Saturday, September 28, 2013

Summary of "The Corporate Culture Survival Guide: New and Revised Edition"



The Corporate Culture Survival Guide: New and Revised Edition, summarized by arrangement with John Wiley & Sons, Inc., from The Corporate Culture Survival Guide: New and Revised Edition by Edgar H. Schein. © 1999, 2009 by John Wiley & Sons, Inc.
In this summary...
 
  • Learn what culture is and why it's important, how to evaluate your organization's culture, and how to improve it.
  • Develop a clear understanding of how to manage your culture at three levels, from visible artifacts to espoused values to shared tacit assumptions.
  • Discover how your corporate culture can aid or hinder your company's current performance and its future effectiveness.
  • Succeed at leading cultural change in your organization by following specific guidelines for companies that are young, mature, declining companies.
  • Increase your chances of making culture change stick by grasping a three-stage model of learning: (1) unfreezing, (2) learning, and (3) refreezing.
The Corporate Culture Survival Guide
In order to manage culture, you must understand what culture is and how to assess    it. The biggest danger in trying to understand culture is to oversimplify it.
It is tempting to say that culture is just "the way we do things around here," "the rites and rituals of our company," "our basic values," and so on. These are all manifestations of the culture, but none is the culture at the level where culture matters.
A better way to think about culture is to realize that it exists at three "levels," and that we must understand and manage the deeper levels. The levels of culture go from the very visible to the very tacit and invisible.
 


The easiest level to observe when you go into an organization is Level One, consisting of artifacts — what you see, hear, and feel as you hang around. Think about restaurants, hotels, stores, banks, or automobile dealerships. Note your observations and emotional reactions to the architecture, the decor, and the climate, based on how people behave toward you and toward each other.
You can sense immediately that different organizations do things differently. For example, in the computer firm Digital Equipment Corp. (DEC), people were constantly in meetings with each other, there were no walls or closed doors, they dressed informally, and you got a sense of fast-paced action.
In the Swiss chemical and pharmaceutical firm Ciba-Geigy, on the other hand, everything was very formal. People worked behind closed doors, conversations were hushed, dress was formal, and you got a sense of careful deliberation and slow movement.
As a customer or new employee, you may like or dislike one or the other of these organizations; you may think to yourself that DEC and Ciba-Geigy have different cultures. But you have to be careful. All you know for sure is that they have different ways of presenting themselves and different norms of how people deal with each other. What you don't know is what this all means.
In other words, at the level of artifacts, culture is very clear and has immediate emotional impact. But you don't really know why the members of the organization are behaving as they do and why each organization is constructed as it is. Just by hanging around and observing, you cannot really decipher what is going on.
You have to be able to talk to insiders and ask them questions about the things you observe and feel. That takes you to Level Two: espoused values.
Imagine yourself to be a new employee or manager, offered jobs at two companies that differ as much as DEC and Ciba-Geigy did. Should you go to work for the one whose entry lobby and security procedures make you feel most comfortable? Do you know enough about either culture from experiencing the artifacts and behavior patterns, or should you dig more deeply?
To dig deeper means to start asking questions about the things the organization values. Why do they do what they do? Why did DEC create open office areas while Ciba-Geigy put everyone behind closed doors?
These questions have to be asked, especially about those observed artifacts that puzzle you or that seem somehow inconsistent with what you would expect. For this purpose, you need to find insiders who can explain their organization to you.
The first things you learn when you start asking questions is that the organization has certain values that are supposed to create an image of the organization. In DEC, you were told that they believe in teamwork, that you cannot get good decisions without arguing out what everyone's point of view is and obtaining buy-in from those who have to implement decisions. Therefore, they had to make it easy for people to communicate with each other.
You may even have been told that these values came directly from Ken Olsen, the founder of the company and that at one time in the company's history he had even forbidden having doors on offices. In this company, when they had meetings, they tended to be free-for-alls and highly emotional.
You may also have been given some documents, pamphlets, or short papers that described the company's values, principles, ethics, and visions and been told that these documents reflected their basic values: integrity, teamwork, customer orientation, product quality, and so on.
In Ciba-Geigy, you were told that good decisions cannot be made without careful thought and that they value privacy and the opportunity for employees to really think things through before taking action. You would have heard that this approach was necessary because the nature of their technology was such that careful individual research and thought was the only way to reach a good decision.
In this company, meetings were formal and consisted mainly of senior people announcing the decisions that now had to be implemented by junior people.
In Ciba-Geigy, you would also have been given various documents that purported to describe the company's values and principles. But to your surprise, many of the points on the list of values would be almost identical to the ones that DEC gave you.
Ciba-Geigy was also customer-oriented, cared about teamwork, product quality, integrity, and so on. How could two organizations that espoused so many of the same values have completely different physical layouts and working styles?
You also may have noticed that some of the values mentioned did not seem to fit the observed behavior. For example, both organizations espoused teamwork as a value, but both were highly individualistic, encouraged competitive behavior among their employees, and had reward systems that were geared entirely to the individual.
The longer you hang around and the more questions you ask, the more you see obvious inconsistencies between some of the espoused values and the visible behavior.
For example, both companies espoused customer orientation, yet neither was producing products that were particularly easy to understand or use, and neither had people who seemed very polite or service-oriented.
What these inconsistencies tell you is that a deeper level of thought and perception is driving the overt behavior. The deeper level may or may not be consistent with the values and principles that are espoused by the organization. If you are to understand the culture, you must decipher what is going on at this deeper level, which takes you to Level Three: shared tacit assumptions.
To understand this deeper level, you have to think historically about these organizations. Throughout the history of the company, what were the values, beliefs, and assumptions of the founders and key leaders that made it successful?
Organizations are started by individuals or small teams who initially impose their own beliefs, values, and assumptions on the people whom they hire. If the founders' values and assumptions are out of line with what the environment of the organization allows or affords, the organization fails and never develops a culture in the first place.
But suppose, for example, that Ken Olsen, the founder of DEC, believed that to obtain good decisions and implementation of those decisions, people must argue things out and get buy-in on all decisions, and that the imposition of this way of working created a set of products that were successful. He could then attract and retain others who believed the same thing.
If, by this means, they continued to be successful in creating products and services that the market liked, these beliefs and values would gradually come to be shared and taken for granted. They would become tacit assumptions about the nature of the world and how to succeed in it. As DEC continued to succeed and grow, these assumptions would grow stronger.
In analyzing DEC's culture, you would observe two other factors. Olsen was an American and an electrical engineer who grew up in the academic environment of MIT's Lincoln Labs. Many of the values and assumptions he brought to the table reflected U.S. values, academic norms of open debate, and the technological realities of electrical engineering and computer design.
No one knew what was possible in interactive computing, so strong debate was a far better problem-solving method than arbitrary authority. Experimentation and internal competition were appropriate to the development of a new technology.
In Ciba-Geigy, the founders were Swiss-German chemists working on dyestuffs and agricultural chemicals. Unlike electrical engineering, chemistry is a much more hierarchical science, in which experiments have to be very carefully done because of the dangers of mistakes.
Individual creative thought was more relevant than group debates, and researchers with more knowledge and experience were more valued and trusted.
A highly disciplined organization that could efficiently implement solutions would attract people who liked discipline and order, and as they succeeded, they also would come to take it for granted that hierarchy, discipline, and order were the only way to run an effective organization based on chemistry and basic research.
In either case, then, one could "explain" the essence of the culture if one understood national background, the core technology underlying the business, and the personalities of the founders.
The essence of culture is then the jointly learned values and beliefs that work so well that they become taken for granted and non-negotiable. At this point, they come to function more as tacit assumptions that become shared and taken for granted as the organization continues to be successful.
It is important to remember that these assumptions resulted from a joint learning process. Originally, they were just in the heads of founders and leaders. They became shared and taken for granted only as the new members of the organization realized that the beliefs, values, and assumptions of their founders led to organizational success and so must be "right."
Consider the case of Atari. Many years ago, it brought in a new CEO whose background was in marketing. His cultural background told him that the way to run a company was to get a good individual incentive and career system going.
Imagine his chagrin when he discovered a loosely organized bunch of engineers and programmers whose work was so seemingly disorganized that you could not even tell whom to reward for what. The CEO was sure he knew how to clean up that kind of mess. He instituted clear personal accountabilities and an individualistic, competitive reward system symbolized by identifying the "engineer of the month" — only to discover that the organization became demoralized and some of the best engineers left the company.
This well-meaning CEO had not realized that, in its evolution, the company had learned that the essence of the creative process in designing good games was the unstructured collaborative climate that enabled designers to trigger each other's creativity. The successful game was a group product. The individual engineers shared an assumption that only through extensive informal interaction could an idea come to fruition. No one could recall who had actually contributed what.
The new individualized reward system gave too much credit to the "engineer of the month" named by the CEO, and the competitive climate reduced the fun and creativity. This leader did not understand a crucial tacit assumption of the culture he was entering, so he made some decisions that changed a key element of the culture in a dysfunctional way.
So, now that we've explored the three levels of culture, how do we define culture? Culture is a pattern of shared tacit assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, which has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.
What really drives daily behavior are the learned, shared, tacit assumptions on which people base their view of reality — as it is, and as it should be. It results in what is popularly thought of as "the way we do things around here," but even the employees in the organization cannot, without help, reconstruct the underlying assumptions on which their daily behavior rests.
They know only that this is the way, and they count on it. Life becomes predictable and meaningful. If you understand those assumptions, it is easy to see how they lead to the kind of behavioral artifacts that you observe. But doing the reverse is very difficult; you cannot infer the assumptions just from observing the behavior.
The implications of this way of thinking about culture are profound. For one thing, you begin to realize that culture is so stable and difficult to change because it represents the accumulated learning of a group — the ways of thinking, feeling, and perceiving the world that have made the group successful. For another thing, you realize that the important parts of culture are essentially invisible. Members of the organization cannot tell you what their culture is, any more than fish could tell you what water is.
Furthermore, you begin to realize that there is no right or wrong culture, except in relation to what the organization is trying to do and what the environment in which it is operating allows. In some markets and with some technologies, teamwork and employee empowerment are essential and the only way the organization can continue to succeed. In other market environments or with other technologies, tight discipline and highly structured relationships are the prerequisites to success.

How to Assess Your Culture
Culture assessment comes into play when an organization identifies problems in how it operates or as a part of a strategic redirection relating to mergers, acquisitions, joint ventures, partnerships, or other collaborations in which more than one culture will be involved.
The potential insights that culture can bring to you will occur only when you discover that some problem you are trying to solve or some change that you are trying to make depends on cultural forces operating within you and within your organization.
But how should you proceed to do a culture assessment?
Remember that cultural assumptions are shared, tacit, and out of awareness. This does not mean that they are repressed or unavailable. If you want to access your organization's culture, bring together a group of employees who represent the parts of the organization that may be most involved with solving the business problem that is motivating this exercise.
Bring in a facilitator who does not belong to the group that is doing the exercise. The group of 10 to 15 should be people who cut across the levels and functions that are most likely to care about the business problem you are trying to work on.
Here are the steps to assess your culture:
 
  1. Meet in a room with lots of wall space to hang flip-chart paper. Sit in a circle to facilitate face-to-face communication.
  2. State the business problem. Start the meeting with a review of something you need to fix, something that could work better, or some new strategy that you need to launch.
  3. Review the concept of culture and its levels. Once you agree on the things you want to change or improve, review the concept of culture as existing at the three levels of visible artifacts, espoused values, and shared tacit assumptions.
  4. Identify and list artifacts. Start by identifying lots of the artifacts that characterize your organization. Ask the newest members of the organization what it is like to come to work there. What artifacts do they notice? Write down on flip charts all the items that come up. To make sure you cover all of the areas in which cultural artifacts are visible, be sure to consider the following elements:
 
  • Dress codes
  • Level of formality in authority relationships
  • Working hours
  • Meetings, including how often, how run, and timing
  • How are decisions made?
  • Social events
  • Jargon, uniforms, and identity symbols
  • Rites and rituals
  • Disagreements and conflicts: How are they handled?
  • Balance between work and family
 
  1. Identify your organization's espoused values. Ask the group to list some of the espoused values that the organization holds. Some of these may have already been mentioned, but list them on pages separate from the artifacts.
  2. Compare values with artifacts. As the values are listed in the previous step, cross-check those values against the artifacts. Next, compare the espoused values with the artifacts in those same areas. For example, even if the organization espouses the value of "open communication" and "open-door policies" with respect to bosses, you may find that whistle-blowers and employees who bring bad news are punished. These inconsistencies tell you that, at the level of shared tacit assumptions, your culture may really be closed, that only positive communications are valued, and that if you cannot come up with a solution to the problem you are bringing up, you should keep your mouth shut. The way to deeper cultural levels is through identifying the inconsistencies and conflicts you observe between (1) overt behavior, policies, rules, and practices (the artifacts) and (2) the espoused values as formulated in vision statements, policies, and other managerial communications. You must then identify what is really driving the overt behavior and other artifacts. This is where the important elements of the culture are embedded. As you uncover deeply shared assumptions, write them down on a separate page. You will begin to see what the patterns are among those assumptions, and which ones seem to really drive the system in the sense that they explain the presence of most of the artifacts that you have listed.
  3. Assess the shared assumptions. Since culture is very difficult to change, focus most of your energy on identifying the assumptions that can help you. Try to see your culture as a positive force to be used, rather than a constraint to be overcome. If you see specific assumptions that are real constraints, then you must make a plan to change those elements of the culture.
  4. Decide next steps. You may now have sufficient insight to plan the next steps in your change program, using culture to aid you and identifying cultural elements that will require culture evolution. You may discover that this group's analysis does not clarify the culture sufficiently or that differences among the members reflect the presence of subcultures that would require separate assessment. Or you may decide that you want additional groups to cross-check what you have learned so far.
 
  • 8a: Proceed with the change program using cultural strengths. Because you and the others in the group are "in" the culture, you will be able to perceive strengths that outsiders might not notice. You then go back to the planning of your change program for the business problem you identified and examine systematically how the culture can help you accomplish your goals. If you also perceive that some elements of the culture will be obstacles or hindrances, you proceed to the next step and define the overcoming of these obstacles as a new change initiative that you then have to launch.
  • 8b: Proceed with a culture change program to overcome barriers. If some cultural elements clearly prevent you from achieving your business goals, you must design a culture change program, realizing, however, that you are only proposing to change some elements of the culture. One step then, which will be illustrated later, is to see how some of the cultural strengths can help you change those cultural elements that need to be changed.
Now that you understand something of the process of cultural assessment, you are ready to think about how to build, evolve, enhance, or maybe even change your culture.

Cultural Learning, Unlearning, and Transformative Change
In order to understand the dynamics of culture, it is necessary to grasp a general model of learning and change, and then comprehend how that model applies to culture formation in new organizations, culture evolution as those organizations grow, and, finally, change and destruction of cultural elements as organizations age and become dysfunctional.
We will begin with a discussion of learning and change theory in general.
It is especially important to understand how learning and change work with human systems, in which the learners are adults who may have to unlearn something before they can learn something new. The fundamental reason why people sometimes "resist change" is that the new behavior to be learned requires some unlearning that they may be unwilling or unable to do.
Adult learning is, therefore, fundamentally different from childhood learning, where everything learned is new. A model of learning and change that works for organizational employees must take into account resistance to change and the reasons for it.
Resistance to change applies especially to cultural assumptions because they provide meaning, predictability, and security to its members. If a culture change program is announced, discomfort and anxiety will be the immediate result because organization members will realize that they may have to give up some beliefs, attitudes, values, and assumptions — as well as to learn some new ones.
One basic principle of adult learning is that we are at all times in a state of "quasi-stationary equilibrium," and that we are always trying to stabilize our emotional and cognitive state, which is perpetually bombarded by new external and internal stimuli that have the potential for upsetting the equilibrium.
Many of these stimuli can be thought of as "driving forces" that push us toward something new, but we also generate "restraining forces" that keep us at the present state. Learning or change takes place when the driving forces are greater than the restraining forces.
This model of learning is best understood from the perspective of a manager trying to produce change, and can be viewed as consisting of three stages, as follows:
Stage 1. Unfreezing. Creating the motivation to change. This can be done in three ways:
 
  1. Disconfirmation
  2. Creation of "survival anxiety" or "guilt"
  3. Creation of psychological safety to overcome "learning anxiety"
Stage 2. Learning. New concepts, new meanings for old concepts, and new standards for judgment. This can be achieved in two ways:
 
  1. Imitation of and identification with role models
  2. Scanning for solutions and trial-and-error learning
Stage 3, Refreezing. Internalizing new concepts, meanings, and standards. Refreezing can be done in two ways:
 
  1. Incorporation into self-concept and identity
  2. Incorporation into ongoing relationships
Because humans avoid unpredictability and uncertainty, the basic argument for adult learning is that we need some new stimulus to upset the equilibrium. The best way to think about such a stimulus is as "disconfirmation;" something is perceived or felt that is not expected and that upsets some of our beliefs or assumptions.
Members of the organization can experience disconfirming forces directly, or they can be articulated by someone in the organization, such as the CEO, a whistleblower, or a functional manager whose job it is to track certain indicators. Disconfirming information can involve any or all of the following categories:
 
  • An economic threat. Unless you change, you will go out of business, lose market share, or suffer some other loss.
  • A political threat. Unless you change, some more powerful group will win out over you or gain some advantage.
  • A technological threat. Unless you change, you will be obsolete.
  • A legal threat. Unless you change, you will go to jail or pay heavy fines.
  • A moral threat. Unless you change, you will be seen as selfish, evil, or socially irresponsible.
  • An internal discomfort. Unless you change, you will not achieve your own goals and ideals.
If the data get through your denial and defensiveness, disconfirmation creates "survival anxiety" — something bad will happen if you don't change — or "guilt" — as you realize that you are not achieving your own ideals or goals.
You begin to recognize the need to change, the need to give up some old habits and ways of thinking, and the necessity of learning new habits and ways of thinking.
But at the moment you accept the need to change, you also realize that the new behavior that may be required of you may be difficult to learn, and the new beliefs or values may be difficult to accept.
This discomfort is "learning anxiety." The interaction of these two anxieties creates the complex dynamics of change.
Learning anxiety is a combination of several specific fears, all of which may be active at any time as you contemplate having to unlearn something and learn something new. These fears include:
 
  • Fear of loss of power or position in the new culture.
  • Fear of temporary incompetence during the transition process from the old way to the new.
  • Fear of punishment for incompetence if it takes you a long time to learn the new way of thinking and doing things.
  • Fear of loss of personal identity if your current way of thinking is a strong source of identity for you.
  • Fear of loss of group membership as you give up the shared assumptions that make up the old culture.
How do you get past the resistance to change? Two principles come into play:
 
  • Principle One: Survival anxiety or guilt must be greater than learning anxiety.
  • Principle Two: Learning anxiety must be reduced rather than increasing survival anxiety.
The implementation of Principle Two means that the change process creates "psychological safety" — the sense that it is safe to abandon your old behavior and attempt to learn the new behavior.
The learner needs reassurance that the pain of unlearning and relearning will be possible, worthwhile, and, most important, will be supported by the provision of whatever time and other resources are needed to facilitate the new learning.
How do you create psychological safety for organizational members who are undergoing change and learning? This involves a number of steps, and they must be taken almost simultaneously. Creating psychological safety requires eight things:
 
  1. A compelling positive vision. The new way of working must be presented as necessary for the survival or growth of the organization and be perceived as non-negotiable.
  2. Formal training. For example, if the new way of working necessitates teamwork, formal training on team building must be provided.
  3. Involvement of the learner. If the formal training is to take hold, you must have a sense that you can manage your own informal method of learning.
  4. Informal training of relevant "family" groups and teams. Because resistance to change is often embedded in group norms, informal training and practice must be provided to whole groups so that new norms and new assumptions can be built jointly.
  5. Practice fields, coaches, and feedback. Practice fields are particularly important so that you can make mistakes and learn from them without disrupting the organization.
  6. Positive role models. You must be able to see the new behavior and attitudes in others with whom you can identify.
  7. Support groups. Groups should be formed in which problems connected with learning are aired and discussed.
  8. Systems and structures consistent with the desired changes. It is essential to have reward and discipline systems and organizational structures consistent with the new way of thinking and working.
A change program that involves unlearning and relearning requires that all eight of the above conditions be met.
However, in many change programs, senior management asks employees to make a major cognitive shift that they may not be able to make.
For example, when senior management announces that employees should become more involved and empowered, they are asking both employees and supervisors to shift their whole cognitive frames of reference for what it means to be an employee or a supervisor.
Such cognitive shifts are possible if the organization manages to create enough psychological safety — especially if it involves the people who are the targets of change in the learning process. Then the learning takes place in one of two ways:
 
  1. Through trial and error, in which the learner keeps inventing his or her own solutions until something works.
  2. Through a more formal training process, which usually involves imitating role models and psychologically identifying with them.
For all of this to happen, the desired new behavior must be clearly defined, and the learner must discover that the new behavior leads to desirable outcomes.
The final step in any transformative change process is "refreezing." This involves internalizing the new concepts so that the new behavior occurs automatically. If the behavior fits the rest of the learner's personality and is aligned with the expectations of important others in the learner's work and social environment, it becomes a stable part of the person, and eventually of the group.
Now that we've looked at learning and change theory in general, we can apply it to organizations at various growth stages.

Culture Change in Start-Up Companies
The most salient cultural characteristic of young organizations is that they are the creation of founders and founding families. The personal beliefs, assumptions, and values of the entrepreneur or founder are imposed on the people he or she hires, and — if the organization is successful — they come to be shared, seen as correct, and eventually taken for granted.
At this stage, culture is the organization's primary asset, but it is repeatedly tested. If the organization succeeds, the culture grows stronger. If the organization fails, the founders are likely to be thrown out and their assumptions will be challenged and probably abandoned. During the growth phase, if the basic criteria of success are met, the organization will be very resistant to disconfirming forces.
The need for a lot of unlearning in a young organization is limited by the success of the founder in selecting employees who already have the beliefs, values, and assumptions that the founder holds.
Founders and leaders impose their assumptions and values in a number of ways, including:
 
  • What they pay attention to, measure, and control regularly
  • How they allocate scarce resources
  • Deliberate role modeling, teaching, and coaching
  • How they recruit, select, promote, and excommunicate organizational members
  • Formal statements of organizational philosophy and values
By far, the most important of these mechanisms is the leader's own behavior. When it comes to culture creation and embedding, "walking the talk" has special significance in that new members pay far more attention to the walk.
How, then, does culture evolve in a successful growing organization? Several change processes can be identified.
The first is Natural Evolution: General and Specific Adaptation. If the organization continues to be successful and if the founder is around for a long time, the culture evolves in small increments by continuing to assimilate what works best over the years.
 
  • General evolution involves diversification, growing complexity, higher levels of differentiation and integration, and creative synthesis into new and higher forms.
  • Specific evolution involves adapting specific parts of the organization to their particular environments, thus creating subcultures that eventually have an impact on the core culture.
These mechanisms cause organizations within varied industries to develop distinct industry cultures. Thus, a high-technology company develops highly refined R&D skills, while a consumer products company in foods or cosmetics develops highly refined marketing skills. But it is "natural" evolution because it is necessary adaptation to the realities that the organization encounters.
The second change process is Guided Evolution Through Insight and Planning. If you think of culture as a mechanism for avoiding the anxiety that comes with unpredictability, you can help members of the organization by making explicit the major cultural themes and elements.
If you gain insight into what your shared assumptions are, there is a better chance of evaluating them to determine how functional they continue to be as the environment around you changes. The process for assessing your culture that we discussed earlier typically produces a level of cultural insight that allows a group to decide the direction of its future evolution.
The key roles of the leader in this process are to recognize the need for such an intervention, and to manage the internal assessment process. The leader in these situations becomes a counselor, coach, or process consultant to guide the organization's evolution. Cultural evolution can then be integrated into the overall planning process.
The third change process is Managed Evolution Through Promotion of "Hybrids." Changes in the environment often create a sense of disequilibrium that forces real cultural change. How can a young organization so highly committed to its identity make such changes?
Clearly, the first condition is that key leaders in the organization notice the disconfirming information. One mechanism is to stimulate cultural evolution by promoting hybrids who grew up in the culture and therefore understood it, but who developed some new beliefs and assumptions that were more aligned with the new behavior.
Because of their personalities or life experiences, or the subculture in which their careers developed, hybrids are employees or managers who hold assumptions that are different from those at the core, and thus can move the organization gradually into new ways of thinking and acting.
If such managers are put into key positions, they often elicit a feeling from others on the order of "We don't like what he or she is doing in the way of changing the place, but at least he or she is one of us." So not only does the hybrid get more initial acceptance, but he or she is familiar enough with the core culture to know how to use it as a positive force to make changes.
Finally, the fourth change process in young organizations is Managed Evolution by Aligning Critical Subcultures. As the new organization grows and ages, strong subunits arise based on function, geography, markets, or products, and these subunits have to survive in their external environments. In adapting to these external environments, they evolve beliefs and assumptions that are different from the core assumptions of the founder.
For example, the CEO subculture is out of sync with the engineering subculture because of the latter's desire to build the most elegant system, which is usually too costly. The degree to which these occupational subcultures are aligned with each other is a major determinant of how well the organization as a whole functions.
Each of these subcultures is necessary for the effectiveness of the organization, so they must be aligned with each other. Evolution, in this case, requires the nurturing of each of these subcultures. Your job as a cultural change agent in a young organization is to develop meetings and events in which enough mutual understanding can arise among them to enable each to flourish and grow.

Culture Dynamics in the Mature Company
As organizations reach maturity, a different set of issues arises because if change is needed, you are now dealing with unlearning and replacing assumptions and values, and that almost invariably creates resistance to change.
Whereas culture was a necessary glue in the period of growth, the most important elements of the culture are now deeply embedded in the structure and major processes of the organization. The culture is now taken for granted and largely invisible. The only elements that are likely to be conscious are the credos, dominant espoused values, company slogans, written charters, and other public pronouncements of what the company wants to be and claims to stand for — its philosophy and ideology.
The culture change mechanisms described in the previous section all continue to operate in mid-life. But because culture is now more embedded, elements of the culture that are potentially dysfunctional require change processes that have to be more transformative than evolutionary.
The actual change activities in a managed change program will vary according to the situation, but the process starts with senior management experiencing enough disconfirmation to realize that a change process must be launched.
Senior management also must realize that, if elements of the culture may require change, a parallel learning system must be created in which some new assumptions are learned and tested.
The essence of this concept is that it is often too painful for everyone in the organization to give up a shared assumption in favor of an unknown substitute or to learn some new and untested behavior. So part of the organization must expose itself to new ways of thinking so that it can be objective about the strengths and weaknesses of the existing cultural elements and examine how these will aid or hinder the changes to be made.
If some part of the organization can learn an alternative way of behaving and thinking, and if the alternative can be shown to work, then there is less anxiety as the alternative is gradually introduced into the main part of the organization.
The group that functions as the parallel structure may or may not actually design and implement the change programs that will be needed. Often, it becomes the "steering committee" with accountability and oversight, but the change team is usually a different group or subunit of a department that has to take on the actual work of designing and implementing the day-to-day assessment and change activities.
 

These activities are best viewed as five necessary steps that have to be taken for the overall change to succeed.
Step 1. Why Change? The first step is to determine whether change is, in fact, necessary and feasible. Disconfirmation has created survival anxiety or guilt, leading to a lot of turmoil and proposed action, new visions, and calls for solutions.
It is important for the change team to ensure that the disconfirming data are valid and that the launching of a change program actually makes sense.
Step 2. What Is the Ideal Future State? If a change is needed and is deemed possible, the next step is to define the ideal future state. Leaders in the organization may have already articulated this, but the change team must reassess the concept and ensure that the new vision is clear. The vision of the ideal future state should answer this question: "If we are successful in making the changes, what should our behavior look like in the future?"
Steps 3 and 4. Assessing the Present State and Planning. Once the ideal state is well understood, the change team must diagnose and assess the present state of the system to identify the gaps between the ideal future and the present. At this point, the change process also moves from analysis to concrete planning. For each of the gaps and barriers to achieving the vision, specific plans must now be made for what to do to get from the present to the future.
Step 5. Managing the Transition. For every behavior that has been identified as the future ideal, the team should take the present behavior and ask: "What 'existing forces' are driving the current organization toward the future behavior we want?" These can be listed on the left side of a sheet of paper. On the right side of the paper can be listed the "restraining forces" that prevent the behavior from occurring.
Movement toward the new way of working is then produced by changing the balance in the force field, either by increasing the driving forces or reducing the restraining forces. No change will occur unless the driving forces (the survival anxiety) are greater than the restraining forces (the learning anxiety). The change team then needs to examine each set of forces to determine what to focus the change program on in terms of access, feasibility, cost, and desirability.
In general it will be found that the optimal way to produce change is to reduce the restraining forces, the learning anxiety, by providing psychological safety during and after the learning process. This means involving the learner and providing training, role models, resources, and rewards and incentives.
The mid-life culture change process involves many steps and is, in a sense, never finished. As some processes are institutionalized and become stable, other sources of disconfirmation arise that launch new change initiatives. As some elements of the culture change, others are reinforced.
The triggers for mid-life culture change will be highly variable for different organizations, but the mechanism by which the culture will evolve will always be some form of the planned change program that has been described — the creation of a parallel system, a functioning change team, and a five-step change process.

Mid-Life Crisis and Potential Decline
We will have to confront the question of what happens when, with growth and age, strong core assumptions of the corporate culture become dysfunctional.
Continued success creates strongly-held shared assumptions, and thus a strong corporate culture core. If the internal and external environments remain stable, this continues to be an advantage. However, if there is a change in the environment, some of those shared core assumptions can become liabilities, precisely because of their strength. Several circumstances can cause this problem:
 
  • First, the organization may no longer be able to grow because it has saturated its markets and/or the industry has excess capacity.
  • Second, patents may run out, creating new economic conditions for the organization.
  • Third, the market standardizes on a commodity version of the products, causing all the producers to have to compete on price.
  • Fourth, technological innovations can make the products obsolete, and the core culture may not value the kinds of adaptive innovations that would be needed to stay viable.
  • Fifth, new leaders come into the organization who do not share or value the core assumptions on which the organization was built.
If the core — or more central — elements of the culture become dysfunctional, normal or even managed evolution of the kind described in the last sections becomes irrelevant because, at this stage, senior leaders are themselves emotionally resistant to accepting the need for change.
It takes unusually strong disconfirming forces to shake this emotional resistance and denial. Often it is only outside forces from economic downturns, scandals, legal actions, or board activity that break through and start a change process.
In a situation in which growth has slowed and decline is imminent, there are basically only two mechanisms of changing core cultural assumptions:
 
  1. Bankruptcy/Turnaround: Destroying parts of the culture core and starting with a new management to build new behavior patterns that are more adaptive and that might then start a new culture creation process.
  2. Merger/Acquisition: Destroying the organization and its culture through a process of total reorganization via merger or acquisition
In either case, strong new change managers are needed to unfreeze the organization and launch the change programs. The human cost is always high, as the new managers discover that changing core cultural assumptions can only be accomplished quickly by forcing out the people who are the carriers of the old core assumptions.
There is no formula or program for this level of culture change.
If culture change as described in the last section does not produce the business results that are needed, then change leaders have to seek more drastic measures. The most common of these is to bring in an outside CEO who has a different set of values and assumptions from those of the present core culture. If a hybrid manager can be found in a subculture, he or she can serve that function.
The board typically empowers the new CEO to produce a major turnaround. The extreme version of this process is to bring in a known "turnaround manager" who promises to bring the company back into some kind of financial health by immediately taking whatever measures are necessary, usually massive firing of senior executives, reorganizing, selling off unprofitable units, breaking the union, merging with another organization, or preparing the organization to be sold.
More measured versions of this process are exemplified by General Electric empowering Jack Welch, or IBM bringing in Lou Gerstner.
If the new turnaround manager sees major barriers in the present culture, it is inevitable that a period of cultural destruction has to take place. Many managers have to evolve new ways of thinking and behaving very rapidly, or they have to be replaced by managers who have different assumptions in the first place. For old cultural assumptions to be destroyed, the organization has to convert or get rid of the culture carriers.
The new outside leader must be familiar enough with the old culture to understand just what needs to be changed and what kind of resistance will be encountered. The hybrids as insiders are in a much better position to figure this out than even the strongest outsiders.
Welch's success at GE was undoubtedly related to his having grown up in the company, and Gerstner's success in IBM was probably related to the fact that he was bringing back some of the marketing values that had so badly eroded with IBM's growth.
Although these cases are often perceived as turnarounds and major culture changes, they are, in fact, more like destruction of a few dysfunctional core elements and revitalizations of other cultural elements that had been eroded and were now needed for the organization to survive.
If basic assumptions are really to be changed without destroying and rebuilding the organization, transformations require anywhere from 5 to 15 years or more. It takes time to construct the parallel system, learn new assumptions, and then design processes that allow the assumptions to be introduced into the original organization.

Conclusion
Any organizational culture change is transformative because you have to unlearn something before you can learn something new. The "unlearning" is painful and causes resistance to change
The motivation to unlearn and learn something new comes from the realization that, if you continue in the present way, you will not achieve your goals; you will experience "survival anxiety." Survival anxiety is created by "disconfirmation" — information that something you want or expect is not happening, or the wrong things are happening. That motivates you to do something else.
But the realization of what may be involved in learning something new causes "learning anxiety" because you realize that you may become temporarily incompetent, lose your current role, lose your membership in your group, or even lose your identity, if you learn something new. Resistance to change is a normal result of learning anxiety.
For change to occur, survival anxiety must be greater than learning anxiety. The way to produce change is to lower learning anxiety through creating "psychological safety" for the learner.
Psychological safety is produced by providing a clear vision of the future, clear targets of what the new behavior is to be, opportunities for the involvement of the learner in the process of learning, adequate training, resources for new learning, and structural supports in the way of reward, control, and discipline systems.
If you are the agent of the change, the key to managing transformative change is to balance survival anxiety with enough psychological safety to overcome resistance.
Culture evolves and changes through several different mechanisms that you can influence to varying degrees:
 
  • General evolution through adaptation to the environment.
  • Specific evolution of subgroups to their different environments.
  • Guided evolution resulting from cultural "insights" on the part of leaders.
  • Guided evolution through empowering selected hybrids from subcultures that are better adapted to current realities.
  • Planned and managed culture change through creation of parallel systems of steering committees and project-oriented task forces.
  • Partial or total cultural destruction through new leadership that eliminates the carriers of the former culture through turnarounds and bankruptcies.
If you are in a young and growing organization, you can help to evolve and consolidate the culture, and you can help members gain insight into the culture. In a growing organization, the culture is so central to the identity of the organization that changing elements of that culture becomes very difficult. You can evolve the culture by looking for leaders who have arisen in the various subcultures, locating those who hold the kinds of assumptions you feel are needed, and promoting them into more powerful positions.
If you are in a mid-life organization that has clearly dysfunctional elements in its culture, you may launch a managed change program by creating a parallel system to assess the culture, identify a change program, and implement it. Planned change programs hinge on a clear and non-negotiable vision of what the new kind of behavior is to be and the involvement of the employees in figuring out how to get there. Employee involvement is the best way of ensuring a degree of psychological safety. If the new behavior produces better results, it will eventually lead to internalization of the values it is based on and will ultimately become an element of the culture.
If you are in a mid-life or aging organization that has dysfunctional elements in the core culture and you do not have time for a managed change program, you may need to function as a turnaround manager, assess the culture to identify the dysfunctional elements, locate the carriers of those cultural elements you do not want, and replace them. This will be a painful process. Alternatively, you may need to destroy the organization through bankruptcy, a merger, or an acquisition that forces a major reassessment of cultural elements.
Learning about culture requires effort. You have to enlarge your perception, you have to examine your own thought process, and you have to accept that there are other ways to think and do things.
But once you have acquired this knowledge, you will be amazed at how rewarding it is. Suddenly, the world is much clearer. Anomalies are now explainable, conflicts are more understandable, resistance to change begins to look normal, and, most important, your own humility increases. And in that humility, you will find wisdom and an increased capacity to work with others whose thoughts and feelings may be very different from yours.
About the author
Edgar H. Schein is the Sloan Fellows Professor of Management Emeritus at the MIT Sloan School of Management.
He has published extensively in organizational psychology (Organizational Psychology, 3rd ed., 1980), process consultation (Process Consultation Revisited,1999), career dynamics (Career Anchors, 3rd ed., 2006), organizational culture texts (Organizational Culture and Leadership, 3rd ed., 2004), analyses of Singapore's economic miracle (Strategic Pragmatism, 1996), Digital Equipment Corporation's rise and fall (DEC Is Dead, Long Live DEC, 2003), and the general theory and practice of giving and receiving help (Helping, 2009).
825 75th Street, Willowbrook, Illinois 60527
1-800-776-1910 • 1-630-734-0600 (fax) • www.audiotech.com
Table of Contents
In this summary...
The Corporate Culture Survival Guide
How to Assess Your Culture
Cultural Learning, Unlearning, and Transformative Change
Culture Change in Start-Up Companies
Culture Dynamics in the Mature Company
Mid-Life Crisis and Potential Decline
Conclusion
About the author

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