Organizational Psychology– (PSY510) VU

LESSON 09
CHANGING ORGANIZATIONAL CULTURE
An organization’s current customs, traditions and general way of doing things are largely due to what it has
done before and the degree of success it has had with those endeavors. The original source of an
organization’s culture usually reflects the vision or mission of the organization’s founders. Because the
founders have the original idea, they may also exhibit biases in how to carry out the idea. They are not
constrained by previous customs or approaches. The founders establish the early culture by projecting an
image of what the organization should be. The small size of most new organization also helps the founder
instill their vision in all organization members. However, it is not only the organizational culture that plays a
significant role. The organization, if considered as an open system, it interacts with its environment as it
takes in inputs and distributes outputs. The external environment refers to forces and institutions outside
the organization that potentially can affect the organization’s performance.
The external environment is made up of two components, the specific environment and the general
environment.
The specific environment includes those constituencies that have a direct and immediate impact on
manager’s decisions and actions and are directly relevant to the achievement of the organization’s goals. It
includes the customers, suppliers, public pressure groups etc.
The general environment includes the broad economic, political, legal, socio-cultural, demographic,
technological and global conditions that may affect the organization. This brings us to the fact that if the
external environment undergoes a change, it impacts the organization. In order to adapt to the external
change, the organization must undergo a change in terms of its culture as well. Further, if there is a change
in the internal environment of the organization, it also needs to undergo a change in terms of the culture of
the organization.
Why change the culture?
Organizational culture needs to be changed since it has a direct impact on managerial decision making.
Because it constrains what they can and cannot do, an organization’s culture is particularly relevant to
managers. These constraints are rarely explicit. They are not written down. It is unlikely that they will even
be spoken. But they are there, and all managers quickly learn what to do and what not to do in their
organizations.
Change is specifically required in an organization due to the following reasons:
• Mergers and acquisitions happen
Merger is a tool used by companies for the purpose of expanding their operations often aiming at an
increase of their long term profitability. Evidence on the success of mergers and acquisitions however is
mixed: 50-75% of all mergers and acquisitions deals are found to fail adding value.
Usually mergers occur in a consensual setting where executives from the target company help those from
the purchaser in a due diligence process to ensure that the deal is beneficial to both parties.
Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of
a company in the open market against the wishes of the target's board. In the United States, business laws
vary from state to state whereby some companies have limited protection against hostile takeovers. One
form of protection against a hostile takeover is the shareholder rights plan, otherwise known as the "poison
pill".
Mergers and acquisitions affect the culture of the organization since it either completely changes norms and
values of the organization or partially amends them.
• Rapidly changing external environment
The external environment of organizations is also in a process of change. This can be best understood by
considering the impact of the globalization on organizations.
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Organizational Psychology– (PSY510) VU
Globalization refers to the greater international movement of commodities, money, information, and
people; and the development of technology, organizations, legal systems, and infrastructures to allow this
movement. The effects that Globalization has had on the modern day living of mankind are as follows:
• International Cultural exchange
• Multiculturalism
• Diversity
• Greater international travel and tourism
• Greater immigration, including illegal immigration
• Spread of local consumer products (e.g., food) to other countries (often adapted to their culture)
• World-wide fads and fashions
• Formation or development of a set of universal values
• Development of a global telecommunications infrastructure
• Increase in the number of standards applied globally; e.g. copyright laws, patents and world trade
agreements.
• Corporate Imperialism: Dominance of MNCs
• Cultural Imperialism
• Emergence of virtual organizations require change in organizational culture, a global alliance is required
in trust, communications, negotiating, etc.
A Virtual Organization is an organization existing as a corporate, educational, or otherwise productive
entity that does not have a central geographical location and exists solely through telecommunication
tools. It comprises a set of (legally) independent organizations that share resources and skills to achieve
its mission / goal, but that is not limited to an alliance of for profit enterprises. The interaction among
members of the virtual organization is mainly done through computer networks. A Virtual
Organization is a manifestation of Collaborative Networks.

Organizational Culture Must Change In Terms Of:

o Change in organizational structure
Organizational structure is the arrangement of various jobs levels of management within the
organization. It may be flat, i.e. fewer layers of management or it may be vertical, i.e. large
number of managerial layers. Therefore, in an organization, whenever there needs to be
incorporated a change in terms of its culture; the structure needs to be revised. For example,
organizations are moving away from centralized decision making towards decentralized
decision making. This requires a change in the organizational structure which has to have lesser
number of layers than before.
o Change in organizational politics
Politics is the art of gaining and sharing power. Every organization has its set of politics. In
order to change the culture, the politics of the organization need to be reviewed and adjusted
according to the requirement of the new culture.
o Change in organizational emotions
The emotions of the organization refer to the feelings which are possessed within the
organization by the employees. They also need to be manipulated according to the
requirements of the changing culture.
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Organizational Psychology– (PSY510) VU
How to Change Organizational Culture
Following are the steps in changing the organizational culture:
Assess current culture
The first step in changing organizational culture is to assess the current culture and the requirements, i.e.
why and what needs to be changed?
Set change goals, bottom line
The second step in the change process is to set goals and targets, i.e. to define what shall be the ultimate
motive behind a cultural change effort.
Recruit experienced people
The third step is to involve people to carry out the change process. It is imperative to involve experienced
people from within and from outside the organization to carry out the change.
Make changes and include employees in changes
Once the changes are made, employees need to be made a part of the change since they shall be the first
ones to get affected.
Expect problems, be ready to tackle
Once the culture is changed, the problems may arise in terms of non-compliance from the employees.
These should be expected and plans already in place to help sort out such problems.
Move decisively, defuse resistance
The cultural change should be enforced with rigor and the resistance shall be countered with tactful
measures.
Persist, get feedback
The change should not be rolled back since it was meticulously designed in the beginning. Feedback may be
taken from the employees to ensure that the change causes the desired results.
Do no abandon roots
An important consideration in making the change is to not to abandon the cultural roots of the
organization. This means that the change should be congruent with the mission statement and the original
culture of the organization.
REFERENCES
• Mejia, Gomez. Balkin, David & Cardy, Rober. (2006). Managing Human Resources (Fourth Edition). India:
Dorling Kidersley Pvt. Ltd., licensee of Pearson Education in South Asia.
• Changing Culture in Organizations. www.managementhelp.org/org_perf/culture.htm
• Changing Organizational Cultures.
http://www.valuebasedmanagement.net/methods_trice_beyer_changing_organizational_cultures.html
• Kris Krug ‘Change, Culture, Creativity, Communication’Thoughts.http//www.kriskrug.com/
• Changing Culture & Managing Change. Bringing about significant change in the way an organization
works, ... An Example of "Managed" Culture Change. http://www.thedelphigroup.com/change.html
FURTHER READING
• Changing culture and change stories. http://www.idea-
knowledge.gov.uk/idk/core/page.do?pageId=76273
• Mergers Articles. http://www.articleon.com/mergers-articles.html

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Organizational Psychology– (PSY510) VU
• Mergers and acquisitions - Wikipedia, the free encyclopedia. http://en.wikipedia.org/wiki/Merger
• A Case Study - Changing culture. http://
www.mercerdelta.com/organizational_consulting/change_culture_study.html -

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