these organizational processes and individual perceptions to facilitate high degrees of organizational commitment and identification encourages a culture of engagement that supports internal whistle blowing

If an organization member is not committed to high ethical standards there may be a tendency to rationalize questionable behavior as a common or even necessary practice in performing job duties On the other hand if an employee has high ethical standards that are not supported by the organization there is a tendency for the employee to experience internal conflict Such conflict will arise when organizational demands on employees are inconsistent with personal or professional values The result is decreased commitment and an unwillingness to exert effort on behalf of the organization

Once employees enter the organization socialization methods including training on ethical standards can be used to deepen employee commitment to organizational values and norms

CREDIBILITY

A culture of engagement that supports organizational commitment and identification however may not be sufficient for prompting employee disclosures An employee will also seek to test the organizations commitment to integrity Leadership behavior is a key determinant of employee perceptions and beliefs

The most powerful strategy that can be relied upon to facilitate credibility is employee belief in espoused ethics and values including organizational expectations for employee disclosure attending to and monitoring congruence in the organizational culture The role of leadership is central to this strategy

5 | P a g e

ORGANIZATIONAL CULTURE

Aligning leadership behaviors with formal policies and consistent modeling of espoused values are important practices for fostering credibility Demonstrating personal commitment to organizational values builds trust and creates a safe environment for employees to come forward and report concerns

ACCOUNTABILITY

Accountability for communicating knowledge of wrongdoing will be carefully judged by employees Is it my job to report Isnt this someone elses responsibility Why should I get involved After all I am not the only one aware of what is going on here Again values beliefs and norms embedded in the organizational culture and picked up by employees will influence employee reflections

HOW DID ORGANIZATIONAL CULTURE START

While organizational cultures developed in different ways the process usually involves some version of the following steps

A single person (founder) has an idea for a new enterpriseThe founder brings in one or more other key people and creates a core group that shares a common vision with the founderThe founding core group begins to act in concert to create an organization by raising funds obtaining patents incorporating locating space building and so onAt this point others are brought into the organization and a common history begins to be built

Most of todayrsquos successful corporate giants in all industries basically followed these steps Three well-known representative examples are Motorola McDonaldrsquos and Wal-Mart

McDonaldrsquos Ray Kroc worked for many years as a salesperson for a food supplier He learned how retail food operations were conducted He also had an entrepreneurial streak and began a sideline business with a partner They sold multimixers machines that were capable of mixing up to six frozen shakes at a time One day Kroc received a large order for multimixers from the McDonald brothers The order intrigued Kroc and he decided to look in on the operation the next time he was in their area When he did Kroc became convinced that the McDonaldrsquos fast food concept would sweep the nation He bought the rights to franchise McDonaldrsquos units and eventually bought out the brothers At the same time he built the franchisee on four basic concepts quality cleanliness service and price In order to ensure that each unit offers the customer the best product at the best price franchisees are required to attend McDonald

6 | P a g e

ORGANIZATIONAL CULTURE

University where they are taught how to manage their business Here they learn the McDonald cultural values and the proper way to run the franchisee This training ensures that the franchisees all over the world are operating their units in the same way Kroc died several years ago but the culture he left behind is still very much alive in McDonaldrsquos franchisees across the globe In fact new employees receive videotaped messages from the late Mr Kroc

Wal-Mart Sam Walton founder of Wal-Mart Stores Inc opened his first Wal-Mart store in 1962 Focusing on the sale of discounted name brand merchandise in small town markets he began to set up more and more stores in the Sun Belt At the same time he began developing effective inventory control systems and marketing techniques Today Wal-Mart has not only become the largest retailer but also one of the biggest firms in the country Although Sam died a few years ago his legacy and cultural values continue To ensure that these values get out to all the associates the company has a communication network worthy of the Pentagon It includes everything from a six-channel satellite system to a private air force of numerous planes Everyone is taught this culture and is expected to operate according to the core cultural values of hard work efficiency and customer service

LEVELS OF CULTURE

ARTIFACTSVALUESBASIC ASSUMPTIONS

ARTIFACTS

Artifacts are the most visible and accessible level of culture It is symbol of culture in the physical and social work environment of the organization

Artifacts of culture are

PERSONAL ENACTMENT RITES AND CEREMONIESSTORIES AND LEGENDSRITUALSSYMBOLS

7 | P a g e

ORGANIZATIONAL CULTURE

PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

8 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

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ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

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ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

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ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

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ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

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ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

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ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

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ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

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ORGANIZATIONAL CULTURE

To support a culture of vigilance employees also must be educated on the relationship between organizational integrity and the organizations strategic positioning Employees who observe wrongdoing may not report it because they cannot fully estimate the resulting damage Therefore the organization should ensure employees are in a position to identify the potential consequences of ethical compliance and legal breaches including opportunity costs and harm to the organization its reputation and stakeholders

ENGAGEMENT

The cultural dimension of engagement is multifaceted and complex Engagement is concerned with organizational and individual factors that contribute to a personal state of authentic involvement in the organization Organizational processes used to recruit orient socialize and manage employees influence engagement Employeersquos sense making psychological contracts and perceptions of fairness in organizational dealings influence the degree of authentic involvement by them Managing these organizational processes and individual perceptions to facilitate high degrees of organizational commitment and identification encourages a culture of engagement that supports internal whistle blowing

If an organization member is not committed to high ethical standards there may be a tendency to rationalize questionable behavior as a common or even necessary practice in performing job duties On the other hand if an employee has high ethical standards that are not supported by the organization there is a tendency for the employee to experience internal conflict Such conflict will arise when organizational demands on employees are inconsistent with personal or professional values The result is decreased commitment and an unwillingness to exert effort on behalf of the organization

Once employees enter the organization socialization methods including training on ethical standards can be used to deepen employee commitment to organizational values and norms

CREDIBILITY

A culture of engagement that supports organizational commitment and identification however may not be sufficient for prompting employee disclosures An employee will also seek to test the organizations commitment to integrity Leadership behavior is a key determinant of employee perceptions and beliefs

The most powerful strategy that can be relied upon to facilitate credibility is employee belief in espoused ethics and values including organizational expectations for employee disclosure attending to and monitoring congruence in the organizational culture The role of leadership is central to this strategy

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ORGANIZATIONAL CULTURE

Aligning leadership behaviors with formal policies and consistent modeling of espoused values are important practices for fostering credibility Demonstrating personal commitment to organizational values builds trust and creates a safe environment for employees to come forward and report concerns

ACCOUNTABILITY

Accountability for communicating knowledge of wrongdoing will be carefully judged by employees Is it my job to report Isnt this someone elses responsibility Why should I get involved After all I am not the only one aware of what is going on here Again values beliefs and norms embedded in the organizational culture and picked up by employees will influence employee reflections

HOW DID ORGANIZATIONAL CULTURE START

While organizational cultures developed in different ways the process usually involves some version of the following steps

A single person (founder) has an idea for a new enterpriseThe founder brings in one or more other key people and creates a core group that shares a common vision with the founderThe founding core group begins to act in concert to create an organization by raising funds obtaining patents incorporating locating space building and so onAt this point others are brought into the organization and a common history begins to be built

Most of todayrsquos successful corporate giants in all industries basically followed these steps Three well-known representative examples are Motorola McDonaldrsquos and Wal-Mart

McDonaldrsquos Ray Kroc worked for many years as a salesperson for a food supplier He learned how retail food operations were conducted He also had an entrepreneurial streak and began a sideline business with a partner They sold multimixers machines that were capable of mixing up to six frozen shakes at a time One day Kroc received a large order for multimixers from the McDonald brothers The order intrigued Kroc and he decided to look in on the operation the next time he was in their area When he did Kroc became convinced that the McDonaldrsquos fast food concept would sweep the nation He bought the rights to franchise McDonaldrsquos units and eventually bought out the brothers At the same time he built the franchisee on four basic concepts quality cleanliness service and price In order to ensure that each unit offers the customer the best product at the best price franchisees are required to attend McDonald

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ORGANIZATIONAL CULTURE

University where they are taught how to manage their business Here they learn the McDonald cultural values and the proper way to run the franchisee This training ensures that the franchisees all over the world are operating their units in the same way Kroc died several years ago but the culture he left behind is still very much alive in McDonaldrsquos franchisees across the globe In fact new employees receive videotaped messages from the late Mr Kroc

Wal-Mart Sam Walton founder of Wal-Mart Stores Inc opened his first Wal-Mart store in 1962 Focusing on the sale of discounted name brand merchandise in small town markets he began to set up more and more stores in the Sun Belt At the same time he began developing effective inventory control systems and marketing techniques Today Wal-Mart has not only become the largest retailer but also one of the biggest firms in the country Although Sam died a few years ago his legacy and cultural values continue To ensure that these values get out to all the associates the company has a communication network worthy of the Pentagon It includes everything from a six-channel satellite system to a private air force of numerous planes Everyone is taught this culture and is expected to operate according to the core cultural values of hard work efficiency and customer service

LEVELS OF CULTURE

ARTIFACTSVALUESBASIC ASSUMPTIONS

ARTIFACTS

Artifacts are the most visible and accessible level of culture It is symbol of culture in the physical and social work environment of the organization

Artifacts of culture are

PERSONAL ENACTMENT RITES AND CEREMONIESSTORIES AND LEGENDSRITUALSSYMBOLS

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ORGANIZATIONAL CULTURE

PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

8 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

Aligning leadership behaviors with formal policies and consistent modeling of espoused values are important practices for fostering credibility Demonstrating personal commitment to organizational values builds trust and creates a safe environment for employees to come forward and report concerns

ACCOUNTABILITY

Accountability for communicating knowledge of wrongdoing will be carefully judged by employees Is it my job to report Isnt this someone elses responsibility Why should I get involved After all I am not the only one aware of what is going on here Again values beliefs and norms embedded in the organizational culture and picked up by employees will influence employee reflections

HOW DID ORGANIZATIONAL CULTURE START

While organizational cultures developed in different ways the process usually involves some version of the following steps

A single person (founder) has an idea for a new enterpriseThe founder brings in one or more other key people and creates a core group that shares a common vision with the founderThe founding core group begins to act in concert to create an organization by raising funds obtaining patents incorporating locating space building and so onAt this point others are brought into the organization and a common history begins to be built

Most of todayrsquos successful corporate giants in all industries basically followed these steps Three well-known representative examples are Motorola McDonaldrsquos and Wal-Mart

McDonaldrsquos Ray Kroc worked for many years as a salesperson for a food supplier He learned how retail food operations were conducted He also had an entrepreneurial streak and began a sideline business with a partner They sold multimixers machines that were capable of mixing up to six frozen shakes at a time One day Kroc received a large order for multimixers from the McDonald brothers The order intrigued Kroc and he decided to look in on the operation the next time he was in their area When he did Kroc became convinced that the McDonaldrsquos fast food concept would sweep the nation He bought the rights to franchise McDonaldrsquos units and eventually bought out the brothers At the same time he built the franchisee on four basic concepts quality cleanliness service and price In order to ensure that each unit offers the customer the best product at the best price franchisees are required to attend McDonald

6 | P a g e

ORGANIZATIONAL CULTURE

University where they are taught how to manage their business Here they learn the McDonald cultural values and the proper way to run the franchisee This training ensures that the franchisees all over the world are operating their units in the same way Kroc died several years ago but the culture he left behind is still very much alive in McDonaldrsquos franchisees across the globe In fact new employees receive videotaped messages from the late Mr Kroc

Wal-Mart Sam Walton founder of Wal-Mart Stores Inc opened his first Wal-Mart store in 1962 Focusing on the sale of discounted name brand merchandise in small town markets he began to set up more and more stores in the Sun Belt At the same time he began developing effective inventory control systems and marketing techniques Today Wal-Mart has not only become the largest retailer but also one of the biggest firms in the country Although Sam died a few years ago his legacy and cultural values continue To ensure that these values get out to all the associates the company has a communication network worthy of the Pentagon It includes everything from a six-channel satellite system to a private air force of numerous planes Everyone is taught this culture and is expected to operate according to the core cultural values of hard work efficiency and customer service

LEVELS OF CULTURE

ARTIFACTSVALUESBASIC ASSUMPTIONS

ARTIFACTS

Artifacts are the most visible and accessible level of culture It is symbol of culture in the physical and social work environment of the organization

Artifacts of culture are

PERSONAL ENACTMENT RITES AND CEREMONIESSTORIES AND LEGENDSRITUALSSYMBOLS

7 | P a g e

ORGANIZATIONAL CULTURE

PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

8 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

University where they are taught how to manage their business Here they learn the McDonald cultural values and the proper way to run the franchisee This training ensures that the franchisees all over the world are operating their units in the same way Kroc died several years ago but the culture he left behind is still very much alive in McDonaldrsquos franchisees across the globe In fact new employees receive videotaped messages from the late Mr Kroc

Wal-Mart Sam Walton founder of Wal-Mart Stores Inc opened his first Wal-Mart store in 1962 Focusing on the sale of discounted name brand merchandise in small town markets he began to set up more and more stores in the Sun Belt At the same time he began developing effective inventory control systems and marketing techniques Today Wal-Mart has not only become the largest retailer but also one of the biggest firms in the country Although Sam died a few years ago his legacy and cultural values continue To ensure that these values get out to all the associates the company has a communication network worthy of the Pentagon It includes everything from a six-channel satellite system to a private air force of numerous planes Everyone is taught this culture and is expected to operate according to the core cultural values of hard work efficiency and customer service

LEVELS OF CULTURE

ARTIFACTSVALUESBASIC ASSUMPTIONS

ARTIFACTS

Artifacts are the most visible and accessible level of culture It is symbol of culture in the physical and social work environment of the organization

Artifacts of culture are

PERSONAL ENACTMENT RITES AND CEREMONIESSTORIES AND LEGENDSRITUALSSYMBOLS

7 | P a g e

ORGANIZATIONAL CULTURE

PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

8 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

PERSONAL ENACTMENT

Personal enactment is a behavior that reflects the value of organization through the examination of the behavior of organization members

CEREMONIES AND RITES

Set of activities that are enacted time and again on important occasionIt provides the opportunity to reward and recognize the employees whose behaviors are according to the values of the organization

Rites to the employees can be awarded as

Rites of passagerites of renewal Rites of integrationRites of conflict reductionRites of degradations

RITES OF PASSES

Rites of passes show the changed status of individuals in the respected organization

Retirement dinner

RITES OF RENEWAL

Rites of renewal show the holistic changing in organization by enhancing the dedication towards

learning and growth

RITES OF INTEGRATION

It emphasize on the commitment of the employees by uniting diverse group within the organizationCompany function annual picnic cultural fest are the rites of integration in the

organization

RITES OF COFLICT REDUCTION

Its primal objective is to dwindle the disagreements and keep up with the positive environment inside the organization by satisfying the tangible and intangible needs of the employee

8 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

Grievance hearing negotiation of union contracts isrite of conflict reduction

RITES OF DEGRADATION

It is basically punishment oriented and organization people may be punished visibly if they donrsquot follow the organizational norms

Ribbon of shame demotion in the organizational post reduction in salary can be under the rites

of degradation

STORIES AND LEGENDS

Stories are the most effective way to reinforce the organizational values it give meaning and identity to the organizations and very helpful in orienting new employees

Stories can be delivered in different ways

Stories about the bossStories about getting firedStories about company detailsStories about employeesStories about rules

RITUALS

Rituals are unwritten and shows the way the employee follow the things to be done in the

organization These are the everyday organizational practices repeated over and over

SYMBOLS

Symbols are again one important artifact of the organization which communicates about the organizational culture by unspoken messages

VALUES

Values reflect a personrsquos underling believes in the organization it is often consciously articulated both in conversation and the companyrsquos mission statement or annual report a firmrsquos values and how it promotes and publicizes them can also affect workers feeling about their job and

themselves

ASSUMPTIONS9 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

Assumptions are deeply held believes that guide behavior and awakens the members of the organization how to perceive and go about the things

FUNCTIONS OF ORGANIZATIONAL CULTURE

These are the functions being served by the organization

Sense of identitySense ndash making deviceReinforcing the values in organizationControl mechanism for shaping behavior

SENE OF IDENTITY

Culture provides a sense of identity to the members and enhances their commitment towards the

organization

SENSE MAKING DEVICE

Culture in the organization provides the employees to interpret the meaning of the organizational

events

VALUE REINFORCEMENT

Values in the organization can be reinforced by the cultural activities

CONTROL MECHANISM

In shaping the behavior of members in the organization culture plays the big role

CULTURAL PERPECTIVES

THE STRONG PERSPECTIVETHE FIT PERSPECTIVETHE ADAPTATION PERSPECTIVE

THE STRONG PERSPECTIVE

10 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

The strong culture facilitates performance with the intensity visible to the outsidersIt states that organization with strong culture performs better than other organizations

THE FIT PERSPECTIVE

Fit perspective argues that the culture of the organization is valid if it fits the industry or firmrsquos

strategies It is useful in explaining short term performances

THE ADAPTATION PERSPECTIVE

The cultures that help organizations adapt to environmental change are deeply associated with excellent performance It encourages confidence and risk taking capacity among the employees

LEADERS ROLE IN SHAPING CULTURE

WHAT LEADERS PAY ATTENTION TOHOW LEADERS REACT TO THE CRISESHOW LEARERS BEHAVEHOW LEADERS ALLOCATE REWARDSHOW LEADERS HIRE AND FIRE PEOPLE

ORGANIZATIONAL SOCIALIZATION

Another process that perpetuates culture is the way it is handed down from generation of employees Newcomers learn the culture through organizational socialization ndash ldquoThe process by which newcomers are transformed from outsiders to participating effective members of the organizationsrdquo The process is also a vehicle for bringing newcomers into the organizational

culture

STAGES OF THE SOCIALIZATION PROCESS

The organizational socialization process is generally described as having three stages

Anticipatory SocializationEncounterChange and Acquisition

ANTICIPATORY SOCIALIZATION

The first stage encompasses all of the learning that takes place prior to the newcomerrsquos first day on the job It includes the newcomerrsquos expectations The two concerns at this stage are

11 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

RealismCongruence

Realism is the degree to which a newcomer holds realistic expectations about the job and about the organization One thing newcomers should receive information about during entry into the organization is the culture Information about values at this stage can help newcomers begin to construct a scheme for interpreting their organizational experiences

There are two types of Congruence between an individual and an organization Congruence between the individualrsquos abilities and the demand of the job and the fit between the organizationrsquos values and the individualrsquos values Value Congruence is particularly important for organizational culture It is also important in terms of newcomer adjustment

ENCOUNTER

The second stage of socialization encounter is when newcomers learn the tasks associated with the job clarify their roles and establish new relationships at work This stage commences on the first day at work and is thought to encompass the first six to nine months on the new job

TASK DEMAND

Task demand involves the actual work performed Learning to perform tasks is related to the organizationrsquos culture In some organizationrsquos newcomers are given considerable latitude to experiment with new ways to do the job and creativity is valued

ROLE DEMAND

Role demand involves the expectations placed on newcomers Newcomers may not know exactly what is expected of them or may receive conflicting expectations from other individuals The way newcomers approach these demand depends in part on the culture of the organization

INTERPERSONAL DEMAND

Interpersonal demand arises from relationships at work Politics Leadership style and group pressure are interpersonal demand All of them reflect the values and assumptions that operate within the organization

CHANGE AND ACQUISITION

In the third and final stage of socialization change and acquisition newcomers begin to master the demands of the job They become proficient at managing their tasks clarifying and

12 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

negotiating their roles and engaging in relationship at work The end of the process is signaled by newcomers being considered by themselves and others as organizational insiders

OUTCOMES OF SOCIALIZATION

Newcomers who are successful socialized exhibit good performance high job satisfaction and the intention to stay with the organization In addition they should exhibit low levels of distress symptoms High levels of organizational commitment are also marks of successful socialization Successful Socialization is also signaled by mutual influences

When socialization is effective newcomers understand and adopt the organizations values and norms This provides employees a context for interpreting and responding to things that happen at work

Newcomers adopt the companyrsquos norms and values more quickly when they receive positive support from organizational insiders

SOCIALIZATION AS CULTURAL COMMUNICATION

Socialization is a powerful cultural communication tool While the transmission of information about cultural artifacts is relatively easy the transmission of value is more difficult The communication of organizational assumption is almost impossible

The primary purpose of socialization is the transmission of core values to new organization members Newcomers are exposed to these values through the role models they interact with the training they receive and the behavior they observe being rewarded and punished

ACCESSING ORGANIZATIONAL CULTURE

Although some organizational scientists argue for assessing organizational culture with quantitative methods others say qualitative methods yield better results Quantitative methods

such as questionnaires are valuable because of their precision comparability and objectivity

ORGANIZATIONAL CULTURE INVENTORY

The OCI focuses on behaviors that help employees fit into the organization and meet the expectations of coworkers Using Maslowrsquos motivational need hierarchy as its basis it measures

13 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

twelve cultural styles The two underlying dimensions of the OCI are taskpeople and securitysatisfaction There are four satisfaction cultural styles and eight securities cultural styles

KILMANN-SAXTON CUKTURE-GAP SURVEY

The kilmann- saxton culture-gap survey focuses on what actually happens and on the expectations of others in the organization Its two underlying dimensions are technicalhuman and time With these two dimensions the actual operating norms and the ideal norms in four areas are assessed The areas are task support task innovation social relationships and personal freedom

TRIANGULATION

A study of a rehabilitation centre in a 400-bed hospital incorporated triangulation to improve inclusiveness and accuracy in measuring the organizational culture Triangulation has been used by anthropologists sociologists and other behavioral scientists to study organizational culture Its name comes from the navigational technique of using multiple reference points to locate an

object

CHANGING ORGANIZATIONAL CULTURE

Changing situation may require changes in the existing culture of an organization With rapid environmental changes such as globalization workforce diversity and technological innovation the fundamental assumptions and basic values that drive the organization may need to be altered

One particular situation that may require cultural change is a merger or acquisition

14 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

EMPOWERMENT OF EMPLOYEE TO EXCEL IN PRODUCT AND SERVICE QUALITY

Empowerment unleashes employeesrsquo creativityEmpowerment requires eliminating traditional hierarchical notions of power

Involve employees in decision making

15 | P a g e

Hiring andsocializing

members whofit in with thenew culture

Removingmembers who

reject the new culture

Culture

Culturalcommunication

Changing behavior

Examining

justificationsfor

changed

behavior

2

1

5

3

4

Interventions forChanging

OrganizationalCulture

Reprinted with permission from Vijay Sathe ldquoHow to Decipher amp Change Corporate Culturerdquo Copyright copy 1985 Jossey-Bass Inc Reprinted by permissionOf Jossey-Bass Inc a subsidiary of John Wiley amp Sons Inc

Copyright copy2006

by South-Western a division of Thomson Learning All rights reserved

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

Remove obstacles to their performance

Communicate the value of product and service quality

CISCO CULTURE CASE STUDY

ABSTRACT

The case focuses on Ciscos organization culture which many feel was responsible for Cisco bouncing back to profit after recording losses during the tech meltdown of 2001 The case looks at Ciscos growth through the years the drivers of Cisco culture and the characteristics of work culture at Cisco Incorporated in 1984 Cisco had a culture based on the principles of customer focus transparent communication employee empowerment integrity and frugality The work culture which epitomized fun and fostered a spirit of employee involvement ensured that employee turnover was way below industry norms Continuous Learning an element of the Cisco culture was taken care of even through acquisition and partnerships The case also looks into the role played by the companys CEO John Chambers in the evolution of the Cisco culture

CASE

Cisco Systems Inc (Cisco) the leader in Internet Protocol (IP)-based networking technologies and networking gear recorded $22 billion in revenues and a market capitalization of $9 billion in 1995 By March 2000 market capitalization went up to $ 531 billion while revenues in 2000 were $19 billion In 1995 Cisco accounted for 15 of the networking industrys profit and this figure went up to 50 in 2000 But with the tech meltdown of 2000-01 telecom companies and Internet service providers stopped purchasing telecom equipments from Cisco Cisco was thus on a free fall a situation the top management did not expect If somebody wouldve told me then that wed go from 70 growth to minus 30 growth in 45 days Id have said it was mathematically impossible said John T Chambers (Chambers) President and CEO Cisco Systems Inc5

Though the company recorded losses in 2001 it bounced back with net profits the next year Ciscos net sales for fiscal 2004 were $220 billion an increase of 168 percent from the $189 billion for fiscal 2003 while net income for fiscal 2004 was $44 billion or $062 per share compared with $36 billion or $050 per share for fiscal 2003 (Refer Exhibit I for stock market

16 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

movement of Cisco between 1990 and 2005) Industry observers were quick to point out that it was the organization culture of Cisco that helped it survive the tough periods of meltdown Cisco was founded on a culture based on the principles of customer focus open communication empowerment trust integrity and giving back to the community

This culture ensured that Cisco was on the list of the Fortune magazines 100 best places to work for eight consecutive years starting 1998

BACKGROUND NOTE

Headquartered at San Jose California US Cisco was incorporated on December 10 1984 The company was founded by a group of computer scientists who designed software named IOS (Internet Operating System) which could send streams of data from one computer to another This was loaded into a box containing microprocessors specially designed for routing In 1985 the company started a customer support site from where customers could download software over FTP6 and also upgrade the downloaded software Cisco on its site also provided a database that contained information about potential software problems to help customers and developers

By 1991 Ciscos support centre was receiving around 3000 calls a month which increased to 12000 by 1992 To deal with the large volume of transactions it built an online customer support system on its site

In 1993 Cisco installed an Internet-based system for large multinational corporate customers The system allowed customers to post queries related to their problems Cisco also installed a trigger function called the Bug Alert on its website The Bug Alert sent e-mails on software problems within 24 hours of their discovery

Encouraged by the success of its customer support site in 1994 Cisco launched Cisco Information Online a public website that offered not only company and product information but also technical and customer support to customers

In 1995 it introduced applications for selling products or services on its website This was done mainly to transfer paper fax and e-mails to the web to save time for employees customers and trading partners besides broadening Ciscos market reach In 1996 the company introduced a new Internet initiative Networked Strategy to leverage on its enterprise network to foster interactive relationships with prospective customers partners suppliers and employees

In August 1996 Cisco launched transactional facilities including product configuration and

17 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

online order placement connected to Ciscos ERP systemsIn 1997 it introduced the dial-in access from desktop computers that enabled customers to place orders without accessing the Internet In the same year it also introduced customized business applications for its customers corporate Intranets and automated the ordering process by linking directly to Ciscos internal systems Commenting on the growth of Cisco in the late 1990s Jeremy Duke analyst at market research firm In-Stat7 said They are entering into the zone of the great phone companies as moneymakers and as builders of infrastructure Theres nobody like them

WHAT DRIVES CISCOS CULTURE

CUSTOMERS FIRST

Ciscos success has been attributed to its relationship with its customers Cisco professed a worship of customers which was a part of the companys culture right from its inception This is a culture where the customer comes first If the customer has a problem we drop everything said Pete Solvik (Solvik) Senior Vice President and Chief Information Officer (CIO) Cisco Cisco viewed the assessment of customer satisfaction as a continuous process One of the elements of this assessment was getting regular customer feedback which helped Cisco employees to be proactive in identifying problem areas rather than waiting for an annual customer satisfaction survey Ciscos field teams designed the questionnaires that were used to assess customer satisfaction

THE WORK CULTURE

The organizational structure of Cisco fostered a spirit of employee involvement Very often its most efficient to just work with the person involved without the formality of passing through every layer of management But that requires a level of trust that not all organizations have mentioned Solvik If a Cisco employee wanted the top management support for an innovative idea he had to discuss the idea with an employee decision-making team and get its assent If the decision-making team accepted the idea the top management gave the green signal They (the decision-making teams) are empowered to make that decision because we put the authority the responsibility and the accountability at the same layer

RECRUITMENT AT CISCO

Ciscos recruitment practices reflected the company culture Ciscos recruiting team identified candidates whom they felt the company should hire and then designed its hiring processes to attract them to the company In the late 1990s the company was hiring at a rate

18 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

which averaged 1000 new employees every month For recruiting candidates who fit into the culture of Cisco a selection criterion was developed which targeted candidates who were frugal enthusiastic about the future of the Internet and were not obsessed with status - all hallmarks of the Cisco culture

BUILT TO LAST

According to some analysts Cisco faced the risk of diluting its culture due to the influences of new recruits who brought in behaviors from past job experiences Were focusing on what it will take to communicate the culture and preserve it Thats another learning experience Culture is not automatic

That it follows a principle of customer focus transparent communication employee empowerment integrity and fragility

It is the culture where customer comes first but in CISCO itrsquos also the product that works and matters Here engineer counts as much as culture So CISCOrsquos betting big on collaboration that draws manager input from all levels as the main drivers for its strategy to grab new market Its taking a decentralized form rather than working on a single leader decision making

In conclusion Cisco Systems appeals to businesses and employees in similar ways by offering a standard to be the best provider and staying ahead of the competition Their cultural presence is felt by worldwide leadership in technology by bringing jobs as well as communications to countries and government structures Cisco offers a strong customer-responsive organization that blends with cultural needs and service to its employees

Thus it has a fit culture perspective where customer and competitors comes first

Although customer is the top priority in CISCOrsquos culture but it gives equal importance to its employees Its decentralized system of decision making amp futuristic approach are the major gluing factor in retaining employees

19 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

3M CASE STUDY

ABSTRACT

The case examines the organizational culture at 3M and the way in which it facilitated innovation at 3M The policies and mechanisms adopted by 3Ms management to encourage the spirit of innovation in its employees are also discussed

The case takes a close look at 3Ms environment of innovation the culture of knowledge sharing and the reward system It also discusses the steps implemented by the new CEO James McNerney to accelerate growth at 3M The impact of cultural change at 3M on the spirit of innovation is also discussed

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION

It was celebration time at 3M The company completed 100 years in business in 2002 For many 3M represented the house of innovation For 100 years 3M formula for growth - recruit the right people provide them with the right environment to work and let them do their things - resulted in around 55000 products and over thousands of patents for the company Analysts attributed 3Ms success to its commitment to innovation They pointed out that 3M gave its employees the freedom to conduct research in areas of their choice even if that research was not related to their official projects

By thus nurturing the talents of its employees and fostering a climate of innovation 3M became one of the most innovative companies in the world

In 2001 James McNerney Jr (McNerney) took over as Chairman and CEO of 3M and announced several initiatives to revive the stagnating growth rate of the company He initiated cost cutting measures rationalized purchases and implemented process improvement programs

20 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

in the company He gave a centralized direction to the company from its earlier laissez-faire working style Analysts cautioned that the changes brought about by McNerney might harm the 100-year old culture at 3M that fostered innovation and sustained its growth over the years However McNerney pointed out that the changes brought about in 3M would provide the company a strategic direction in a volatile business environment without harming its organizational culture

INVENTING 3M

In 1902 five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as 3M) in Two Harbors US The new company was in the business of mining corundum a mineral best suited for making sandpaper and grinding wheels In 1904 when an artificial abrasive replaced corundum 3M decided to manufacture sandpaper Edgar Ober (Ober) one of the founding members of 3M approached his friend Lucius Ordway (Ordway) a successful businessman for funds for the new venture Ordway agreed to invest $25000 in the company on condition that he wont be involved in the day-to-day affairs of the company

However by 1906 Ordway had invested around $200000 in 3M and had become involved in the day-to-day affairs of the company In the same year he became the President of the company

When 3M realized that the corundum owned by it was a low-grade anorthosite it decided to shut down the mine and shift to Duluth in 1905 In the same year 3M decided to import garnet5from Spain 3M received its first shipment of garnet in 1907 and started producing sandpaper By 1911 3M reported sales of $212 898 and in the same year Ober appointed William L McKnight (McKnight) who joined the company in 1907 as assistant bookkeeper as sales manager In 1911 3M brought out its first breakthrough product Three-M-ite cloth Three-M-ite became the companys first profitable product The Carborundum Company which had developed artificial abrasive coated emery cloth before 3M filed a patent infringement suit against the company

3M hired Paul Carpenter a Chicago based lawyer and expert in patent law and won the case against Carborundum Due to Three-M-ites success 3M became debt free and announced its first dividend of 6 cents per share in 1916 In the same year McKnight became vice-president In the 1920s 3M recruited people with diverse backgrounds and expanded its product portfolio It also introduced two breakthrough products waterproof sandpaper and Scotch masking tape invented by Francis Okie (Okie) and Dick Drew (Drew) respectively In 1922 3M entered the English market and reported sales of $68000 in the first year of its operations In order to consolidate its presence in global markets 3M established research laboratories and a sales and marketing network across Europe

21 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

EXPERTS

FOSTERING INNOVATION

From its early days 3M fostered a culture of innovation in its organization McKnight tried to create an organization that would encourage its employees to take the initiative and come up with new ideas

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests According to company sources people who had a broad range of interests were willing to learn and explore new ideas In addition they brought a multi-disciplinary approach to their work To make it easy for recruiters 3M codified the six traits of innovative people in its recruiting brochure

bull Creativitybull Broad interestsbull Self motivatedbull Resourcefulbull Hard workingbull Problem solvers

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions As these divisions increased in size McKnight noticed that there was a slowdown in innovation not much time was devoted to new product development

To increase the pace of new product launches McKnight introduced the philosophy of divide and grow In line with this philosophy new businesses were spun off and new management teams were devoted to the spun off units As a result these new units were able to grow quickly When these new businesses were spun off the established divisions had to develop new products and find new markets to achieve their growth objectives to make up for contributions from the businesses that had become independent This mechanism which analysts called Renewal resulted in increased diversification at 3M

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation 3M also took steps to encourage knowledge sharing among its employees According to analysts innovation could

22 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

flourish in 3M because the management encouraged its employees to talk 3M employees never experienced any communication barriers

REWARDING INNOVATION

In addition to recruiting innovative people creating a challenging environment for employees and encouraging a culture of knowledge sharing 3M also focused on rewarding employees To encourage the spirit of innovation among employees 3M realized it was necessary to reward them appropriately The dual ladder career path adopted by 3M created two career ladders - technical and management This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilitiesFrom the 3M case we reach at the conclusion that though McNerney wanted to make the decision system a bit centralized but he preferred employees taking initiatives Creativity hard work amp problem solving attitude are given importance at 3M It focused on rewarding employees and there was not any communication barrier which encouraged the process of knowledge sharing It basically followed an adaptive culture where employees were the main priority

3M recognized that a strategic commitment to innovative products would pay off if it were tied to creating a culture that allowed its employees to be innovative and creative When an employee at 3M made a mistake or had an idea that didnt work he or she discussed it at a team meeting and the entire team celebrated the learning experience Over time a culture evolved where risk and innovation were viewed as necessary and complementary 3M managed to link strategies to management and employee actions It successfully linked corporate success to the development of new products and a lesser dependence on mature products It linked its HR systems to its strategic framework by creating a set of HR strategies that provided innovative compensation and reward systems creative organizational structures training and development plans tied to strategic outcomes and targeted employee skills Through over 90 years of trial and error 3M has developed a culture that effectively supports both quality and innovation

So there was a cultural overhaul in the 3M system with the entry of McNerney which resulted in

CULTURE OVERHAUL

By the late 1990s 3Ms growth rate started slowing down According to reports the stock price of 3M dropped from $8300 in 1996 to $7113 in 1998 and the price-earning ratio (PE ratio) of the company also declined considerably

It was reported that during 1995-2000 earnings per share grew at an average of only 88 and shareholder returns fell far behind Dow and the SampP 500 Analysts felt that 3M was

23 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

unable to respond to market conditions Commenting on 3Ms performance during the decade Bob Burgstahler (Burgstahler) chief of Business development said We have not produced elite results that correspond to the view that this is an elite organization In December 2000 3M announced the appointment of James McNerney Jr (McNerney) of General Electric as its CEO For the first time an outsider was appointed as CEO of 3M The stock markets responded positively to the appointment of McNerney and 3Ms stock price closed at $12050 the highest in the decade

3M has been encouraging a culture of innovation from the very beginning where employees are given freedom to work without any pressure They are given full freedom to implement new ideas with no or very less questioning There is no communication barrier in the organization These are the major gluing factor in 3M which has retained its employees since so long

SOUTHWEST AIRLINES

Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18 1971 with three Boeing 737 aircraft serving three Texas cities - Houston Dallas and San Antonio Today Southwest operates more than 500 Boeing 737 aircraft between 67 cities Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003 Yearend results for 2008 marked Southwestrsquos 36th consecutive year of profitability Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark Southwest is the United Statesrsquo most successful low-fare high frequency point-to-point carrier

More than 38 years ago Rollin King and Herb Kelleher got together and decided to start a different kind of airline They began with one simple notion If you get your passengers to their destinations when they want to get there on time at the lowest possible fares and make darn sure they have a good time doing it people will fly your airline

CULTURE DONE DIFFERENTLY

For more than 38 years the Southwest Culture has thrived but it hasnrsquot been easy The longevity has been both their biggest accomplishment and their most significant challenge

At Southwest They think of Their Culture in a positive light but every company has a culture whether that culture is supportive or stifling active or passive fun or discouraging The way they keep their Culture supportive active and fun is by making Southwestrsquos Culture everyonersquos responsibility In fact they ask everyone to ldquoown itrdquo

24 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

The Culture Committees are just the beginning of what separates them from the way other companies approach their culture One of the most significant ldquoSouthwest differencesrdquo in their pursuit to preserve and promote their Culture is the way it is embedded in every aspect of the Company Hardly any company make having a ldquoFun-Loving Attituderdquo a key pillar of their leadership expectations Those same expectations include ldquoThe Golden Rulerdquo and possessing a ldquoServantrsquos Heartrdquo The annual Performance Appraisal for all of their Employees includes asection on Southwest Culture From an Employeersquos initial interview until the day he or she retires the Southwest Culture is an ingrained part of daily life

And finally their Culture encourages celebration First they celebrate their Veterans on the month of Nov America would be a much different place without the courage of their Veterans

They then celebrate the blessings of the past year on Thanksgiving

Southwests no-layoff response to September 11 was a reminder to its employees of the organizations tradition of caring for its people When asked to comment on this an official explained Its part of our culture Weve always said well do whatever we can to take care of our people So thats what weve tried to do1

Southwests organizational culture was shaped by Kellehers leadership Kellehers personality had a strong influence on the culture of Southwest which epitomized his spontaneity energy and competitiveness Southwests culture had three themes love fun and efficiency Kelleher treated all the employees as a lovely and loving family Kelleher knew the names of most employees and insisted that they referred to him as Herb or Herbie Kellehers personality charmed workers and they reciprocated with loyalty and dedication Friendliness and familiarity also characterized the companys relationships with its customers

BUILDING RELATIONSHIPS

Since its inception Southwest attempted to promote a close-knit supportive and enduring family-like culture The Company initiated various measures to foster intimacy and informality among employees Southwest encouraged its people to conduct business in a loving manner Employees were expected to care about people and act in ways that affirmed their dignity and

worth

ARTIFACTSThe artifacts which are the symbols of culture in the physical and social work environment can be seen in the way the Southwest Company treats its employees To help keep the Culture at the

25 | P a g e

ORGANIZATIONAL CULTURE

forefront they have two groups Local Culture Committees and the Corporate Culture Committee Both groups put on low-cost Employee events throughout the year

The Employees roll up their sleeves to help out their area Ronald McDonald Houses at ThanksgivingColleen Barrett who is the former President of southwest airlines sent cards to all employees on their birthdaysThe CEO joins with the Employees to wish Happy Thanksgiving

Instead of decorating the wall of its headquarters with paintings the company hung photographs of its employees taking part at company events news clippings letters articles and advertisementsCustomers are not assigned seats rather they are assigned to one of three boarding groups depending on their check-in time (earlier check-ins get to board earlier) and are left to choose their own seats on the plane which helps the airline to board passengers faster

VALUESCompany Values Core Values

LUV Code word for treating individuals employees customers Dignity respect and caring loving attitude Appeared on banners and posters at company facilities Fun Entertaining behavior of employees in performing their jobs The ongoing pranks and jokes Frequent company-sponsored parties and celebrations Charity benefit games chili cook-offs Halloween parties

THRIVING UNDER PRESSURE

Post-September11 2001 when most airlines in the US went in for massive layoffs Southwest avoided laying off any employee Even before the September 11 crisis hit Kelleher had explained his philosophy regarding layoffs in an interview to Fortune magazine He said Nothing kills your companys culture like layoffs Nobody has ever been furloughed [at Southwest] and that is unprecedented in the airline industry Its been a huge strength of ours Its certainly helped us negotiate our union contracts One of the union leadershellipcame in to negotiate one time and he said We know we dont need to talk with you about job security We could have furloughed at various times and been more profitable but I always thought that

26 | P a g e

ORGANIZATIONAL CULTURE

was shortsighted

You want to show your people that you value them and youre not going to hurt them just to get a little more money in the short term Not furloughing people breeds loyalty It breeds a sense of security It breeds a sense of trust So in bad times you take care of them and in good times theyre thinking perhaps Weve never lost our jobs Thats a pretty good reason to stick around

Southwest was the only airline to remain profitable in every quarter since the September 11 attack (Refer Exhibit VIII for financial position of Southwest) Although its stock price dropped 25 since September 11 it was still worth more than all the others big airlines combined Its balance sheet looked strong with a 43 debt-to-equity ratio and it had a cash of $18 billion with an additional $575million in untapped credit lines The company left no stone unturned to boost employee loyalty and morale

South West Airlines has follows a fun loving attitude Their culture is all about care friendliness and familiarity this resulted in the thinking of the employees that ldquothey value usrdquo and thus we need to stick around This is the main gluing factor of the organizations culture

27 | P a g e

ORGANIZATIONAL CULTURE

CONCLUSION

Organizational culture is a pattern of basic assumptions that are taught to the personnel as the correct way to perceive think and act on a day-To-day basis Some of the important characteristics of organizational culture are observed behavioral regularities norms values rules philosophy and so on While everyone in the organization will share the organizations culture not all may do so to the same degree There can be a dominant culture but also a number of subcultures Some organizations have strong cultures and others have weak cultures The strength of the culture will depend on sharedness and intensity In some cases organizations find that they must change their culture in order to remain competitive and even survive in their environment With reference to the cases in this project we had analyzed the value system of the organization like CISCO 3M and SOUTH WEST AIRLINES 3M has built its organizational culture which holds its employees together in line with the vision and mission of the organization- southwest airlines has built an organization of repute - an enterprise that stands apart which even during the last economic downturn was

28 | P a g e

ORGANIZATIONAL CULTURE

unshaken While CISCO has given its culture an innovative and futuristic approach with customer as the top priority

BIBLOGRAPHY

wwwicmrindiaorg

Organizational Behavior by Nelson Quick

Organizational Behavior by KAswathappa

29 | P a g e

ORGANIZATIONAL CULTURE

was shortsighted

You want to show your people that you value them and youre not going to hurt them just to get a little more money in the short term Not furloughing people breeds loyalty It breeds a sense of security It breeds a sense of trust So in bad times you take care of them and in good times theyre thinking perhaps Weve never lost our jobs Thats a pretty good reason to stick around

Southwest was the only airline to remain profitable in every quarter since the September 11 attack (Refer Exhibit VIII for financial position of Southwest) Although its stock price dropped 25 since September 11 it was still worth more than all the others big airlines combined Its balance sheet looked strong with a 43 debt-to-equity ratio and it had a cash of $18 billion with an additional $575million in untapped credit lines The company left no stone unturned to boost employee loyalty and morale

South West Airlines has follows a fun loving attitude Their culture is all about care friendliness and familiarity this resulted in the thinking of the employees that ldquothey value usrdquo and thus we need to stick around This is the main gluing factor of the organizations culture

27 | P a g e

ORGANIZATIONAL CULTURE

CONCLUSION

Organizational culture is a pattern of basic assumptions that are taught to the personnel as the correct way to perceive think and act on a day-To-day basis Some of the important characteristics of organizational culture are observed behavioral regularities norms values rules philosophy and so on While everyone in the organization will share the organizations culture not all may do so to the same degree There can be a dominant culture but also a number of subcultures Some organizations have strong cultures and others have weak cultures The strength of the culture will depend on sharedness and intensity In some cases organizations find that they must change their culture in order to remain competitive and even survive in their environment With reference to the cases in this project we had analyzed the value system of the organization like CISCO 3M and SOUTH WEST AIRLINES 3M has built its organizational culture which holds its employees together in line with the vision and mission of the organization- southwest airlines has built an organization of repute - an enterprise that stands apart which even during the last economic downturn was

28 | P a g e

ORGANIZATIONAL CULTURE

unshaken While CISCO has given its culture an innovative and futuristic approach with customer as the top priority

BIBLOGRAPHY

wwwicmrindiaorg

Organizational Behavior by Nelson Quick

Organizational Behavior by KAswathappa

29 | P a g e

ORGANIZATIONAL CULTURE

CONCLUSION

Organizational culture is a pattern of basic assumptions that are taught to the personnel as the correct way to perceive think and act on a day-To-day basis Some of the important characteristics of organizational culture are observed behavioral regularities norms values rules philosophy and so on While everyone in the organization will share the organizations culture not all may do so to the same degree There can be a dominant culture but also a number of subcultures Some organizations have strong cultures and others have weak cultures The strength of the culture will depend on sharedness and intensity In some cases organizations find that they must change their culture in order to remain competitive and even survive in their environment With reference to the cases in this project we had analyzed the value system of the organization like CISCO 3M and SOUTH WEST AIRLINES 3M has built its organizational culture which holds its employees together in line with the vision and mission of the organization- southwest airlines has built an organization of repute - an enterprise that stands apart which even during the last economic downturn was

28 | P a g e

ORGANIZATIONAL CULTURE

unshaken While CISCO has given its culture an innovative and futuristic approach with customer as the top priority

BIBLOGRAPHY

wwwicmrindiaorg

Organizational Behavior by Nelson Quick

Organizational Behavior by KAswathappa

29 | P a g e

ORGANIZATIONAL CULTURE

unshaken While CISCO has given its culture an innovative and futuristic approach with customer as the top priority

BIBLOGRAPHY

wwwicmrindiaorg

Organizational Behavior by Nelson Quick

Organizational Behavior by KAswathappa

29 | P a g e