Organizational Culture And Change Management

Introduction

The greek philosopher, Heraclitus, once stated: “Change is the only constant in life”. In the age of globalization, change has become a normal part of our everyday lives. At the same time, more and more companies do their business across country borders. Companies find themselves in markets that change rapidly, and in order to keep their position and market shares, companies are forced to adapt and change as well. In order to meet the expectation of both foreign customers, ownership, shareholders, and workers, companies need to understand local customs and business practices (Champoux, 2011). The change in both consumers and workforce demands a change in the way companies are managed, due to an increase in diversity and constant changing internal and external environment(Cornelissen, 2017). The importance of an understanding of and respect for culture within organizations has increased drastically within management theories, and as the management consultant, Peter Drucker once put it “Culture eats strategy for breakfast”.

ECCO - the case

Following the changes in the Japanese market caused by the economic crisis in 1990, ECCO found it necessary to conduct structural changes in their business in Japan. After having worked together in a joint venture for more than three decades, ECCO and Achilles decided to part ways. Mostly because Achilles no longer seemed to be the right fit for the retail business ECCO wished to conduct in Japan. In order to ensure and enable ECCO Japan to align with the global strategy and goals of the ECCO group, ECCO decided to move from a joint venture to a wholly-owned business. In order to turn things around and change the image of ECCO Japan, Rikke Dahl-Throup was appointed president. The case describes Rikke Dahl-Throup’s experience of working with the international team in Japan and the challenges she and the other team members faced. The case is based on interviews of the team members, and their perceptions of the team dynamics and what they found work well and not so well in times of change.

Diversity

According to Champoux´s definition, workforce diversity are the variations within a workforce, in relation to personal and background factors of employees (Champoux, 2011). There are many dimensions of workforce diversity, including age, gender, and ethnicity (ibid).

Diversity Management

Diversity management involves the promotion of the perception, recognition, and implementation of diversity in organizations and institutions(Champoux, 2011).

There are multiple reasons for diversity management. Firstly, demographic changes are forcing companies to look beyond their own country borders (Champoux, 2011) With the ever-growing globalization, the workforce is not only more diverse but also more flexible in regard to what country it works in. Secondly, it allows the company to recruit the most talented for the position, regardless of where this person might be located. (ibid.) Thirdly, there are market opportunities to be exploited with a diverse team (ibid.). Finally, diverse teams are known to breed more innovation and creativity (Stahl et. al, 2010).

Organizational Culture

Champoux defines organizational culture as a complex and deep aspect of organizations that can strongly affect organization members (Champoux, 2011). It includes both observable and unobservable characteristics, such as values, norms, rituals, and heroes (ibid). Each organizational culture is a construction of a number of subcultures, such as the different departments, age groups or ethnicity within an organization (ibid).

Schein - Three levels of Culture

Edgar Schein defined culture as “a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration” (Schein, 1992). He described three levels of culture namely, artifacts, espoused values, and basic assumptions (see appendix). The artifacts are the visible, and often undecipherable, aspects of an organization. In sum, it is what we do. The espoused values of an organization work as guidelines of the organization members for what they should do in different situations. Although the espoused values of an organization aren’t visible to the eye, it is possible to discover and learn them. The basic assumptions are the unconscious aspects of the organizational culture, they can only be learned through trial-and-error. The basic assumptions are unconscious to the organization members and they are aspects of both behavior and relationships between humans (Schein, 1992).

Hofstede - Cultural Dimensions

Geert Hofstede executed a thorough cross-cultural study of employee values between 1967 and 1973 (Champoux, 2011). With his study, he mapped out five cultural dimensions; power distance, uncertainty avoidance, individualism, masculinity, and long-term orientation. These dimensions are used today to understand cultural differences in organizations, which international managers should consider before deciding how to manage an organization (Champoux, 2011).

Functions and Dysfunctions of Organizational Culture

The adaptation to an organization’s external environment and coordination of its internal systems and processes is considered one of the functions of organizational culture (Champoux,). It gives the employees and other organization members a clear vision of the organization’s mission and it defines the rewards and sanctions that managers can use. Additionally, organizational culture gives a set of definitions, concerning group boundaries and inclusion as well as rules of power. The ideology that defines what the organization is all about, is both developed and communicated through the organizational culture.

There are many functions of organizational culture, but there are also dysfunctions connected to organizational culture. Firstly, members of an organization might show resistance to change if it goes against the organizational culture (Champoux, 2011). The necessary change can, for example, be caused by changes in the external environment of the company or when two companies merge (ibid).

Teams

“A team is a small number of people with complementary skills who are committed to a common purpose, set of performance goals and approach for which they hold themselves mutually accountable” (Katzenbach & Smith, 1993).

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Pentland

In his study, Pentland found that building a team is a science, and it can be studied from dynamics that are observable, quantifiable, and measurable. Pentland argues that the communication behavior of team members is more important than individual intelligence, personality, skill, and substance of discussion combined. His study showed that the best indicator of productivity in teams was the team’s energy and engagement outside of formal meetings, for instance in a social gathering or taking the coffee break together.

When building a team it is important to not select the individuals based only on their intelligence and accomplishments, but also on their communication behavior and their contribution to the team. Organizations facing external changes often need to make internal changes as well. Successful ways of reactivating a team are plentiful, the most common and easily done is to reorganize the office. Another is that the manager sets a personal example, by encouraging even participation and conducts more face-to-face communication with him-/herself. Lastly and perhaps the most drastic tactic is to hire and fire.

Change Management

Organizational change can be defined as the movement from the current state of an organization towards the future or target state (Champoux, 2011). There are many different forces of change, both internal and external (ibid). An example of an external force of change can, for example, be the competition for global market shares, whereas internal forces of change can be dissatisfaction and stress (ibid). Usually, there are opposing forces, so-called forces against change, these can be found both within and outside of organizations. A distinction can also be made between unplanned and planned change. If the necessity for change overwhelms the resistance of change, it is defined as unplanned change. Whereas, if there has been a deliberate effort from a part of the organization to change, it is defined as planned change (ibid). Both types of change will often be faced with resistance from the organization members. There are various reasons for resistance to change, including the feeling of something valued being lost, feelings of future unfairness, the lack of trust in the person bringing the change, and not sharing the same perception of change (ibid). If managers fail to communicate adequately about the change it is more likely to be met with resistance (Cornelissen, 2017). The management has different ways to react to this resistance, it can either be seen as a problem or a sign of a lack of information given about the change (Champoux, 2011). To reduce the resistance towards change, managers should communicate clearly the reasoning behind the change, and at the same time outline how it will happen and how it will affect the organization (ibid).

Analysis and Findings

Diversity

As an international company, ECCO values diversity. Point 3 in the ECCO Code of Conduct states that “ECCO respects equal opportunities and fights discrimination in the workplace”. The team in Japan is diverse in regard to both cultures, ethnicity, and gender (see appendix no.). Japan is a country where demographic changes will force companies to seek workers from outside the country’s borders, in order to accommodate consumer demand (Clausen, 2015,).

Culture

“ECCO is a guest in each of the countries in which it operates and respects the local culture” (ECCO). This is the first point of ECCO’s code of conduct, outlining the type of behavior that is expected and what is prohibited within the organization (Champoux, 2011). Danish and Japanese organizational cultures are very different. According to Hofstede’s five dimensions of culture, the countries score most differently on masculinity, uncertainty avoidance, and long-term orientation (Hofstede Insights,). In all of these dimensions, Denmark has a lower score than Japan. The high score in masculinity indicates that Japan is a very competition-driven culture, at the same time with a strong focus on excellence and perfection (Hofstede Insights,). The detail orientation of the ECCO team in Japan was especially evident as Rikke Dahl-Thorup mentions how they have 40% more manpower than….(average for ECCO??) for the logistics and operational part of the team, mostly due to the high detail level. Furthermore, she describes how her Japanese team members will do anything to avoid making errors, as they regard it as unacceptable to do so. The high level of uncertainty avoidance could stem from the occurrence of natural disasters in Japan, everything should be planned with maximum predictability and precision (Hofstede,). This is an aspect that can make it hard to go through with changes in corporate Japan. The precision level demanded in Japanese culture aligns well with Rikke Dahl-Thorup’s experience as she described how brainstorming didn't work in the Shibuya office, because the team members wanted information that was 100% relevant to the execution. The high score on long-term orientation indicates that companies focus on the profitability of the company in the long run, rather than quarterly (Hofstede,). Rikke Dahl-Throup shows knowledge of this aspect as she describes that investments done in Japan are long-term, well aware that this makes it harder to reach the goal, but in return for the hard work ECCO will get loyalty and sustainable long-term business.

Miyuki Kiuchi, Rikke Dahl-Thorup’s assistant and right hand, is of great help to avoid and overcome cultural misunderstandings (Clausen, 2015). Miyuki is responsible for translating for Rikke Dahl-Thorup if meetings are held in Japanese, but as her cultural helping hand she doesn’t only translate the language, but also what is actually being said. In regards to understanding the organizational values, which aren’t visible to the eye, Miyuki Kiuchi is very important for Rikke Dahl-Throup.

One of the challenges Rikke Dahl-Throup faced was understanding how to communicate with her team in Japan. This can be due to some of the basic assumptions within the team, which can only be learned by trial and error, Rikke Dahl-Throup understood early on that her mission in Japan would differ from the ones she had in Australia and Canada, which in turn lead to a lot of learning throughout the process. In order to communicate efficiently with the team members, Rikke learned to be more specific with what she was saying. If she left information between the lines or gave abstract examples it was easy for the team members to misunderstand. Another aspect that Rikke learned through trial and error was the way her team reacted to brainstorming. Although this is commonly used in western companies, it didn’t work in the Japanese office. The ideas the team members presented were thoroughly thought through beforehand with a high level of precision, which is not something that comes in a brainstorming process. To work around this, Rikke Dahl-Thorup found that direct orders were the best way to ensure efficient work.

Another of his tasks was to spread corporate values, including passion, commitment to excellence, care, and heritage, hereby making sure that all the organization members are aware of the organizational culture.

Teams

Changing the team was necessary to get new energy to ECCO Japan. This implied firing old employees and hiring new ones. According to Pentland, hiring and firing can be a successful tactic of bringing more energy to teams (Pentland, 2010). Rikke Dahl-Thorup explains that this was a way to avoid the mindset of “this is how it has always been done” (Clausen, 2015) Neurettin, the HR manager, made sure that the new employees were good matches with the company. Throughout the hiring process, he made sure that the interviewee would be a loyal employee to ECCO and not just any company. Furthermore, new employees needed to be open to change. He spent time ensuring that the new team member would contribute with energy to the team. Pentland argues that it is more important to consider how the new employee will contribute to the team, rather than their individual smartness and accomplishments (Pentland, 2010).

According to Pentland, the best indicator of productivity is the team’s energy and engagement outside of formal meetings (Pentland,2010). Rikke Dahl-Thorup acknowledges her team’s hard work and tries to celebrate it, not only with bigger annual parties but with for example ice cream for the entire office on a sunny day (Clausen, 2015). Events such as this will, according to Pentland, increase the productivity of the team and accounts for 50% of positive changes in teams (Pentland, 2010).

The importance of communication is stressed throughout Pentland’s study. The better the communication, the higher the performance (Pentland, 2010). The communication with the ECCO team in Japan was one of the main challenges for Rikke Dahl-Thorup. The cultural differences in communication style were something Dahl-Thorup learned throughout her time in the team. Although she had international experience in change management from Australia and Canada, the differences in communication between Denmark and Japan were greater than the two other countries. Pentland argues that uneven contribution is a cause of poor team performance in his study of a Japanese team he found that they were reluctant to speak up, which in turn led to low levels of energy and engagement in the team (Pentland, 2010). Rikke Dahl-Thorup’s depictions of her team’s reaction to for example brainstorming illustrates Pentland’s picture of uneven communication well. Pentland argues that with sufficient training the team should be able to overcome these uneven communication levels, however, Rikke Dahl-Thorup decided to work within the framework in which her team members found themselves comfortable. She succeeded in doing so by giving the team members direct orders and working around the brainstorming techniques that she had used in Canada and Australia (Clausen, 2015).

Change Management

Rikke Dahl-Thorup is an experienced change manager, she described herself as a person that fits better in a place of change, than maintaining the machinery. She has dealt with change before and said that she trusts her navigation skills and wasn’t afraid to tackle things head-on. Dahl-Thorup was made responsible for bringing ECCO Japan to the target state, which was a wholly-owned subsidiary that was aligned with ECCO’s global strategy (Clausen, 2015,). In order to do so, a lot of changes were necessary. This included restructuring the team by hiring and firing. ECCO Japan was forced to change due to external forces, more specifically the changing markets and customer demands. To an extent, there were also internal forces, since the partnership with Achilles was no longer satisfactory for any of the parts involved. The change was a planned change, where there were management efforts to move the office in Japan towards the target state. In the case of ECCO Japan, the resistance was minimal. The team in Japan was overall welcoming to the organizational change (Clausen, 2015). However, Miyuki Kiuchi explains how some team members were less accepting of the change, and she argues that this was due to their lack of experience with change (Ibid). The way Dahl-Throup communicated the change may have played a crucial role in the overall positive reaction. Rikke Dahl-Thorup explains how she has been reminding herself that what seems logical to her does not need to be logical to others (Clausen, 2015). On the basis of this, she consistently shared her plans and her reasoning behind them.