Organization’s Culture and Strategic Management

Introduction

Current research seeks to evaluate the importance of organizational culture and leadership in modern strategic management. The analysis of best practices and procedures required to realization of successful strategic management will be provided with a special attention to the practice of modern business entities and particularly drawing on JC Penney’s case study. We hope that current research will prove to be helpful for all interested in the issues of strategic management, leadership and organizational culture.

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Business leaders and acumen are more and more realizing the significance of organisation culture as a constituent of the strategic management development; however, they do not understand or have a indistinguishable information of the theory itself. In contrast, they have working knowledge other tangible management aspects of organization, including formulation of trade stratagem and the structure.

Culture formation and preservation process provides a basis for understanding cultural management of many organizations. It also provides insight into the methodology for deciphering the culture of the organization. By linking culture to business strategy, the emphasis is on culture as a practical concept and there is a shift in the analysis of the concept from a general to a practical context. The concept is therefore analyzed to provide an insight into the factors that influence the formation and preservation of culture within the organization and those that determine its content. A distinction is drawn between the organization’s dominant culture and the subcultures that evolve within the organization.

Particular emphasis is placed on the role of the founder of the evolutionary management of the organization in the culture formation process. Various methods have been developed for deciphering organisation culture. These methods are briefly reviewed in order to provide insight into the methodology for deciphering organisation culture. Emphasis is placed on the importance of the cultural audit and the management of culture as a component of the strategic management process. Problems encountered in deciphering organisation culture are investigated to gain a perspective on the tasks involved. In some instances, organisation culture can be classified in terms of identifiable cultural characteristics, yet Thomas and Whittington’s typology of culture is analyzed in order to gain an understanding of the cultural categories and to determine their relevance within the context of strategic management (ICFAI, 2002, p. 13).

Finally, the process of culture perpetuation is used to demonstrate the methodology for achieving cultural change within organizations. This is of particular importance from a strategic management perspective.

Organisation culture and JC Penney’s experience

Culture is defined as “historical transmitted patterns of meaning embodied in symbols, a system of inherited conceptions expressed in symbolic forms by means of which men and women communicate, perpetuate, and develop their knowledge about and attitudes toward life” (Chakravarthy and White, 2002). Although organization culture has been defined at society level, it affects the behaviour of individual that in turn affects the performance of companies (Robbins, 2004).

Organization culture defines how things are done within the organization. It is a source of stability or a barrier to change depending on the organizations strength. The organization’s culture has many characteristics among them innovation and risk taking people orientation, outcome orientation, aggressiveness stability and team orientation. Organization culture deals with ways in which employees perceive the organization characteristics like leadership, delegation, communication channels and management of change (Robbins, 2004, p. 78).

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In the perspective of strategic management, cultural factors that have received considerable attention are information system, organizational structure, reward system, processes, people and leadership (Drummond, 2000, p. 14). In term of organizational structure, formal and hierarchal organizational structure is claiming to prevent effective strategic management initiatives.

Learning organization and the formation of communities of practice are among the highly cited organizational structures that make strategic management more porous. Reward system is a cultural factor that includes compensation system and performance. Strong and dedicated leadership that walk the talk is seen as a must-have cultural factor. In addition, the leadership’s role is critical to create the vision, mission, objectives and ethics codes of the organisation.

As JC Penney Corporation’s chairman and CEO Myron E Ulmman rightly claims ‘The business isn’t just about store managers any more – it’s more complicated than it used to be, and I need to motivate employees from the entry level to the officers. If I had a choice to honor the past and lose, or move forward and win, I pick wining’ (ICFAI, 2007, p. 2). This postulates the fact that the role of organizational culture as recognized as important element of strategic management. As the case study suggests the way chosen for the improvement JC Penney’s business performance was enhancing its organizational structure to transform it into the ‘place to work in’. The main emphasis was on building the customer-focused culture in the enterprise. There is no denying the importance of the fact that this approach goes in line with propositions of such theoreticians as Tannenbaum who claims that ‘Reaching a common understanding about the inherent beliefs in the organization provides a platform for further explorations of the norms of behavior that help define the organization’s culture’ (Tannenbaum, 2003, p.19).

The organization culture in JC Penney for a long period of time was characterized by rigidness and strictness which significantly intimidated new employees and halted the development of human capital which according to Carpenter et al.(2001) ‘is a crucial component of business development in the conditions of globalization’ (ICFAI, 2007, p. 34).

The changes that were made to organizational culture included communicational and symbolic transformation. This mainly refers to campaign ‘Call me Mike’ which sought to set off communicational barriers between ordinary employees and management.

Besides this JC Penney’s management made all necessary steps to create democratic culture in this business organization by introducing development programs and trainings such as ‘Winning together’. These changes were designed to create conditions for developing human capital and favorable working climate in JC Penneys which is an accordance with best HR practices and procedures now existent. According to Mcgoldrick et al. (2002) the main prerequisites for creating successful organizational culture are: 1. Clear objectives shared by all workers; 2. Organization’s embedding in its environment, fostering good relations with all relevant parties. 3. Perfect social interaction between units and between individual employees, sound working climate. 4. Creating activity’s patterns that can be implemented on a daily basis not demanding special intervention or attention. 5. Critical practices for ensuring employees’ health and well-being are stress training (Mcgoldrick J., Stewart J., Watson, S., 2002). The results of these policies proved to be effective in attracting new talents from colleges and schools since the information on the favorable organizational culture quickly disseminated among those searching for employment. Besides this it should be noted that the introduced policies were successful in terms of enhancing company’s economic performance which is a good evidence of connection between organizational culture and business success.

As Pfeffer supposes (1998, p. xvi): “The returns from managing people in ways that build high commitment, involvement, and learning and organizational competence are typically on the order of 30 to 50 percent, substantial by any measure.” And later he adds (Pfeffer, 1998, p. 32): “substantial gains, on the order of 40 percent or so in most of the studies reviewed, can be obtained by implementing high performance management practices.” (ICFAI, 2007, p.33).

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To sum it up the steps taken by JC Penney’s leadership were effective in terms of creating new democratic organizational culture which strengthened commitment of its employees in the company’s interests and fostered the implementation of viable strategic management decisions.

The influence of Leadership on Organizational Culture

Johnson et al (2005, p. 78) illustrated in his work the significant roles of leadership in the creation and management of organizational culture throughout organizational growth. During the formation of organizations, leaders or founder members of organization are the first leaders and they have main impact on how the organization will be run. At this inception is defined. This is because founders or leaders are usually entrepreneurs who have a high level of self-confidence and determination; they usually impose strong assumptions to their invented organizations (Drummond, 2000). Their assumptions are thriving in the business; they will be perceived as accurate and ultimately will be assimilated as part of the organizational culture. A founder member will to choose associates who share the same values, similar assumptions, and thus strengthening the foundation of the organizational culture per se. Keyton came up with two types of mechanisms that are used by the influential of organization to incorporate their assumptions in the organizational culture which in turn affects strategic decision making (2004, p. 56-59). (Table below)

Secondary mechanisms are organizational environment and they are a reflection and manifestation of cultural assumptions derived from the leaders, especially at the initial formation of the organizations. These secondary mechanisms can become a powerful reinforcement of the primary mechanisms used by the leaders (Brass B., Riggio, R., 2006). The principles of using the secondary mechanisms are that they must be consistent with the primary mechanisms and leaders need to set an example.

Primary Embedding Mechanisms Secondary Articulation and Reinforcement Mechanisms
What leaders pay attention to, measure and control on regular basis

How leaders react to critical incidents and organizational crises

Observed criteria by which leaders allocate scarce resources

Deliberate role modeling, teaching, and coaching

Observed criteria by which leaders allocate rewards and status

Observed criteria by which leaders recruit, select, promote, retire, and ex-communicate organizational members.

Organizational design and structure

Organizational systems and procedures

Organizational rites and rituals.

Design of physical space, facades, and buildings

Stories, legends, and myths about people and events

Formal statements of organizational philosophy, values and creed.

The dynamics of midlife, maturity and declining organizations in term of the influence of leaders are quite different from the early stage of organization formation. For example, in the midlife organizations, the culture determines the leadership as founders have been replaced with newer generations of CEOs. The new breed of leaders needs to understand the organizational culture and decide which cultural assumptions that needs to be changed (Clegg et al., 2005, p. 45). In short, they become the cultural change agents. They can promote changes through systematic promotion of desired subculture, use planned organizational development projects, create parallel learning structure or unfreezing and change through technological seduction When the organizations enter into the maturity and decline phase, which may indicate that the existing organizational culture becomes outdated, the leaders need to start the change process at a more pervasive level. At this juncture, leaders with transformational leadership style are often desirable (Politis, 2001; Carpenter et al., 2001).

JC Penney’s case study suggests that fostering leadership was one of the main prerequisites for developing effective organizational culture and strategic management in the company. Through the mechanism of training and motivation the management sought to foster the development of leadership skills in different categories of employees beginning from the managers of the low level, group leaders and top management. The main emphasis was put on the development of ‘emotional connection’ between employees and customers. In January 2006 as the case-study suggests the leadership conference was conduced in JCP for the store managers. The main purpose of this conference was developing leadership, autonomy in decision-making and creativeness. The plan named ‘Long Range Plan’ was developed during the conference and all employees participated during the process of its elaboration. As the company’s CEO claims, ‘ We have been investing heavily in executive education and leadership training for our managers, strategic skills for our top people…we’re very committed to being a great place to work, and we think the first thing to be an advantage of changing…is lowering our turn to the lowest in the industry’ (p. 10). As the case-study suggests the results of new leadership policies were efficient in terns of fostering JCP economic performance and customer confidence. The development of teams who designed customer-tailored solutions was one of the main consequence of improving leadership skills of employees.

The decision of JC Penneys’ management to transform company’s organizational culture was warmly welcomed by all business and management experts. The shortage of talents in retail industry is one of its main problems precluding rapid growth and high performance. There is no denying the importance of the fact that rigid culture that was characteristics of JC Penneys before reformation had negative impact on strategic management and company’s performance. Satisfaction with job does not only depend on the level of monetary compensation but on the working climate and organizational culture that unites all employees and management in one common goal that is to achieve strategic goals of their company. As wise management say, ‘Happy employees make happy customers’.

The approach to changing organizational culture in JC Penneys’ company was elaborated not voluntarily but through extensive and intensive consultations with representatives from other companies, employees, theoreticians and practitioners. The analysts that assessed the changes that had taken place to this company said that creating comprehensive action-plan before making any decisions is characteristic of wise and effective management. Besides this one of the most important lessons that may be learned from JC Penney’s case-study is an importance of top management involvement in implementation of changes. The management of JC Penneys’ company was in permanent contact with low-level employees taking part in trainings, seminars and other meetings. This is particularly of education in Retail Academy for which they spent many hours.

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There is no denying the importance of the fact that organizational culture is not only about management involvement in the life and work of their employees but is effective only if realized in a coherent way. It suggests that for organizational culture to be cost-effective and dynamic it is necessary to maintain all necessary conditions for its systematic reproduction. Top management can not regulate the efficacy of organizational culture every moment and hence a system of norms, self-control, checks and balance must be in place.

It is noteworthy that the strategy of improving organizational culture in JC Penneys’ was designed to achieve wider business goals of the company i.e. winning in competition with other retailers and department stores which is quite intense. Hence the strategic management implemented in JC Penney’s depended on combination of technology, culture and business processes. The successful realization of these strategic elements was one of the main prerequisites for effective business performance of the company.

According to the JC Penney’s case-study the changes in organizational culture had resulted in better customer service, creating exclusive design lines (creativity) and other improvement in the quality of business activities. Hence, to sum it up the impact of flexible approach to organizational culture and strategic management was quite evident in the case of JC Penney’s company.

Conclusion

Based on the above underlying discussion, it is clear that organizational culture has major effect on the implementation and development of strategic decisions. Therefore, organization culture needs to promote to allow employees have trust themselves. I highlighted the omnipresent role of leadership in shaping the organisation culture. Organizational culture should be a reflection of the leadership’s aspiration. This is because only leaders of organisations are in the position to assemble organizational resources for desired goals.

I feel that leadership is the main issue to be tackled prior to organizational culture. This is particularly true since firms try to forget the importance of culture. I will recommend that the organisation should encourage the culture of honesty; ethical and innovation in remain in the word of corporate governance.

References

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