Organizational Change

The term Change refers to any alternation which occurs in the overall work environment of
an organisation.

Keith Davis

Definition of Organisational Change

Organizational change occurs when an oganisation transforms its structure, strategies,

methods, culture and other elements to reorganize and restructure the organisation. It implies
alternation of structural relationship and role of people in an organization. In simple words
organizational change takes place when organisation makes a transition from its current
position.

Meaning of Change

1. Change refers to the alteration of the status quo in an organization.

2. It can impact the work environment, structure, processes, and people.
3. Change occurs due to internal or external forces and can be good or bad.
4. It disturbs the existing equilibrium or status quo within an organization.

Features of Organisational Change

 It results from outside and inside forces.

 A change in any one part of organisation effects the whole organization. For example any
change in production department will effect the finance department, marketing department,
personal department and other departments.

 It effects all the parts in the organisation but at varying degree of significance and at
varying speed.

 It may effects people, structure, technology, working process, work environment,

organisation policy and other elements of organisation.

 Change is inevitable.

 It is a continuous phenomenon. Oganisation has to manage it.

Importance of Change

1. Organizations must adapt to survive in a dynamic environment.

2. Failure to change can lead to decline or closure.
3. Bureaucratic structures with rigid hierarchies and inflexible rules struggle to adapt.
4. Adaptive and flexible designs enhance commitment, innovation, and
competitiveness.
5. Technology and knowledge drive rapid change, making continuous adaptation
essential.
Goals of Organizational Change

1. Improve efficiency, resource utilization, and market relevance.

2. Enhance value creation and stakeholder returns.
3. Respond to declining demand by restructuring (e.g., IBM, General Motors in the
1990s).
4. Expand operations and enter new markets (e.g., Walmart, Google, Tata Group).

Change and Competitive Advantage

1. Successful individuals, organizations, and societies manage change effectively.

2. Change involves planning, evaluating, and implementing strategic shifts.
3. Organizations that fail to embrace innovation risk losing relevance.

Managing Change in a Fast-Paced World

1. The Industrial Revolution accelerated the pace of change.

2. Modern advancements (AI, automation, biotechnology) demand continuous
adaptation.
3. Organizations must design responsive and flexible systems to manage change.

Forces That Create the Need for Change

Organizations must adapt to various internal and external forces that drive change. Below are
key forces along with relevant examples:

1. Technology: Technology evolves rapidly, making it crucial for organizations to adopt

new advancements to stay competitive.

Example:

a) Amazon & Automation: Amazon introduced robotic process automation

(RPA) in warehouses to improve efficiency and reduce operational costs.
b) Netflix’s Digital Transformation: Transitioned from DVD rentals to online
streaming due to advancements in internet speed and cloud computing.

2. Change in Managerial Personnel and Workers: New leadership often brings a

different vision, strategies, and management style, necessitating organizational change.
Workforce changes due to resignations, retirements, or layoffs also trigger
transformation.

Example:

a) Apple Under Tim Cook: After Steve Jobs, Tim Cook’s leadership focused on
supply chain optimization, employee inclusivity, and environmental
responsibility.
b) Tata Group Leadership Changes: The transition from Ratan Tata to Cyrus
Mistry and later to N. Chandrasekaran led to strategic shifts in business
operations.
3. Market Conditions: Competitive pressures and changing consumer preferences force
businesses to adjust.

a) Example:
a. Coca-Cola vs. Pepsi: Coca-Cola introduced healthier options like Diet Coke
and Coca-Cola Zero to adapt to changing consumer preferences toward low-
sugar beverages.
b. Nokia’s Downfall: Nokia failed to adapt to the rise of smartphones while
competitors like Apple and Samsung embraced touchscreen technology.

4. Change in Existing Structure: Organizations restructure to improve efficiency,

adaptability, and decision-making.

Example:

a) Google’s Alphabet Inc. Formation: Google restructured into Alphabet Inc.

to manage different ventures like YouTube, Waymo (self-driving cars), and
Google Cloud separately.
b) General Electric (GE) Spin-off: GE split into three separate companies
(Aviation, Healthcare, and Energy) to focus on specialized operations.

5. Social Changes: Changing cultural values, demographics, and social norms influence
business operations.

Example:

a) Work-from-Home Culture (Post-COVID): Companies like TCS and

Infosys adapted to remote work trends.
b) Nike’s Social Responsibility: Launched sustainable products and diversity
campaigns to align with modern social movements.

6. Crises and Emergency: Unexpected crises demand immediate changes in

organizational strategies.

Example:

a) COVID-19 Pandemic: Companies like Zomato and Swiggy expanded into

grocery delivery to counter revenue losses from restaurant shutdowns.
b) BP Oil Spill (2010): BP had to revamp its safety regulations and crisis
management policies after an environmental disaster in the Gulf of Mexico.

7. Opportunity and Threat: Organizations change to seize opportunities or counter

threats from competitors.

Example:

a) Reliance Jio’s Market Disruption: Entered the telecom market with low-cost
4G services, forcing competitors like Airtel and Vodafone to revise pricing
strategies.
 b) Tesla’s Electric Cars: Capitalized on the demand for sustainable vehicles and
pioneered the shift to electric mobility.

8. To Meet Performance Gaps (Between Goals and Achievements): When organizations

fail to meet targets, they must revise their strategies.

Example:

a) McDonald’s Menu Innovation: Introduced healthy options and plant-

based burgers after facing criticism over unhealthy food choices.
b) Ford’s Restructuring: Ford cut production costs and invested in electric
vehicle (EV) technology after struggling with declining sales.

9. Political, Economic, and Legal Environment: Changes in government policies, tax

regulations, and international trade laws impact business strategies.

Example:

a) GST Implementation in India: Businesses had to modify their taxation and

supply chain models to comply with the new Goods and Services Tax (GST)
system.
b) Brexit and Financial Markets: Many companies relocated headquarters
from the UK to the EU due to Brexit-related uncertainties.

10. Globalization: Companies must adapt to international competition, trade policies, and
diverse consumer expectations.

Example:

a) Starbucks' Global Expansion: Adapted menus to local tastes (e.g., matcha

in Japan, masala chai in India).
b) Hyundai in India: Expanded affordable car options to cater to the price-
sensitive Indian market.

Levels of Change

Individual Level Change: For example, change in job assignment, physical move to different
location, change in attitude and personality of person. Significant changes at individual level
have its repercussions on the group to which individual belongs and further to the
organisation.

Group -Level Change: For example, change in work flow, work design, communication
pattern. Group has powerful influence on Individual. Informal group and formal group may
resist for change. Effective implementation of change at the group level can overcome
resistance at the individual level.

Organisation-Level Change: For example Change in goals and strategies, entry to new
business, change in management, Joint venture, merger. These big changes in the
organisation are required to adapt to environmental changes.
Types of Change

 Reactive or Proactive -Change may be reactive or proactive. When change is brought about
due to pressure of external forces it is called reactive change. Proactive change is initiated by
the management on its own to increase organizational effectiveness. For example if any
technology of production becomes obsolete and organisation shifts to new technology as a
consequence, it is r,eactive change but if organisation introduces new technology of
production by its own to improve efficiency, it is proactive change.

 Strategic Change – change in priorities, like shift from product to service.

 Structural Change- change in whole structure and in the pattern of relationship among
various positions.

 Process oriented or people oriented Change- If change in process it is process oriented

change, like introduce new method of digital accounting instead of paper form accounting
methods. If change in training, attitude, behaviour and other personal characteristics of
people, it is people oriented change.

Process of Organizational Change

The change process can be understood as a sequence of steps an organization undertakes to

move from its current state to a desired future state. The key stages in the process include:

1. Recognizing the Need for Change: Change is often driven by external (market trends,
competition, technological advancements) and internal factors (leadership shifts, declining
performance).

Example: Nokia recognized the need for change when smartphone technology overtook its
feature phones, though its response was delayed.

2. Diagnosing the Problem: A thorough analysis is conducted to identify issues requiring

change. Diagnostic tools such as employee feedback, SWOT analysis, and financial
performance assessments help pinpoint areas needing intervention.

3. Planning the Change

a) Change strategies are formulated.

b) Establish clear objectives and define the scope, timeline, and key performance
indicators (KPIs).

Example: IBM's shift from hardware manufacturing to IT services was a strategic

change that involved thorough planning.

4. Implementing the Change

a) Change implementation involves altering policies, procedures, workflows, or

technologies.
 b) Methods include pilot programs, phased rollouts, and employee training.

5. Monitoring and Evaluating

a) Performance metrics and feedback loops are used to assess the success of the change.
b) Adjustments are made based on real-time results.

6. Institutionalizing the Change: Changes must be reinforced through policies, cultural shifts,
and leadership alignment.

Example: Microsoft's transition under Satya Nadella emphasized a culture of

collaboration and learning, ensuring changes became permanent.

Managing Organizational Change – Kurt Lewin’s Model

Kurt Lewin, a social psychologist, developed a three-step model to help organizations

manage change effectively. This model explains how to transition from an old way of
doing things to a new, improved approach without causing too much disruption.

Step 1: Unfreezing – Preparing for Change

What does it mean?

a) This step is about breaking the existing habits, mindsets, and structures that
people are used to.
b) The goal is to make people realize why change is necessary and create an
environment where they are ready to accept it.

How to do it?

a) Communicate the need for change to employees, customers, or stakeholders.

b) Create a sense of urgency by explaining the risks of not changing.
c) Reduce resistance by involving employees in discussions and addressing their
concerns.

Example:
Netflix’s transition from DVD rentals to online streaming

Earlier, Netflix used to rent DVDs by mail, but with increasing internet speeds,
online streaming became the future. To "unfreeze" its old business model, Netflix
gradually reduced its focus on DVDs and promoted streaming services through
advertisements and customer-friendly subscriptions.
Step 2: Changing (Moving) – Implementing the Change

What does it mean?

a) This is the stage where the actual change happens—new technologies, policies, or
strategies are introduced.
b) Employees learn new ways of working, and the company ensures proper support
and training.

How to do it?

a) Provide training and guidance so employees can adapt smoothly.

b) Ensure strong leadership and motivation to keep people focused.
c) Encourage an open feedback system so employees feel involved.

Example: Tata Motors launching electric vehicles (EVs)

To support environmental sustainability, Tata Motors decided to shift from

traditional fuel-powered cars to EVs. The company had to restructure
manufacturing units, train employees in new EV technology, and invest in
research and development. Customers were also educated on the benefits of
electric vehicles, making the transition smoother.

Step 3: Refreezing – Making the Change Permanent

What does it mean?

a) After a change is implemented, it must become a permanent part of the

organization.
b) Employees should feel comfortable with the new system and not return to old ways.
c) New habits, rules, and processes should be established to support the change.

How to do it?

a) Introduce rewards and policies to encourage employees to stick to the new system.
b) Keep reinforcing the benefits of change through regular communication and
success stories.
c) Create a supportive work culture so that the new change feels natural.

Example: Apple’s shift to a design-driven culture under Steve Jobs

Before Steve Jobs, Apple struggled with product identity and innovation. Jobs
introduced a design-first approach that focused on simplicity, user experience, and
premium quality. Over time, this "refreezing" happened as Apple made innovation,
design excellence, and customer experience its core values—resulting in iPhones,
iPads, and MacBooks becoming global hits.
Why is this model important?

a) Change can be stressful and difficult, but a structured approach like Lewin’s model
makes it easier to manage.
b) It ensures that organizations prepare people for change, implement it effectively,
and make sure it lasts.
c) Companies like Google, IBM, Tesla, and Reliance have used change management
strategies to stay ahead in business.

Resistance to Change

Background of the Concept

Resistance to Change: Egos are fragile, and change can feel threatening.
Example: In a company implementing a new performance management system, employees
who are comfortable with the old system may resist the change due to fear of being judged or
evaluated differently.

Study Findings: Employees often cling to data that supports their current state, avoiding the
need to change.
Example: In an organization transitioning to remote work, employees might ignore research
showing productivity increases with remote work, instead focusing on data suggesting that
face-to-face interactions are crucial.

Negative Reactions: Employees coping with negative feelings about change may disengage,
increase sick time, or quit, draining the organization’s energy.
Example: Employees in a company undergoing a merger might increase absenteeism or leave
the company due to uncertainty about their roles and the company's future direction.

Positive Resistance: Resistance can be valuable if it sparks open discussion and debate,
leading to engagement and opportunities for change agents to explain or adjust changes.
Example: In a company rolling out a new software system, employees voice concerns during
meetings, prompting a discussion that helps the IT department make adjustments, leading to a
more user-friendly system.

Managing Resistance: Resistance can be overt (e.g., complaints, strikes) or subtle (e.g.,
decreased motivation, absenteeism). Implicit and deferred resistance is harder to manage.
Example: Overt resistance might be a union strike in response to proposed wage cuts, while
subtle resistance could include employees showing less enthusiasm for work, leading to
decreased team performance over time.

Deferred Resistance: Resistance may not appear immediately and can surface later,
sometimes triggered by minor changes that accumulate over time.
Example: A company constantly reorganizing departments might not see immediate
pushback, but after months of uncertainty, employees may start leaving the organization or
reduce their work quality due to accumulated frustration.

Sources of Resistance: Resistance stems from individual factors (perceptions, personalities,

needs) and organizational factors (structural makeup).
Example: An employee’s resistance to change may stem from their personality (e.g., a
preference for stability), while an organizational structure with rigid hierarchies may
exacerbate resistance by limiting communication and decision-making flexibility.

Caution with Change: Not all change is beneficial; speed may result in poor decisions, and
rapid transformational changes can be risky and costly.
Example: A company rushes to implement a new customer relationship management (CRM)
system without adequate testing, resulting in technical glitches and frustration among the
sales team, which harms customer relationships and sales performance.

Sources of Resistance to Change

Individual Sources of Resistance

1. Habit: People rely on established habits or programmed responses to navigate daily

life. When change occurs, individuals tend to resist because they are comfortable with
their routine.

Example: In a company where employees have been using a specific software for
years, a sudden switch to a new software system can cause resistance. Employees are
used to the old system’s layout and shortcuts, and the change feels like a disruption to
their well-established work habits.

2. Security: Individuals with a high need for security are more likely to resist change
because it creates uncertainty, making them feel unsafe or threatened.

Example: Employees in a manufacturing company may resist automation or the

introduction of robotics because they fear their jobs might be replaced, reducing their
job security and stability.

3. Economic Factors: Changes in job tasks or work routines can provoke economic
fears, especially when pay is tied to productivity or performance. Employees may fear
they won’t perform new tasks to the same standard, which could affect their earnings.
 Example: If an organization introduces a new performance metric or restructuring
that reduces commissions for sales staff, employees may resist the change out of
concern for their income and career progression.

4. Fear of the Unknown: Change often brings ambiguity and uncertainty, which many
people find uncomfortable. This fear of the unknown can lead to resistance.

Example: When a company announces a major merger or acquisition, employees may

fear the potential loss of their roles, changes in organizational culture, or the
uncertainty of working with new management. This fear can cause them to resist or
disengage from the process.

5. Selective Information Processing: People often ignore or dismiss information that

contradicts their existing beliefs or perceptions, making it harder for them to embrace
change.

Example: A manager who is resistant to adopting a more flexible work schedule

might selectively ignore studies showing that remote work increases productivity and
job satisfaction, instead focusing on information that supports the belief that in-office
work is more effective.

Organizational Sources of Resistance

1. Structural Inertia: Organizations have built-in mechanisms (e.g., selection

processes, regulations, and routines) designed to maintain stability. When faced with
change, these existing structures tend to counteract the change, creating resistance.

Example: In a government agency, rigid hierarchical structures and established

approval processes may slow down or block changes to how services are delivered,
even when employees see the need for innovation. The bureaucracy and resistance to
altering long-standing practices slow the adoption of more efficient ways of working.

2. Limited Focus of Change: Organizations are complex systems with interdependent

subsystems. Changes in one area often affect other areas, and limited changes may not
achieve the desired outcomes because the broader system resists.

Example: A company that introduces new technology for its marketing department
might face resistance from other departments like sales and IT, whose operations are
impacted by the change but weren't consulted or prepared for it, leading to
inefficiencies and lack of cooperation.

3. Group Inertia: Even if individual employees want to change, group norms and
dynamics within teams or departments can act as barriers to change.

Example: A group of long-tenured employees in a department may resist adopting

more collaborative work practices because they are accustomed to working in silos.
The group's established behavior and informal norms create inertia, resisting changes
in teamwork or communication methods.
 4. Threat to Expertise: Changes that disrupt established organizational patterns may
challenge the expertise or power of specialized groups within the organization.

Example: A company decides to implement cross-functional teams to foster

innovation, but employees from specialized departments like finance or legal may
resist because they fear their expertise will be diluted, and their influence will
diminish as a result of broader, more collaborative work arrangements.

5. Threat to Established Power Relationships: Changes that redistribute decision-

making authority or adjust the power structure within the organization can threaten
long-established power relationships.

Example: In a hierarchical organization, senior managers may resist the introduction

of a flat management structure because it reduces their control and authority over their
teams. The change threatens their power, making them less likely to support or
engage with the change process.

These sources of resistance can significantly impact how change is implemented in an

organization. Successful change management involves addressing both individual and
organizational sources of resistance, fostering open communication, and creating a supportive
environment for change.

Overcoming Resistance to Change

Eight tactics to overcome resistance to change, with relevant examples from organizational
behavior:

1. Education and Communication: Clear communication helps reduce misinformation,

clarifies misunderstandings, and "sells" the need for change.

Example: A company undergoing a merger can hold town hall meetings to explain
the benefits of the merger, reassuring employees about job security and addressing
concerns directly.

2. Participation: Involving employees in the decision-making process can reduce

resistance and increase commitment.

Example: In a company introducing a new software system, allowing employees

from different departments to participate in the testing phase helps them feel invested
in the change and reduces resistance.

3. Building Support and Commitment: Providing emotional support and new skills
training helps employees adjust and commit to change, especially in times of
uncertainty.

Example: When a company undergoes a significant restructuring, offering counseling

sessions and job training programs can ease anxiety and improve employee buy-in.
 4. Develop Positive Relationships: Trust in leaders is key to overcoming resistance.
Positive relationships can foster openness to change, even among naturally resistant
individuals.

Example: During a company-wide digital transformation, employees are more likely

to embrace the change if they trust the management team, especially if leaders are
transparent and supportive throughout the process.

5. Implementing Changes Fairly: Employees are more accepting of change when they
perceive it as fair and justified.

Example: If a company needs to reduce staff to cut costs, implementing the layoffs
transparently, with clear criteria for selection and a fair process, reduces resentment
and resistance.

6. Manipulation and Cooptation: Covert methods like manipulating facts or co-opting

key leaders from resistance groups can be used to influence change.

Example: If employees resist a pay cut, management might "co-opt" a respected team
leader by offering them a special role in the change process, thus gaining their
endorsement for the change. However, these tactics can backfire if employees feel
manipulated.

7. Selecting People Who Accept Change: Hiring individuals who are adaptable and
open to change can ease the transition.

Example: A fast-growing tech company may prioritize hiring candidates with a

growth mindset and a positive attitude toward risk-taking, which helps in adapting to
frequent changes in technology and market conditions.

8. Coercion: Coercion involves using threats or force to compel compliance, often as a

last resort.

Example: If employees resist a critical cost-cutting measure like a pay reduction,

management might threaten layoffs, transfers, or poor performance reviews to force
acceptance. While effective in the short term, it can severely damage trust and morale.

These tactics can help manage resistance, but their effectiveness varies depending on the
organization's culture, the scale of the change, and the personalities involved.

Organisational Culture

1. Organizational Culture refers to a system of shared values, beliefs, and norms held by
members of an organization.
2. It helps in distinguishing one organization from another.
3. Culture affects how members behave, make decisions, and interact within the
organization.
Seven Primary Characteristics of Organizational Culture

1. Innovation and Risk-Taking

1. Encouragement for employees to be creative, take initiatives, and try new

ideas.
2. High innovation = more flexibility and experimentation.

2. Attention to Detail

1. Focus on precision, accuracy, and careful analysis.

2. Employees are expected to work with thoroughness and exactness.

3. Outcome Orientation

1. Emphasis on results and performance rather than methods or processes.

2. Success is measured by achievements and goals met.

4. People Orientation

1. Consideration of how decisions and actions affect employees and internal

stakeholders.
2. Shows concern for employee well-being and satisfaction.

5. Team Orientation

1. Work is organized around teams instead of individuals.

2. Promotes collaboration, mutual support, and collective effort.

6. Aggressiveness

1. Degree to which employees are competitive, ambitious, and assertive.

2. A highly aggressive culture pushes for high performance and fast action.

7. Stability

1. Focus on preserving current ways and maintaining consistency.

2. Less emphasis on change or innovation; stresses predictability and control.

Four Types of Organizational Culture (Based on Competing Values Framework)

Researchers have identified four major types of culture, each with distinct characteristics:

1. Clan Culture

1. Focus: Collaboration, cohesion, and a family-like environment

2. Values: Trust, loyalty, mentorship, teamwork
3. Leadership Style: Facilitative, nurturing
4. Outcome: High job satisfaction and employee morale
 Example: Zappos – prioritizes employee well-being and open communication.

2. Adhocracy Culture

1. Focus: Innovation, flexibility, and adaptability

2. Values: Creativity, experimentation, risk-taking
3. Leadership Style: Entrepreneurial, visionary
4. Outcome: Strong innovation and responsiveness to market changes

Example: Google – encourages innovation and exploration of new ideas.

3. Hierarchy Culture

1. Focus: Control, structure, and formal procedures

2. Values: Stability, efficiency, consistency
3. Leadership Style: Coordinating, monitoring, organizing
4. Outcome: Reliable operations but can lack flexibility

Example: McDonald’s – known for standardized procedures and consistent service.

4. Market Culture

1. Focus: Results, competition, and customer success

2. Values: Achievement, performance, profitability
3. Leadership Style: Hard-driving, competitive
4. Outcome: High innovation and strong financial performance

Example: Amazon – highly focused on performance, customer metrics, and

market leadership.

Name of Clan Adhocracy Market Hierarchy

culture
1. Definition The culture is Culture is Result Structured,
more of family dynamic and oriented controlled and
like that focuses entrepreneurial culture of rules driven
more on with risk loving competitive culture with
mentoring, attitude and being spirit, focus doing
nurturing and initiator. achievement things rightly.
doing things and getting
together the job done.
2. Leader Type facilitator, Innovator, Hard driver, Coordinator,
mentor, team entrepreneur, competitor, monitor,
builder idealistic producer organizer
 3. Value Commitment, Innovative outputs, Market Efficiency,
Drivers communication, transformation, share, goal timeliness,
development agility achievement, consistency,
profitability and
uniformity

4. Theory of Human Resource Innovativeness, Aggressively Control and

Effective- ness development and vision and new competing efficiency
participation are resources are and with capable
effective effective customer processes are
focus are effective
effective
Measuring
5. Quality Empowerment, Surprise and
client Error
Improvement team building, delight, creating preferences, detection,
Strategy employee new standards, improving measurement,
involvement, anticipating needs, productivity, process
Human Resource continuous creating
external control,
development, improvement, partnerships, systematic
open finding creative enhancing problem
communication. solutions competivene solving,
ss, involving quality tools
customers
and
suppliers.

What Do Cultures Do in an Organization?

Positive Roles of Organizational Culture

1. Defines Role Boundaries

a) Culture helps in setting clear boundaries for employee roles.

b) Differentiates one organization from another.

2. Develops Organizational Identity

a) Creates a sense of belonging and shared identity among employees.

b) Employees see themselves as part of a bigger purpose.

3. Encourages Commitment to Group Interests

a) Promotes group-oriented behavior over individual self-interest.

b) Fosters teamwork and collaboration.

4. Brings Social Stability

a) Ensures stability and predictability in workplace relationships and

behaviors.
 b) Reduces conflict and confusion.

5. Shapes Attitudes and Behaviors

a) Culture acts as a system of meaning that influences how employees think

and act.
b) Guides behavior even in the absence of formal rules.

Can Culture Be a Liability?

Yes. In some contexts, culture can become a challenge or limitation:

6. Decentralized Organizations

a. While they benefit from strong culture, it’s harder to establish due to:
i. Reduced formal authority
ii. Shared decision-making
b. Culture must act as the unifying force.

7. Virtual Organizations

Minimal face-to-face interaction makes it difficult to:

 Build a common understanding

 Enforce shared values or behavior norms.

Individual-Organization Fit

8. Culture Affects HR Practices

a. The alignment of employee values with organizational culture affects:

i. Recruitment and selection
ii. Performance appraisal
iii. Promotion decisions
b. Better fit leads to higher satisfaction and retention.

Determinants of Organizational Culture

Organizational culture doesn't develop overnight. It evolves over time, shaped by a range of
internal and external factors. These factors are known as determinants of organizational
culture. Understanding them helps explain why organizations behave differently, even
within the same industry.

1. Founder's Philosophy and Vision: The beliefs, values, and goals of an organization’s
founder serve as the foundation of its culture. Founders often create the core purpose and tone
of the organization, influencing how it will operate and grow.
Example:

a) Steve Jobs (Apple) – Focused on innovation, simplicity, and design, which shaped
Apple’s creative and product-centric culture.
b) Dhirubhai Ambani (Reliance) – Cultivated a risk-taking and opportunity-driven
culture rooted in entrepreneurial zeal.

2. Leadership Style and Behaviour: The attitude, decisions, and example set by top leaders
shape the organizational climate. Employees tend to model their behavior on how leaders
behave, especially in ethical matters, decision-making, or communication.

Example:

a) Ratan Tata encouraged ethical conduct and social responsibility at the Tata Group.
b) Satya Nadella (Microsoft) brought a cultural shift focusing on empathy,
collaboration, and continuous learning.

3. Organizational Structure: Whether an organization has a rigid hierarchy or a flexible, flat

structure greatly affects communication, decision-making, and how people work together.

Example:

a) Startups like Swiggy or Zomato – Often have flat structures that promote open
communication and fast decisions.
b) Public Sector Units (PSUs) – Typically follow a hierarchical structure emphasizing
discipline and control.

4. Rules, Policies, and Procedures: Formal systems such as policies, standard operating
procedures (SOPs), and rules influence what behaviors are accepted and rewarded.

Example:

a) Google encourages employee flexibility through its policy of "20% time" for personal
projects.
b) Banks and Insurance Firms have strict rules that create a culture of compliance and
caution.

5. Reward Systems: What the organization chooses to reward—creativity, punctuality,

teamwork, performance—signals what it values and reinforces desired behaviors.

Example:

a) Infosys gives performance bonuses and recognition for innovation and efficiency.
b) Sales firms like Amway reward top performers through contests, bonuses, and trips,
reinforcing a competitive culture.
6. Work Environment and Physical Layout: The design of the office space and the overall
work environment can reflect and reinforce cultural elements like openness, collaboration, or
formality.

Example:

a) Google’s open and colorful office design promotes creativity and informality.
b) Traditional law firms often have closed cabins, signaling authority and formality.

7. Organizational History, Successes, and Traditions: The stories of the past—major

successes, crises overcome, key people remembered—help shape how employees view the
organization and its values.

Example:

a) Tata Group has a legacy of over 150 years promoting service, trust, and nation-
building.
b) HCL Technologies celebrates stories where employees challenged norms to benefit
clients, fostering a "Employee First" culture.

8. Nature of Business and Technology Used: The type of industry or business (e.g.,
manufacturing vs. IT) and the technology used often dictate the pace, style, and values of the
organization.

Example:

a) BPOs and IT companies require adaptability and quick learning due to fast-changing
technologies.
b) Construction companies might emphasize discipline, safety, and time-bound
execution.

9. External Environment (Legal, Political, and Economic Factors): Changes in

government policy, law, economy, or global competition can force organizations to shift or
adapt their culture to survive and thrive.

Example:

a) The liberalization of the Indian economy in 1991 forced many PSUs and Indian
companies to adopt competitive and customer-oriented cultures.
b) COVID-19 pandemic shifted organizations toward remote work, flexibility, and
digital collaboration.

10. Employee Composition (Demographics and Diversity): The age, gender, cultural
background, and education level of employees also shape the workplace culture, influencing
values like inclusivity, creativity, or tradition.
Example:

a) Startups with young workforces often foster informal, fast-paced, and innovation-
driven cultures.
b) Multinational firms with diverse employees focus on inclusion and global thinking.

Summary Table: Determinants of Organizational Culture

Determinant Cultural Influence Example

Founder's Philosophy Sets initial tone and values Steve Jobs at Apple

Leadership Style Role modeling, vision, ethics Satya Nadella at Microsoft

Organizational Defines communication and power

Flat structure in startups
Structure flow

Policies and Rules Establish behavioral norms Banks’ compliance culture

Reward Systems Reinforce what is valued Amway’s incentive culture

Shapes daily behavior and

Work Environment Google’s creative workspace
collaboration

Tata Group’s service

History and Traditions Builds legacy and shared meaning
orientation

Nature of Business & IT companies value

Drives pace and value system
Tech adaptability

Post-COVID remote work

External Environment Forces adaptation of culture
cultures

Affects values, practices, and diversity

Employee Composition Multinational companies
emphasis

Do Organizations Have Uniform Cultures?

1. Shared Perception

a) Organizational culture is a shared system of meaning held by members of an

organization.
b) Regardless of department or designation, people often describe their
organization’s values and ways of working in similar ways.
 Example: In Infosys, employees across levels often speak of values like integrity,
customer centricity, and respect for individuals—highlighting a shared culture.

2. Presence of a Dominant Culture

a) A dominant culture represents the core values shared by a majority of

employees.
b) It defines the organization’s personality and what it stands for.

Example: At Google, the dominant culture emphasizes innovation, collaboration,

and employee empowerment. These values are reflected in recruitment, workspaces,
and team structures.

3. Existence of Subcultures

a) In large organizations, different departments, branches, or teams may form

their own subcultures.
b) Subcultures develop due to shared challenges, functions, or physical
locations.

Example: In Tata Group, while the dominant culture focuses on ethics and social
responsibility, a sales team in Tata Motors may develop a subculture that
emphasizes target achievement and aggressiveness, reflecting their field challenges.

4. Nature of Subcultures : Subcultures align with the dominant culture but include
additional values specific to their group or function.

Example: In Amazon, the dominant culture values customer obsession and

operational excellence. The logistics department may develop a subculture stressing
speed, efficiency, and problem-solving under pressure, driven by the demands of
timely delivery.

How Employees Learn Organizational Culture

Organizational culture is not something explicitly taught in classrooms or manuals—it is

absorbed, observed, and experienced by employees over time. The process through which
employees learn this culture is called cultural socialization.

Organizational socialization is the process by which new employees acquire the knowledge,
behaviors, attitudes, and skills needed to become effective members of the organization.

Mechanisms Through Which Employees Learn Organizational Culture:

1. Stories and Narratives

What it is: Repeated tales of organizational heroes, challenges overcome, and major
achievements.
 Why it matters: Stories communicate underlying values, norms, and what is admired or
discouraged in the organization.

Example: At Apple, stories of Steve Jobs’s obsession with product perfection are
commonly shared, reinforcing a culture of innovation and excellence.

2. Rituals and Ceremonies

What it is: Repetitive activities that reinforce key values of the organization (e.g., award
functions, annual days, onboarding programs).

Why it matters: These rituals create a sense of identity and celebrate desired behaviors.

Example: Infosys conducts an elaborate training ceremony at its Mysore campus for new
hires, emphasizing learning and discipline from day one.

3. Symbols and Artifacts

What it is: Visual elements of an organization that carry meaning (office layout, dress
code, logos, mission statements, etc.).

Why it matters: They reflect the priorities and style of the organization.

Example: An open office layout at Google promotes openness and collaboration,

aligning with its culture of free flow of ideas.

4. Language and Jargon

What it is: Unique terms, acronyms, slogans, or language specific to the company.

Why it matters: It reflects and reinforces company values.

Example: At Amazon, phrases like “customer obsession” and “Day 1” are frequently
used to remind employees of core values.

5. Role Models and Mentors

What it is: Senior leaders and colleagues act as role models by living out the culture in
everyday actions.

Why it matters: Employees observe and imitate behaviors that are rewarded or admired.

Example: If a manager at Tata Steel consistently demonstrates ethical behavior, junior

employees are likely to follow the same.

6. Formal Training and Orientation

What it is: Programs designed to educate employees about the company’s mission,
history, values, and expected behaviors.
 Why it matters: It provides a structured way to learn about the organizational culture.

Example: Wipro’s induction program not only focuses on job roles but also discusses
corporate values and client-centricity.

7. Reward Systems

What it is: What gets rewarded (or punished) in the organization—performance,

teamwork, innovation, loyalty.

Why it matters: It sends a clear message about what the organization values.

Example: At Google, employees are rewarded for innovation, encouraging them to take
risks and think differently.

8. Organizational Structure and Leadership Style

What it is: The hierarchy, decision-making style, and management practices.

Why it matters: These shape employee behavior and perception of power and freedom.

Example: A flat structure at Zappos promotes informality, quick decision-making, and

individual empowerment.

Mechanism Purpose Example

Stories Communicate history, values, and heroes Steve Jobs at Apple

Rituals/Ceremonies Reinforce and celebrate cultural values Infosys onboarding

Symbols/Artifacts Visualize values and behaviors Open offices at Google

Language/Jargon Create a shared identity "Day 1" at Amazon

Role Models Provide living examples of behavior Ethical managers at Tata

Training/Orientation Formal exposure to culture Wipro induction

Reward Systems Signal what is appreciated and valued Innovation rewards at Google

Structure/Leadership Define power and behavior norms Flat hierarchy at Zappos

STRONG AND WEAK CULTURE

Strong culture is the one where:

• Most employees have same opinion about organisation’s mission and values;

• Organisational values are widely shared and deeply rooted;

• The more members who accept core values and the greater their commitment, the stronger
will be the culture, for example Tata steel has strong organisational culture than their
competitors because its employees knows what is expected of them in ethical situation and
this develops their behaviour; and

• A strong culture faces low absenteeism because in such organisation there is cohesiveness,
loyalty and organisational commitment with agreed and unanimous purposes. On the other
hand in weak cultures opinions of employees and management vary widely and
organisational values are not widely shared.

Creation of Ethical Organizational Culture

Characteristics of Ethical Organizational Culture

1. Encourages Risk-Taking and Innovation: Employees with high risk tolerance and
moderate aggressiveness are more likely to act ethically when culture supports it.

Example: Google promotes ethical innovation while encouraging employees

to take calculated risks.

2. Focus on Both Methods and Results: Ethical cultures value not just outcomes, but
also the ways in which outcomes are achieved.

Example: Infosys emphasizes transparency in client dealings and internal

processes.

3. Long-Term Perspective: Ethical organizations focus on sustainable practices and

balance the interests of:
 Employees
 Shareholders
 Community

Example: Tata Group integrates ethical conduct with CSR, benefiting multiple
stakeholders.

4. Positive Impact of Strong Culture: A close-knit ethical culture encourages:

 Responsible employee behavior
 Stronger teamwork and trust

Example: Patagonia’s ethical climate supports environmental activism among

employees.
 5. Negative Effects of Weak Ethics: A loose ethical culture can lead to:
 Customer boycotts
 Legal issues
 Regulatory interventions

Example: Enron’s unethical practices led to bankruptcy and criminal charges.

How Managers Can Create Ethical Organizational Culture

Creating an ethical culture is not just about setting rules—it's about influencing values,
guiding behavior, and setting the tone from the top. Here’s how managers can actively
shape an ethical culture:

1. Be a Role Model (Lead by Example)

a) Managers set the tone for ethical behavior through their own actions.
b) Employees closely observe their leaders—ethical leadership creates a ripple effect
across the organization.
c) Managers must consistently demonstrate:
a. Integrity
b. Fairness
c. Accountability

Example: Ratan Tata, by always prioritizing ethics over profit, established Tata Group’s
reputation for high integrity and social responsibility.

2. Communicate Ethical Expectations

a) Ethical values and expectations should be clearly communicated through:

i. A written Code of Ethics

ii. Ethical policies and handbooks
iii. Regular reminders and awareness programs

b) Clarity reduces ambiguity, helping employees understand what is acceptable and

what is not.

Example: IBM’s Global Code of Conduct outlines the company's values and provides
guidance on ethical decision-making.

3. Provide Ethical Training

a) Ethics training helps employees:

 Recognize ethical dilemmas

 Understand how to respond appropriately
  Build moral awareness

b) Can include:

 Seminars, workshops, case studies

 E-learning modules
 Role-playing exercises

Example: Wipro offers structured ethics training to all its employees to reinforce values like
honesty and customer-centricity.

4. Use Carrot-and-Stick Method (Reinforcement of Behavior)

a) Reward ethical actions through:

 Promotions
 Incentives
 Recognition programs

b) Punish unethical actions to discourage misconduct.

c) Managers must evaluate not just outcomes but also the means by which goals are
achieved.

Example: Johnson & Johnson evaluates managers on how they achieve targets—not just the
results—ensuring values are upheld.

5. Provide Protective Mechanisms (Safe Reporting Channels)

a) Establish formal systems that allow employees to:

 Report unethical behavior

 Discuss ethical dilemmas
 Do so without fear of retaliation

b) Tools include:

 Whistleblower hotlines
 Ethical ombudsmen
 Anonymous reporting systems

Example: Infosys has a confidential whistleblower policy that encourages ethical reporting
and protects informants.

6. Set Ethical Climate from the Top

a) Ethical values must originate from top leadership and flow down through the
hierarchy.
b) If top management is ethical:
  Supervisors adopt ethical practices
 Line employees follow suit

c) This creates an ethical chain reaction, leading to:

 Lower deviant behavior

 Higher cooperation and mutual respect

Example: Unilever’s leadership has committed to sustainability and ethics, creating a global
culture of responsibility.

Principle Action Impact

Be a Role Model Act ethically and transparently Inspires imitation

Communicate Expectations Provide ethical codes and clear values Reduces confusion

Provide Ethical Training Teach employees to navigate dilemmas Increases awareness

Reward/punish behavior based on

Use Carrot-and-Stick Method Reinforces conduct
ethics

Provide Protective
Create safe systems for reporting Encourages integrity
Mechanisms

Demonstrate ethical values in Builds strong

Lead from the Top
leadership culture