ALIGNING STRATEGY AND CULTURE

ALIGNING STRATEGY AND CULTURE

November 1, 2015
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The culture of an organization must be aligned to its strategy. The culture can make or break a strategy. Ideally the existing culture supports the strategy of the organization. However, a new strategy often has consequences for the existing culture. A new strategy often requires changes in the values, way of thinking and habits of organizational members. Old ways of doing things and attitudes can become an obstacle to successful strategy development and execution. This is especially the case when an organization has a culture of fear. When then the existing culture of the organization does not support the strategy it must be changed. This is a challenging task as organization cultures are hard and slow to change. Aligning strategy and culture may take years and a total commitment of leaders and managers.

THE CULTURE OF FEAR

Strategy execution requires a fearless culture. To execute a strategy successfully, proactive managers and employees are needed who actively participate in the development of the strategy and its execution. In order to fully contribute to the development and execution of the strategy, organizational members must dare to take initiative, voice their opinion, share information and not be afraid to make mistakes. To achieve this an empowering and fearless organization culture is needed in which organizational members are able to voice their opinion and take initiatives without being punished for it.

A fearless culture facilitates innovation. When organizational members are allowed to take interpersonal risks without fear of material or reputational harm this facilitates their willingness to take initiative which may result in making mistakes. When organizational members believe that well-intentioned risk taking will not be punished, this stimulates learning in work teams. This in turn increases innovative behavior of employees in organizations. A strategy and especially its execution must be constantly adapted to adapt to changed circumstances. Consequently, managers and employees are needed that voice their opinion and take the initiative in improving the strategy and its execution.

Many organizations have a culture of fear. The emotion of fear and the behavior that results from it is an important factor in the culture of many organizations. Many organizations have what Professor Valdemar Marcha called a culture of fear. A culture of fear is an organizational culture in which people are fearful to be punished by someone higher up in the organization. Employees often become shaped by organizations with high levels of centralization, formalization, and rigid rules. When managers act in authoritarian and punitive ways, subordinates become fearful of being punished and perhaps even losing one’s job. My research found that many organizational members have a fear to lose their job, make mistakes, take initiative, carry responsibility, participate in decision-making, engage in learning behaviors and a fear of change. These emanations of fear act as major barriers to strategy implementation success.

FEAR FOR JOB SECURITY

The fear to lose one’s job is perhaps the most basic fear from which the other fears emanate. A fear for job security often creates a fear to make mistakes, which in turn creates a fear to take initiative, offend others, to take responsibility, participate in decision-making and a fear of change.

New strategies often create job insecurity. As a new strategy can be accompanied by layoffs, organizational members often perceive it as a threat to their job security. Especially in organizations with a culture of fear do organizational members view strategy implementation, which often involves layoffs, as very threatening to their job. Job insecurity is more pronounced in during economic crises and geographic regions where there is a scarcity of jobs and limited social security.

CONSEQUENCES OF JOB INSECURITY. When organizational members have a fear of job insecurity this has the following very negative influences on strategy execution performance,

Job insecurity creates many negative behaviors. Research has found that job insecurity is related to many negative organizational behaviors such as low organizational commitment, low job commitment and, resistance to change. When organizational members become fearful about losing their job they tend to detach themselves emotionally from their work. This results in increasing psychological withdrawal and withdrawal behaviors including low job satisfaction, low motivation and low commitment to job and organization. This in turn leads to low job involvement, reduced work effort, increased absenteeism, and a greater propensity to leave the organization. When employees become uncommitted to their work and the organization they will not be committed to the strategy, resulting in execution failure.

Job insecurity creates a culture of fear. My research found that a fear of job insecurity can result in a fear to make mistakes, take initiative and a fear of organizational change. When this happens employees may start to resist the strategy execution effort. Given these negative behaviors and attitudes, it is clear that job insecurity has a very negative influence on the ability of organizations to successfully execute their strategy.

Employees become distrustful of management. Research has found that when organizational members experience job insecurity they tend to have low trust in management and the organization. Such a low trust greatly inhibits the ability of managers to successfully execute the strategy. When employees do not trust their managers they are not likely do follow him during the execution of the strategy. This results in a resistance to change.

FEAR FOR MAKING MISTAKES

Organizational members become fearful of making mistakes when managers have an authoritarian management style and punish mistakes made by organizational members. Making a mistake or repeated mistakes can have large consequences in some organizations and may even result in job loss. When organizational members become fearful of making mistakes this has the following very negative influences on strategy execution performance.

Fear for mistakes reduces innovative behavior. When organizational members are punished for making mistakes they tend to become risk-averse. This has a very negative influence on innovative behavior. Research has found that psychological safety has a positive influence on the level of risk taking within an organization and thus on learning behavior. Psychological safety is the belief that the work environment is safe for interpersonal risk taking. Motivated organizational members often have valuable ideas for improving performance but often do not dare to share them because they fear to be harshly judged. When employees feel psychological safe they will think less about the potential negative consequences of expressing new or different ideas. The belief of psychological safety thus increases the amount employees learn from mistakes, which increases team innovation and employee commitment. This crucial for building a culture of continuous improvement which greatly increases strategy execution success. Strategy execution is a continuous search for adapting and perfecting the strategy and its execution. Psychological safety can be enhanced by leaders and management using participative management techniques, discussed later on this book.

Employees become fearful of new tasks. Executing a new strategy often involves new tasks and activities that must be performed by organizational member. As these tasks and activities are new, organizational members have not performed them yet and do not know if they are able to perform them successfully. A new task may be seen as an opportunity for failure and thus possible punishment. As a result, organizational members may become fearful about performing the new activities. Research on self-efficacy has shown that when people are not confident about performing a task successfully they are less likely to persist in performing the task until it is a success. Thus, they are more likely to fail.

Employees become less committed to their work. When initiatives are not rewarded and mistakes are punished, organizational members become less committed to their work and their organization. As a result, they become unmotivated and only perform their (implementation) tasks and do what is asked of them by management and nothing more. However, strategy execution requires energetic and dedicated employees who are commitment to their work, their organization and thus its strategy and execution. Many studies have shown that a lack of employee and managerial commitment to the strategy is one of the key reasons why strategies fail.

Employees become reluctant to finish tasks. Organizational members can be reluctant to finish their implementation tasks because they are afraid they may not have been sufficiently performed. As a result, tasks are postponed or never finished or not performed at all. This creates delays in the execution of the strategy which can be very problematic in the current fast paced organizational environment. Being able to execute a strategy quickly and effectively is increasingly one of the cornerstones of competitive advantage and organizational success. Furthermore, when employees do not perform their tasks they will not learn from them and will not increase their feeling of competence and confidence.

FEAR FOR TAKING INITIATIVE

When organizational members are afraid to make mistakes and lose their job they become fearful of taking initiative as well. Employees often become shaped by organizations with high levels of centralization, formalization, and rigid rules and become passive and unable to be creative or exercise initiative on the rare occasions that it is encouraged and rewarded. Such behavior is devastating to innovative behavior and thus to strategy execution as we saw earlier. Organizational members may become fearful to take initiative because of the following two reasons.

Initiatives are opportunities for failure. Taking initiative is often seen as an opportunity to make mistakes, which can be punished, and may even result in job loss. When mistakes are harshly judged and initiatives are not rewarded or even punished by managers, then the next time that person will not take any initiatives any more.

Initiatives may change the balance of power. Organizational members tend to take little initiative because it can change the balance of power within a company. This can result in political repercussions for the initiative taker. This is especially the case in hierarchical culture with a high power distance.

CONSEQUENCES OF A FEAR OF TAKING INITIATIVE. When employees have a fear of taking initiative this can have the following negative consequences for strategy execution.

Subordinates only carry out what they are told. When organizational members are fearful that when they take an initiative they may be punished for it they will only perform new tasks after they get permission to perform them. Employees will become passive and only do what they are explicitly do what they are ordered to do. It may occur that performing a tasks may be very good for the organization but goes against existing standard operation procedures. Consequently, the opportunity may not be acted upon because there was no explicit order to pursue it. Clearly, such behavior is the opposite of innovative behavior.

Strategies are top-down executed. Strategies tend to be executed in a top-down fashion in a culture where employee’s initiatives are not encouraged and employees have become passive. Such a top down strategy execution approach tends to have a very negative influence on implementation performance as many studies have pointed out. The key problem with such an approach is that managers and employees will not be supportive of the strategy. Low commitment to the strategy is one of the most important reasons why strategies fail.

Unforeseen circumstances are not quickly acted upon. During a strategy implementation effort, unforeseen circumstances almost always arise that require organizational member initiative to deal with it in a timely and effective manner. Even the best strategic plans and its execution must be adapted when circumstances change. Valuable time is lost when every initiative needs explicit approval from someone higher up in the organizational hierarchy. In highly centralized and formal organizations decisions are often only made during formal meetings of management teams. Submitting a proposal may take considerable preparation and may have to pass through a long decision-making procedure. This creates unnecessary and often costly delays in the execution of the strategy.

FEAR TO OFFEND OTHERS

A third emanation of the culture of fear is that organizational members fear to offend others. Organizational members can be reluctant to confront or criticize other organizational members because they are afraid to get into arguments and possibly make enemies. Especially with persons who have a higher position in the hierarchy. However, this can also be the other way around. Many managers are reluctant to criticize subordinates to avoid confrontation and keep the peace. A fear of offending others can be the result of the following two reasons.

People may take opposing views personally. Organizational members can have a low tolerance of criticism. People may take criticism very personally, are easily offended, and can get angry quickly. Arguments can get personal very quickly. Especially in more collective cultures with strong personal relationships. When a person offends another person, this can have an effect over a long period of time and impede the cooperation among organizational members. This can have a very negative influence on the execution of the strategy as strategy execution tends to require extensive cooperation and information sharing among co-workers.

People avoid face loss of others. Losing one’s face is considered important in many countries, especially in Asian and Middle Eastern countries. The term face originates from China and refers to an individual’s sense of status, dignity, prestige or honor when interacting with others. When someone is criticized, especially in public, that person may feel that he or she loses his or her face and may react very defensively or hostile. In such contexts, people tend to be very careful to preserve the face of others, especially of those in higher positions of authority.

CONSEQUENCES OF A FEAR TO OFFEND OTHERS. When organizational members fear to offend others this has can have the following negative consequences for strategy execution performance.

Managers are reluctant to address poor performance. To control a strategy execution effort effectively, adjustments must be made when the objectives of the implementation effort are not being met. When managers have to judge or confront subordinates about their performance, it is very possible that those persons will get angry with that person. Few managers want this. Research has found that giving negative feedback is a stressful experience that both managers and subordinates try to avoid. This has been called the mum effect. This is the main reason why work performance and strategy execution performance is often not addressed within many organizations. Executives and managers have to accept the consequence that someone may get angry when that person is confronted about his or her responsibilities and performance.

Employees filter bad news. Organizational members often not only fear to give negative feedback but also negative information, especially to someone higher in the organizational hierarchy. This is another manifestation of the mum effect and is the result of the shoot the messenger problem. Bearers of bad news tend to be blamed even if they are not responsible for it. This problem is exacerbated in centralized and hierarchical organizations. The result is that bad news is filtered as it travels up the chain of command. Bad news become less and less bad or is never delivered as it travels upward. Consequently, top managers do not hear bad news about the strategy and its execution. This is one of the main reasons why flawed strategies are not adapted until its too late.

The wall of friendliness. In many organizations there is a wall of friendliness, which refers to the phenomenon that people tend to say what the listener wants to hear (Marcha and Verweel, 2000). They rather say ‘yes’ or nothing instead of ‘no’. The person appears to be always willing to do something for another person while this is not always the case. Many people do not dare to say ‘no’, especially to someone higher up in the hierarchy. This is especially the case in hierarchical organizations with an authoritarian management style. It is also common in many non-Western societies. During the execution of the strategy, if an organizational member says ‘yes’ and agrees to perform a certain task, the manager often has to find out whether that person really means to say ‘yes’ or actually thinks ‘no’ and will not perform the task but is afraid to say so. This results in a lot of indirect and non-confrontational communication among organizational members. This results in confusion among organizational members during the development and execution of the strategy. This is problematic as strategy execution requires cooperation and information sharing among many organizational members.

Employees do not voice opposing views. Organizational members can be fearful to voice an opinion when it differs from others, especially in public settings. This is especially the case when it differs from someone higher in hierarchy. They do not want to confront other organizational members and especially managers. This reluctance has a negative influence on the level of participation of organizational members. An effective strategy process requires the full participation of all relevant organizational members. Employees often have key operational knowledge about business processes, customer preferences and competitors. When employees are reluctant to share this knowledge this will have a negative impact on the strategy and its execution. A form of group think may emerge that tends to block out valid criticisms of the strategy and its execution. This may result in a suboptimal strategy or even a flawed one.

FEAR OF RESPONSIBILITY

A fourth emanation of the culture of fear is a fear of responsibility. When organizational are fearful of being punished or even lose their job they become afraid to make mistakes. This creates a fear to carry responsibility. When someone is responsible for something they can be held accountable for it when something happens. To avoid taking the blame for something, organizational members tend to take a narrow view on their responsibilities and tend to shift them to others. When organizational members avoid responsibility this has the following consequences for strategy execution.

Subordinates avoid responsibility. Organizational members may fear responsibility because of the following reasons. They may find it easier to ask the manager to make decisions, may fear criticism or punishment for mistakes, may believe they lack the required resources and information to perform well, may already be overloaded with work, and positive incentives may be insufficient. When a person is responsible for something, that person can be held accountable and may be punished when something goes wrong or when a mistake is made. However, accountability is crucial for successful strategy execution. When no one feels responsible for a certain tasks or activity it is likely that it will not performed at all. Furthermore, when no one is responsible it is difficult if not impossible to address someone for poor performance.

Employees are not used to responsibility. My research found that employees may fear responsibility because they are not used to it. Organizational members are often not used to dealing with responsibilities because of the authoritarian management style within many organizations. Hierarchical organizations tend to make organizational members languid and thus unable and/or unwilling to carry responsibilities. In such organizations, organizational members have a tendency to think in a hierarchical way in that management is responsible and should therefore make the decisions.

Employees do not expect responsibility. Employees do no always expect or want to be responsible. This is often the case in cultures with what Geert Hofstede calls a high power distance. All individuals are not equal in cultures with a high power distance. Hofstede defines power distance as the extent to which less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. Hierarchy in organizations is seen as reflecting inherent inequalities. Organizations are often highly centralized and subordinates are expected to be told what to do. The ideal boss is a benevolent autocrat in such a culture. Participative leaders are often seen as weak or incompetent.

Low autonomy jobs induce low responsibility. It has been long recognized that rigidly defined jobs with low autonomy encourages a narrow perspective of the persons who have to perform these jobs. Such a narrow role orientation can also be the result of ‘learned responses to early job experiences in which taking initiative and using extra skill and judgment were severely penalized as stepping over the bounds of one’s authority’ (Karasek and Theorell, 1990: 174). My research found that a centralized organization structure combined with an authoritarian and punitive management style often resulted in a narrow role orientation and a low willingness to carry responsibility.

CONSEQUENCES OF A FEAR OF RESPONSIBILITY. When organizational members have a fear of carrying responsibility this has several negative consequences for strategy implementation.

Employees shift responsibilities to others. When employees are inclined to shift responsibilities to others, it is possible that when an implementation task needs to be performed no one performs it because no one feels personally responsible. This enables organizational members to shift accountability to others when something fails.

Employees hide behind group responsibility. Organizational members are often fond of group responsibility in which the group as a whole is responsible for something instead of being individually responsible. This is especially the case in what Geert Hofstede calls collectivistic cultures. Collectivistic cultures emphasize the needs of the group as a whole over the needs and wishes of individuals. Cultures in the Middle East, Asia, Africa, South America and Central America tend to be more collectivistic.

Employees expect managers to carry responsibility. Employees can have a tendency toward to shift responsibility to management. When a decision is wrong, organizational members shift responsibility to management instead of to themselves. This is often the case in what Geert Hofstede called high power distance cultures. People accept an expect that power is distributed unequally. Organizations tend to be centralized and hierarchical and assign little decision authority to subordinates. Subordinates accept and except that managers carry responsibility.

Employees become reluctant to perform tasks. Organizational members can be reluctant to perform their implementation tasks when they have to carry the responsibility for them because they do not want to make mistakes. They try to avoid new tasks as much as possible and only perform them when they are explicitly ordered to do so.

FEAR OF PARTICIPATION

Employees can be fearful to participate in decision-making concerning the strategy and its execution. Participation is the extent to which organizational members are involved in decision-making for the organization, their department and their work. Many organizational members do not want to be involved in decision-making during strategy formulation and implementation. When an organization culture is characterized by a fear to participate, strategies tend to be implemented in a top-down way with little employee participation. A low level of participation of organizational members may be the result of the following reasons.

Many people fear participation. My research found that when organizational members are given the opportunity to participate in decision-making, many do not take that opportunity. Organizational members often say that they want to participate, but in when it comes down to it, they do not participate. Therefore, involving them in decision-making tends to yield little participation and few ideas. Organizational members often look to management to take decisions or are not interested in managerial topics such as a strategy. Organizational members can be passive, not very interested in participation and democracy, and expecting extensive leadership and supervision from management. Therefore, many employees prefer a highly centralized organization with little participation.

Employees do not understand strategy. Many employees are not trained or educated to understand complex and abstract ideas, such as a strategy. As a result, they are reluctant to participate in strategic discussions because they don’t really understand it and do not want to embarrass themselves by expressing ideas that may be viewed as stupid. In addition, because many organizational members do not understand a strategy, management may view it as useless to involve them in the formulation of a strategy and its implementation. Strategy often has a rather elitist air around in that is an important topic which is only suited for smart and important people.

Many employees lack self-confidence. Many organizational members are reluctant to voice their opinion when asked to participate in decision-making. Many organizational members have low self-confidence and self-esteem and are thus afraid to speak up during meetings. They are afraid that their opinion or idea may be viewed as stupid or incorrect and lose face in front of their co-workers. Furthermore, many people have a fear of speaking in public.

Participation requires time and energy. Because employee involvement often takes a lot of time and energy, managers are often reluctant to seek it. Creating a culture in which organizational members feel safe and free to express their views tends to take considerable time and effort from executives and managers, especially in cultures with a high power distance. At first organizational members do not want to participate but after a while when they see the importance of it and only then really start to participate. When organizational members are used to participating for a while they really come to think that it is important.

Participation builds commitment but is slow. There is not always enough time to involve employees, for example when an organization is in crises and a new strategy is quickly needed. It is also possible that strategy is kept secret because of competitive considerations. In such instances, a top-down implementation style may be more appropriate.

Low participation reduces strategy execution performance. When organizational members are not involved in decision-making about the strategy and especially its execution, this has a negative influence on implementation performance. When an organization culture is characterized by a fear to participate, strategies tend to be implemented in a top-down way with little employee participation. Such an implementation style often results in low strategy commitment, reduced quality of the strategy and its execution due to the failure to tap into specialized expertise of lower-level organizational members, and reduced self-confidence, motivation and performance of organizational members, as we saw earlier in this book.

FEAR OF CHANGE

Organizational members are often fearful of organizational change. The development and especially the execution of a new strategy often engenders tensions and insecurities among organizational members leading to distress. Especially radical organizational change, which often involves major uncertainty, triggers intense emotions such as fear and stress. These emotions in turn affect how organizational members react to a proposed change. It has been shown that emotions are infectious and may spread from person to person especially in more cohesive groups. Such emotional contagion may be especially strong in radical change contexts.

Strategy execution may involve layoffs. Radical organizational change can involve layoffs, which is perceived by organizational members to be very threatening, as argued previously. The experience of job insecurity in the lead up to the changes has been shown to have a negative influence on physical and mental health. This fear may lead to paralysis but may also generate a readiness for action. Furthermore, research has shown that negative emotions tend to spread more quickly within a group compared to positive ones.

Organization change brings opportunities for failure. Organizational change often brings new challenges and are thus opportunities to make mistakes or fail. Organizational members are often fearful of new tasks at first because they are fearful of negative consequences when they fail. Most people just want to avoid problems.

People attach to routines. Organizational participants have a tendency to want to keep performing the same routine tasks and do not want or need challenges. Persons have sometimes been performing the same job for more than twenty years. They are very used to that job and are fearful of change. Especially older organizational members are perceived to fear change. Novelty is often feared and is perceived as threatening.

Organization change disrupts established positions. Organizational members including managers often resist change and feel uncomfortable with it. Organizational change is usually feared because it disturbs the status quo within an organization, threatens people’s vested interests in their jobs, and upsets established routines.

Fear of change leads to resistance to change. When organizational members fear change they are likely to be committed to it or even resist it. A fear of change tends to result in resistance to change. As the execution of a strategy involves changes, these changes are likely to be resisted. Successful strategy execution requires the commitment of managers and employees on all levels of the organization. Without employee commitment, the strategy implementation is likely to fail. Employees who are not committed to the strategy will not be motivated to execute it.

CREATING A FEARLESS CULTURE

Changing the culture of an organization is difficult and may only be done slowly. Changing a culture is a difficult and time-consuming process. It may take years to successfully change an existing organizational culture. Changing habits, which have been the same for a very long time is not easy. To change an existing organizational culture several strategies and tactics can be used.

Develop an attractive vision of the new culture. The vision must clearly describe the new culture, why it is necessary and how it supports the new strategy. Organizational member need to understand how the new culture differs from the old culture. The culture must be made concrete by translating it into a set of key values and behaviors. These values and behaviors must be communicated very clearly to the employees. Cultural change involves a lot of communication.

Serve as an example for the the organization. Leadership from top management is crucial in culture change. Top management must serve as an example of the norms and values it wishes to convey to organization. When top managers do not behave in line with the new culture, the whole culture change will become a failure. Culture change starts at the very top of the organization.

Train managers in giving performance feedback. Managers tend to dread giving poor performance feedback to employees as we have seen. Giving performance feedback is a crucial responsibility of managers. When this is not done correctly and respectfully this can have devastating effects on the motivation, performance and cooperation of subordinates. Poorly delivered performance feedback can ruin the relationship between the manager and the employee. Employees may even leave the organization because of it.

Coach and council employees. Individually coaching and counseling of employees is one of the best ways to build a fearless and innovative organization culture. This includes having open conversations with employees and middle managers. Involve employees and give them information about their performance and the new culture. Providing training and education, especially motivational courses, can also be used to change the culture. Furthermore, visible changes, such as new uniforms and a new corporate logo are very effective for making the culture change more visible and tangible to organizational members.

Hire new managers and employees. Hiring employees who have a better fit with the new culture and demoting or letting go of employees who not able to fit in the new culture are another tactic that can be used. Newly hired employees and especially managers tend to be much more supportive the new culture. Existing organizational members tend to be comfortable with the status quo. New organizational members can serve as a role model to which existing organizational members can aspire to. We discuss this practice in more detail further on in this book.

Employment security reduces fear of change. The prospect of a new strategy and the organizational that often accompanies it tends to create fear in the hearts of many employees. This is especially the case during an economic crisis and in areas where similar jobs are hard to find. Such fear may promote many behaviors that are very detrimental to strategy execution and any organizational culture. Such negative effects may be reduced by providing employment security to employees.

Employment security has many benefits. According to Pfeffer (1998) does providing employment security to employees have many additional benefits to an organization. One of the main reasons is that organizational members are not likely to come up with innovative work practices when they fear that they will lose their job as a result of the increase in productivity. Another reason is that organization will be more careful when hiring someone as it can easily fire them. This can make organizations even more productive with fewer people doing more work. Perhaps the most important reason is that it builds trust between employees and their employer, which can lead to more cooperation. Finally, job security encourages people to take a long-term view on their job and organizational performance, allowing them to think strategically. Developing and executing a strategy is something that takes years as organizations are slow to change.

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