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HOW TO CHANGE THE INFORMAL SIDE? A COMPARATIVE ANALYSIS OF ORGANIZATIONAL CULTURE TRANSFORMATION MODELS

O. MOLDOVAN1, F.C. MACARIE2 1,2 Babeş-Bolyai University, octavian.moldovan@fspac.ro, macarie@fspac.ro

ABSTRACT Although organizational culture plays an important role in the life and success of organizations, the fact that it remains an informal and unconscious aspect of organizational life usually hinders, in practice, any attempt to reform or revitalize it despite the best interest and attempts of leadership. However, the transformation of the formal side of organizations will yield few results if nothing happens on the informal (cultural) side; more often than not, formal changes must be not only accompanied but rather preceded by informal changes in order to maximize the outcomes. The reform or improvement of organizational culture is achieved by reshaping the myths, traditions, values and fundamental ideas shared by the members of an organization, with the ultimate goal of creating a new identity for the organization and its members. By critically reviewing the existent models or organizational culture transformation, this research will highlight not only the mechanisms by which change can be achieved, but also: (1) the type of leadership required to reshape organizations; (2) facilitating and reactive factors; (3) the connection between the development stage of an organization and the transformation means employed and (4) the key factors that can ensure the success of organizational and cultural change. Keywords: Organizational culture, change/transformation, theoretical models. JEL classification: D21, D23, M14. 1. Introduction Organizational change refers to any attempt aimed at revitalizing or refocussing an organization. Such changes can be seen by most members of the organization as being legitimate, but they might also cause adverse reactions and protests; for a change process to be effective, the forces acting for change must have a higher representation and power (influence) than those who oppose it. Development or organizational change can be defined as “a mix of actions (that can be either in the design or implementation phase) aimed at improving components of the management system (strategy, structure, information system, decision- making system, methodology) in order to increase the performance and competitiveness of the organization’’ (Burduş et al., 2003, p. 15). The management of organizational change represents the “whole process of provision, organization, coordination, training, control, replacement, modification and alteration of the organization

in order to increase efficiency and competitiveness’’ (Burduş et al., 2003, p. 23). Taking into consideration its importance, cultural reform represents a prerequisite for a smoother process of organizational change. The reform or improvement of organizational culture is achieved by reshaping the myths, traditions, values and fundamental ideas shared by the members of an organization. The ultimate goal is to create a new identity of the organization and its members in order to increase performance and efficiency or to achieve certain predetermined objectives. Adler (1986, p. 58) analyzes different cultural changes based on their timing vis-à-vis other external and internal factors (reactive and pro-active) and aim (to ameliorate/improve the situation or to reach a strategic purpose).

Table 1: Cultural change matrix

Type Ameliorative Strategic

Reactive Adaptation Re-orientation

Anticipative Harmonization Re-conception

Source: Adler, 1986, p. 58 Harmonization changes: aim to improve the culture and the overall organization in order to be better prepared for a known (foreseen) future event. Adaptation changes: aim to improve the culture and the overall organization as a response to an unforeseen event that has modified the status quo. Re-orientation changes: aim to modify the culture and the organization on a strategic level as a response to external stimuli. Re-conception changes: aim to modify the culture and the organization on a strategic level in order to influence the external environment. Although Adler views change largely as a scope/end in itself, cultural transformation can also be regarded as a mean. For example, Young (2007) argues that cultural change can become a mean for a greater goal, one that does not necessarily relate to the survival or adaptation of the organization, but which connects to social issues. In her opinion, organizational culture and cultural transformation are means to create a more inclusive work environment (Young, 2007, p. 27). The remaining of the paper will discuss the relationship between leadership, socialization and culture from a change/development perspective (section 2), while section 3 will present a critical analysis of two models of

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organizational culture (a circular and a linear one). Section 4 will address some of the limitations that might arise during the process of cultural transformation and section 5 will present the main conclusions. 2. Leadership, socialization and culture Although the roles of leadership and socialization are often brought up in academic papers and discussions vis-à-vis organizational culture, the exact underpinnings of these processes are generally under analyzed. These two elements are either mentioned briefly as being important or taken into account without answering key questions (such as: How does leadership connects with culture? What type of leadership can truly transform culture and what type of leadership will be transformed by it? What is the role of socialization?). Bass and Avolio do not separate leadership and management, but rather they distinguish two types of leadership: transactional and transformational. Transformational leaders “integrate creative insight, persistence and energy, intuition and sensitivity to the needs of others” when building the new culture and can be characterized by four key elements: idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration (1993, p, 112). In a culture created by transformational leadership, a sense of purpose and a feeling of family exist, as: (1) commitments are made on long-term, (2) leaders and followers are joined by common interests and a sense of shared fates and interdependence, (3) members of the organization go beyond their self-interests (or expected rewards) and consider that the organization is more important than their interests and (4) hierarchical superiors socialize members into the culture by serving as mentors, coaches, role models, and leaders (1993, pp. 116, 118). Transactional leaders on the other hand work within the existing culture, frame their decisions and actions according to what already exists in the organization and “develop exchanges or agreements with their followers, pointing out what the followers will receive if they do something right as well as wrong’’ (1993, pp. 112-113). A transactional culture views everything in terms of explicit and implicit contractual relationships as: (1) job assignments are spelled out along with conditions of employment, disciplinary codes, and benefit structures, (2) everyone has a material motivation to work (price) and there is a price on everything and (3) commitments are made on short-term while self-interests primes in front of the organizational interest (1993, p. 116). As such, from a theoretical perspective, culture could be changed via leadership in the case of transformational leadership, while transactional leadership would be modeled by culture and act in the existing cultural context, without trying (and being unable) to change it. A similar approach is proposed by Bate (1994) who argues that two basic approaches to culture can be identified: conforming (maintaining order and continuity) and transforming (changing and breaking existing patterns). Socialization represents the mechanism by which individuals (usually new members of the organization) learn the fundamental characteristics of an organizational culture.

A distinction can be made between organizations that give low importance to culture (were employees are selected by professional criteria, disregarding cultural compatibility issues) and organizations that give more importance to culture (the compatibility of future employees with the culture of the organization is also taken into consideration beside professional characteristics). Richard Pascale (Johns, 1998, pp. 283-284) proposed a model of socialization (Table 2) that is more than suitable to explain how employees undergo a gradual process of socialization (learning the ins and outs of organizational life, learning the values, beliefs, traditions and assumptions of their peers in order to become fully integrated members in the structure and culture of an organization).

Table 2: The socialization process in organizations Stage

(chronological) Main activities

Stage one: employee selection

Possible new employees are rigorously selected according to cultural criteria. The organization is presented in a realistic way so that possible employees can eliminate themselves (if they consider themselves unfit to the cultural model). Group and individual interviews as well as other tests (role playing games) can be used.

Stage two: humiliation and

ridicule

New employees are humiliated and ridiculed in order to make them shed previous cultural characteristics (this will make them accept the new model more easily).

Stage three: hands on training

New employees start work at lower hierarchical and professional levels so that they can obtain a better understanding of how the organization works. Cultural values are taught to them by practice.

Stage four: rewarding and

promoting

Those who adapt and promote the cultural values of the organization and contribute toward reaching the objectives of the organization are rewarded and promoted.

Stage five: exposing the

essential culture

The core beliefs, values and norms are permanently reminded in order to coordinate the behavior of members. The values instilled in the earlier stages of the socialization process are entrenched at the subconscious level.

Source: Johns, 1998, pp. 283-284 3. A critical analysis of main circular and linear models model of change Before dwelling any further into the mainstream models of cultural change and transformation, the sources or forces of change must be analyzed. Gibson and Barsade (2003) identify four major sources or forces of change, three of which are more or less independent of leadership actions, and a fourth one directly connected with leadership action (Table 3).

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Table 3: The multiple facets of OC change

Type Description of forces/sources behind change Survival of the

fittest Environmental demands that force the organization to re-imagine itself.

Evolutionary process

Natural processes of organizations that grow, learn and develop.

Revolutionary process

Internal shifts of power and the emergence of new leaders that reshape the organization according to their own image/ideals.

Managed change

Leaders purposefully take actions in order to change the organizational culture.

Adapted after Gibson and Barsade, 2003, pp. 21-23

Kurt Lewin (Schein, 2004, pp. 319-331) proposes a series of steps that can be followed during the process of cultural reform. The model assumes that any change or reform must be done in three stages (states): unfreezing, change and refreezing.

Figure 1: A cyclical model of OC change

Source: Adapted after Schein, 2004, pp. 319-331

The initial state: refers to the situation of the organization (at some point in its life) when an inconsistency appears with external requirements (economic, social, political regime system and so on) or internal ones (new management, new employees, new values and expectations). The unfreezing: is the stage in which leaders and members of the organization realize that the values, ideas and expectations they shared in the initial state are obsolete and that organizational culture must be changed. At this point leaders start designing a transformation plan (that includes the transformation process and an outline of the outcome) and work to highlight the benefits of a new cultural framework, while distancing themselves from the old one. The change: is the stage in which previously planned transformations are implemented as they are expected to improve the performance and functionality of the organization. It is recommended to implement new

elements at a smaller scale (imperceptible changes); reform should be broadened only if these small changes prove to be successful. The members of the organization should be permanently informed of these changes (and how these can help the organization). The freezing: is the process in which the upper echelons of the organization try to stabilize the new values at organizational level. This process can be done by using different tools such as: seminars, brochures, regulations, meetings, new myths and stories, creating artifacts and so on. The aim is to strengthen the new values and to minimize the tendency to revert to the old values (to use the same procedures and have the same habits as in the initial state). The final state: is the result of all previous processes. At this point the organization has acquired new values, procedures, artifacts and symbols (both at the conscious and unconscious level) and has reached a new level of performance and efficiency. It should be noted that the final state does not represent the ultimate form of the organizational culture or the end of all reform processes. The new type of culture (new values and traditions) can also become redundant at some point as new developments occur in the environment. As such, the final state can always turn into an initial one for a new process of change. From this perspective, the creation and development of culture is a circular and continuous operation/process that takes place during the entire existence of the organization. Lewin’s model offers a rather brief overview of the processes that take place during an organizational culture reform. Being rather general, it can be understood with great ease (at a conceptual level) and it can be used/applied by managers in their efforts to change the culture of an organization. Although the model is highly functional and user friendly, some limitations are easy to observe: it offers a very general overview of the process (it does not pay too much attention to details), it does not present steps and effective measures, it is a static model (based on the assumption that both the environment and the organization remain unchanged for extended periods of time) and it is rather re-active (refers to organizations that are facing problems and not to those that are functioning normally and seek to further improve their performances). Most of these limits are addressed by Schein by proposing a reform model tied/connected to the development stage of the organization. In our view the two models do not oppose or compete with each other and they should both be used to understand and implement organizational change as they complete each other. The more complex process of cultural change and development (Table 4) proposed by Schein (2004, pp. 291- 317) identifies three main stages in the life of organizations: (a) founding and early growth, (b) development and (c) maturity and decline. Depending on the stage reached by an organization, specific sets of measures and actions are recommended in order to reduce potential backlash and resistance, thus ensuring the success or cultural change.

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Table 4: Organizational culture reform according to the development stage of the organization

Development stage of the organization

Mechanisms and tools that can be used for change

I) Founding and early growth: the organization is founded and begins to integrate itself in the environment. At this stage culture is shaped by the vision of the founders (leaders) and aims to create a distinct identity.

1) Gradual change (general and specific evolution). 2) Change by organizational therapy. 3) Promotion of hybrid cultural elements.

II) Development: the organization has already evolved and proved its viability (performance) in time. Culture has evolved during this time but developments such as diversification, geographical expansion, external changes, mergers and acquisitions can generate problems. Thus, culture can act as a factor of progress or regress for the organization according to the values promoted and entrenched in the minds of members.

4) Selective promotion of subcultures. 5) Planning by development projects and establishing structures for organizational learning. 6) Unfreezing and change through technology.

III) Maturity and decline: the organization is facing major problems that can threaten its existence (inefficiency, high operating costs). Values, behaviors and symbols are well assimilated by members, thus modifying them is rather difficult. Cultural elements act as filters in the organization and can encumber reform efforts and reduce performances.

7) Change by infusion of personnel from outside the organization. 8) Unfreezing by conflicts and challenging myths. 9) Basic remodeling of the organization. 10) Change through coercion.

Source: Adapted after Schein (2004, p. 292) Gradual change (general and specific evolution) occurs as relationships between members create specific cultural forms that develop in smaller groups and are then generalized at organizational level. Cultural elements developed at two levels (culture and subcultures) while interacting and influencing each other. Organizational therapy is a multi-stage process whereby the members of the organization: (a) identify the weaknesses and strengths of the organization, (b) grow aware that change is needed and (c) build the consensus necessary to address possible problems (possible solutions would refer to setting new priorities, redefining goals and procedures and so on). Promotion of hybrid cultural elements refers to the rational decisions and actions of upper management (or leadership) that identifies those members that share values capable to ensure the success of the organization; once identified, these members and their cultural characteristics are promoted to the entire organization. Selective promotion of subcultures is a similar process to the promotion of hybrid cultural elements, but done on a larger scale. Groups (departments, offices) that have well-

developed subcultures capable of ensuring growth and performance are promoted at organizational level. Learning structures such as seminars, conferences, codes of conduct, workshops are the mark of external experts that are brought in to help managers in their reform attempts. Reforms are initially implemented in limited areas (pilot programs) and are extended at organizational level only if they prove to be successful. Unfreezing and change through technology refers to the transformation of work processes and human interactions as new technological innovations are introduced. Change can also be generated by an infusion of personnel from outside the organization; the new staff brings a new set of beliefs, values, attitudes and behaviors that can improve the performances of the organization. In the meantime, conservative elements that might oppose the reform process are reduced and gradually eliminated from the organization. Unfreezing by conflict and challenging myths refers to efforts that seek to distance the culture from old myths, stories and traditions that are not compatible with the new vision of the organization; at this stage new cultural elements are proposed to replace the old ones. Remodeling is a fundamental long term process that generates a new culture of the organization as a response to external developments. The process requires consensus between leaders and members, a clear vision (of what transformations will take place and what will be the outcome) and the involvement of all the members of the organization. Coercion is used in crisis situations when the organization needs to react quickly to external or internal threats. This type of change is imposed in an authoritarian, hierarchical and in a top to bottom way. Due to time constraints this type of transformation does not aim to be participative and is based on a negative motivation (punishment) of members that disagree with (or oppose) the reform. The cultural elements modified in any of the aforementioned stages have a direct and immediate effect on the behaviors and values expressed by members; as such, cultural reforms resonate in the entire organization. The reform of culture, as well as its creation, is a long term process that requires time and material resources, as well as the concerted action of both major categories of members: “leadership” and “followers” (ordinary members, lower hierarchical echelons). 4. Limitations, solutions and key themes for the effectiveness of OC change Following a systemic review of the literature, Parmelli et al. (2011) reach a rather pessimist conclusion on the topic, as – according to them – ‘‘current available evidence does not identify any effective, generalisable strategies to change organisational culture’’. However, despite considerable limitations and backlash against organizational and cultural transformation and change, such conclusions are overly pessimistic. Although there is no universal model of cultural change and no panacea for all cultural needs, there is no shortcoming of general applicable guidelines that can shed

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light on how to overcome various limitations and how to generally manage organizational/cultural change. No matter what model (if any) is adopted as a blueprint for the process of cultural change, the context in which these transformations will take place must be taken into consideration. The favorable conditions that facilitate transformation and the reactive factors which will oppose it must be themselves understood and analyzed (Nicolescu, 2004, pp. 358-360). From the early stages of organizational and cultural transformation, decision makers should consider all obstacles and impediments that may occur; the actors who present/have interests contrary to those of cultural promoters ought to be identified and measures must be taken to pave the way for future processes (Nicolescu, 2004, p. 361). The first obstacle can be generated by the very nature of organizational culture; since culture is difficult to decipher, most cultural manifestations will have different meanings for different individuals. The knowledge and comprehension of what exists in the organization is the first and most important stage of a cultural reform. If the person that performs the processes of cultural analysis and change originates from the organization he might lack the theoretical knowledge and the instruments necessary for a proper cultural analysis; on the other hand, if the organization relies on an external expert for this role, he can face a wall of silence from the members of the organization as they might not consider him trustworthy. The primordial fear of change, the general and irrational fear of the unknown affects every aspect of life, including those related to job security. Changes will always be perceived as threats to personal safety; as such, the reaction of those members of the organization that oppose change must be understood as a normal one. This obstacle can be surpassed by involving all the members of an organization in the planning and implementation of the reform process. By highlighting the positive aspects of change and by creating and maintaining permanent communication channels this fear of change can be further diminished. Most attempts to reform an organization also entail measures to reduce costs and staff and this will generate instability and anxiety among the ranks. Yet again, the promoters of change should give due consideration to the backlash that will originate in these worries. Curran (2005) seems to underestimate the problems faced during cultural change, arguing that ‘‘an organization’s culture can be changed for the better, and relatively quickly’’ (p. 29). Although we do not side with the author on the simplicity or cultural transformation, some of the means he proposed to affect cultural change are rather valid. As such, Curran (2005, p. 29) advises leaders and managers to: “(a) address cultural issues as a cohesive system rather than attack each problem on its own, (b) work with the organization or department as a whole rather than with separate individuals, (c) find the right tools, (d) invest time and resources, and (e) get help from someone who knows more about organizational culture than you do”. In similar lines, Gibson and Barsade (2003) argue that organizational culture transformation can be effective only

if a series of key elements are taken into account (Table 5) and addressed accordingly.

Table 5: Key themes in effective OC change Theme Brief explanation

1. Leadership from the top Leaders must assume a proactive role in OC change.

2. Alignment of soft and hard aspects of organizations

Intentionally align structure, systems, and policies with the new structure.

3. Ensuring staff and stakeholder participation

Involvement will influence members to abide and enforce the new culture.

4. Criticality of communicating change

Clear, conscious and sustained communication should ensure transparency/flow of information.

5. Obtain feedback and evaluate progress

Two way communication facilitates the feedback required for evaluating progress

6. Managing the emotional response

Change will cause both positive and negative emotions that must be taken into account.

Source: Adapted after Gibson and Barsade, 2003, pp. 24-30 Similar recommendations to those of Gibson and Barsade, (2003) are made by O’Donnell and Boyle (2008) who argue that the key issues that need to be addressed in order to understand and manage organizational culture and its transformation are as follows: (a) leaders must act and be perceived as champions, (b) a climate for change must be created, (c) training, recognition and rewards must be used, (d) cultural change must be tracked, (e) employers must be empowered and engaged, and (f) everything must be team orientated (2008, pp. 67-72). According to Kotter, employee commitment can be established and skepticism can be reduced even in the face of major change (1996, p. 21) by following eight simple steps (Table 6).

Table 6: Eight-step process for major change No. Name 1 Establishing a sense of urgency

2 Creating a guiding coalition 3 Developing a vision and strategy 4 Communicating the change vision 5 Empowering broad-based action 6 Generating short-term wins 7 Consolidating gains and producing more change 8 Anchoring new approaches in the culture

Source: Adapted after Kotter, 1996, p. 21 Following a review of programs and leaders that successfully managed organizational change, Khademian (2002) noticed a consistent set of leadership characteristics that can facilitate change: listening and learning from the information gathered, looking for ways to broaden participation, identifying and providing resources to enable all participants to excel, practicing continuous evaluation, targeting authority structures within and without the program and being relentless. To complicate the issue even further, the debate on the key elements and leadership traits that can facilitate the transformation of organizational culture and ensure the success of the process if still far from dwindling. For

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example, although most of the aforementioned authors bring up feedback as a key player in the process of cultural change, empirical evidence suggests otherwise. Based on an empirical survey of South African financial institutions (pre and post test, N=2511) la Grange and Geldenhuys (2008, pp. 37-66) conclude that feedback has a limited impact on effecting organizational culture change. On the other hand, the stress generated by cultural transformation is often brought up in the literature (Kets de Vries and Balazs, 1998, pp. 611-622; Lichtenstein, 2000) as one of the most influential factors that can deter said transformation. Kets de Vries, Guillen Ramo and Korotov (2009, p. 3) recognize that change and stress go hand in hand, but they do not perceive this as a threat; for them, stress is a major catalyst for organizational change as it acknowledges the consequences of what is to come and more importantly the negative connotations of refusing to adapt to the environment. 5. Conclusions A cultural transformation must be accompanied by formal changes of the organization and by specific actions; change cannot be achieved only through ideas, concepts and training. Visible changes at the formal level can create an environment favorable to cultural change and can create favorable conditions for the acceptance of new values. All planned cultural transformations should be based on a coherent strategy that takes into account all the levels and forms of manifestation of organizational culture as well as the formal aspects that exist in an organization. The transformation of organizational culture also includes ethical and moral aspects, aspects that are of extreme importance but which are often ignored by the agents of change. The managers/leaders involved in these transformation processes ought to act as ethical role models because their actions will significantly affect the values, beliefs, symbols, rituals and other elements instilled in the new organizational culture. The promoters of change should be beyond any doubt as they will have to lead the transformation by their personal example. As such, the implementation of cultural changes should be reserved for those managers who possess leadership qualities and a range of skills and abilities that will allow them to understand and decipher organizational culture. When considering a new cultural model or new cultural characteristics the promoters of change must take into account the life cycle and the stage of development of the organization. The agents of change must analyze the current stage of development and the history of an organization in order to correctly assess cultural characteristics and what measures have to be taken to modify these elements. The human (informal) elements of an organization should be taken into account during this process to ensure success; members from all levels should be included in the transformation process from the onset. We believe that the most important elements that can ensure success in organizational or cultural change are: (a) the creation of permanent communication channels between all the levels of an organization and (b) the involvement of all echelons in the planning and implementation of cultural transformation.

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