Creating and Re-Creating Corporate Entrepreneurial Culture 9780566091957, 9780566091940

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A Gower Book

Creating and Re-Creating Corporate Entrepreneurial Culture

Creating and Re-Creating Corporate Entrepreneurial Culture Alzira Salama

First published 2011 by Gower Publishing Published 2016 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY 10017, USA Routledge is an imprint of the Taylor & Francis Group, an informa business Copyright © Alzira Salama 2011 Alzira Salama has asserted her right under the Copyright, Designs and Patents Act, 1988, to be identified as the author of this work. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data Salama, Alzira. Creating and re-creating corporate entrepreneurial culture. 1. Corporate culture. 2. Reengineering (Management) 3. Organizational change. 4. Consolidation and merger of corporations. 5. Reengineering (Management)--Case studies. 6. Organizational change--Case studies. 7. Consolidation and merger of corporations--Case studies. I. Title 658.4'063-dc22 Library of Congress Cataloging-in-Publication Data Salama, Alzira. Creating and re-creating corporate entrepreneurial culture / Alzira Salama. p. cm. Includes index. ISBN 978-0-566-09194-0 (hardback) 1. Corporate culture. 2. Organizational change. I. Title. HD58.7.S254 2011 658.4'063--dc22 ISBN 9780566091940 (hbk) ISBN 9781315574578 (ebk)

2010044185

Contents List of Figures List of Tables Acknowledgements About the Author Preface Introduction

Corporate Entrepreneurial Culture – Continuous Innovation in the Existing Organization

viii x xii xiii xv

1

PART I

Entrepreneurial Behaviour: An Overview

Chapter 1

Unleashing Entrepreneurial Behaviour

Chapter 2

Culture and Behaviour: What are the Links?

PART II

Biography of Organizations and Culture Transformation

Chapter 3

Biography of Organizations: A Key for a Transformation Process

27

Organizational Culture Transformation: Cross-Case Analysis

37

Chapter 4

7 15

PART III From Bureaucracy and Inertia to Entrepreneurship: Preparing Firms for Organic Growth Chapter 5

Causes of Inertia and an Integrative Model for Culture Evolution and Transformation

53

Chapter 6

British Airways Story

61

Chapter 7

British Nuclear Fuels Story

77

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Creating and Re-Creating Corporate Entrepreneurial Culture

Chapter 8

Jaguar Cars Story

Chapter 9

British Airports Authority Story

101

Chapter 10

Xerox do Brazil (XBRA) Story

119

PART IV

Creating Entrepreneurial Synergies Through Cross-Border Acquisitions

Chapter 11

Corporate Entrepreneurship and Acquisitions

135

Chapter 12

The Role of the Acculturation Process in M&A: Deutsche Bank–Bankers Trust, BP–Amoco, Ford–Volvo

141

Integration Strategies and Entrepreneurial Synergies: Electrolux–Zanussi and Electrolux–Diamant Boart

157

Conclusions and the Future of Corporate Entrepreneurship

171

Chapter 13



Bibliography Index

93

175 183

List of Figures Figure 2.1 Figure 2.2 Figure 2.3 Figure 3.1 Figure 5.1 Figure 5.2 Figure 11.1 Figure 13.1

Culture and social systems How corporate culture forms Strands of strategic change The five phases of organization growth The integrative culture-change process How corporate culture is reinforced Achieving entrepreneurial synergies through acquisitions Planning phase (pre-acquisition) 

17 21 22 29 55 57 136 164

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List of Tables Table 2.1 Table 3.1 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 13.1 Table 13.2

Definitions of corporate culture How culture was formed in Jaguar, BNFL, BA and BAA Culture change and managerial careers at Jaguar Culture change and managerial careers at BNFL Culture change and managerial careers at BA Culture change and managerial careers at BAA National cultural dimensions index score Organizational culture at Electrolux, Zanussi and Diamant Boart 

19 33 44 45 46 48 161 162

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Acknowledgements I am thankful to Anders Lars Helmerson for his loving and friendly support all the way through the time of writing this book; Professor Stefano D’Anna, Rector of European School of Economics and Elio D’Anna, President of European School of Economics, for the opportunity given to me to teach Entrepreneurial Management courses at the European School of Economics, London, since 2001; Ms Laura Mogarvaro, the European School of Economics Managing Director and Ms Patricia Berth, London Academic Director, for their encouragement; Martin West and Rachel Lynch, Ashgate editorial staff for their insightful feedback; executives of 11 global firms who offered their time for collecting the important raw material, scholars – colleagues and co-authors – who contributed in developing theories: Professor Mark Easterby Smith, Dr Paul Bottomley, Dr Wayne Holland, Gerald Vinten and Marta Lorenzon; European School of Economics colleagues and MBA students for their comments on early drafts: Colin Gordon, Joseph Kapusinsky, Claudia Colen, Mary Thompson, Monika Czaplickicka and Vera Koubkova; my Jewish family who taught me the initial lessons on entrepreneurial management; Hugo Oliveira for his IT support; Jannette VanDenBerg for her wonderful editing skills. The process of fully understanding mergers and acquisitions is difficult due to the often-required secrecy and celerity. Consequently, it was an extremely arduous process to obtain access to organizations to discuss integration strategies. I am thankful to Mr Harald Stoehr, Deutsche Bank Managing Director; Mr Nick Starritt, BP Human Resources Group Director; Ms Anita Beijer, Volvo Vice-President for Human Resources and Executive Responsible for the Integration Strategies and to Angus Knowles-Cutler, Mergers and Acquisitions Vice-President for Cap Gemini–Ernst & Young for their time and cooperation.

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About the Author Dr Alzira Salama is a management consultant and a senior lecturer at the London campus of the European School of Economics (ESE), where she was Academic Director for four years. She trained as an organizational psychologist, gaining BSc and MSc degrees in psychology in her native Brazil, before moving to the UK to undertake research at Manchester Business School. She completed her PhD in Organizational Behaviour at Lancaster University. Dr Salama lectured for four years on MBA and other executive programmes in organizational behaviour, change and HRM topics at Cranfield School of Management and she has also been a visiting researcher and lecturer at the European Business School (EBS) in London, where she delivered a comparative management module for Long Island University (NY) MBA students. She has also lectured on the Summer School programme at the London School of Economics (LSE). Dr Salama has been involved in action research projects and the preparation of case studies for classroom use in Europe and Brazil. She has published a number of case studies and journal articles, winning awards in the process, and delivered many conference papers. Some of the notable case studies developed by Dr Salama featured in her earlier book Privatization: Implications for Corporate Culture Change (Ashgate 1995). Before embarking on academic life Dr Salama worked for ten years as Management Development Manager for Verolme do Brazil, a large Dutch shipyard and as an Executive Education specialist at Xerox Corporation in Brazil. This experience has been fundamental for her career progress and full understanding of human behaviour issues in the work place.

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Preface Corporate entrepreneurship is the result of the interlocking entrepreneurial activities of multiple participants (Burgelman 1983). It is based on unleashing the innovative potential that exists within each of us. It is a process of transforming organizations through strategic renewal leading to new products, processes and market developments. This requires that leaders change their focus from management resources to leading people. This complex process can lead organizations to achieve sustainable growth. The entrepreneurship process can create stakeholders and society value by improving life style in a sustainable manner. Corporate Entrepreneurship can be achieved through internal development – that is, organic process – or acquisition strategies. A firm’s ability to innovate can allow it to create its destiny proactively rather than simply reacting to pressures from markets and the business environment. This book explores various themes, mainly from anthropology, sociology and social psychology. Most importantly, this text illustrates how top executives from different organizations, exposed to diverse industrial pressures and operating in different national and cultural environments, have developed strategies to implement entrepreneurial culture: a transformational perspective. The book presents various frameworks and models which have emerged from consultancy and research developed within large global firms. The processes of corporate culture transformations that occurred within each of the firms are very well detailed as they highlight their ‘ins’ and ‘outs’, their difficulties and how leaders created strategies to overcome them and conquer expected and unexpected resistance by employees and management. The main focus is on how to overcome inertia, bureaucracy and reactive management behaviour. All managers face problems in overcoming inertia and implementing innovation and change. Success often precedes failure due to inertia. This book brings evidence that an appropriate and successful process of transforming the historical corporate culture can trigger entrepreneurial behaviour by employees in large complex firms.

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‘Failure and Success’ were quite predictable in the stories described during the course of this text. Through the case analysis and, in the light of the models presented, it is possible to predict results. Firms which followed the model steps – either in their processes of organic, internal development or through acquisitions – achieved sustainable competitive advantage through diversification and growth. Long-term and sustainable competitiveness seems to be a direct function of an entrepreneurial culture. Defining success and failure of corporate entrepreneurism is a major issue not well addressed in the literature. This book, however, presents several frameworks to guide managers and consultants in the implementation process towards success. Following the recommended phases will lead to success, whereas not following them will, accordingly, lead to failure. Most of the firms analysed in the book illustrate success stories. In a few cases the process of change did not achieve the expected overall results. It is fundamental for business leaders to understand the mechanisms that lie behind people’s behaviour within large organizations. Moreover, it is important to understand the effects that entrepreneurial behaviour can bring to large complex organizations and societies. Finally, it is important to understand how this process of innovation within large firms can contribute to the pursuit of a better sense of wellbeing worldwide.

Introduction: Corporate Entrepreneurial Culture – Continuous Innovation in the Existing Organization The theme of this book is the process of creating and re-creating an entrepreneurial corporate culture that accelerates the business growth process and helps to foster competitiveness in a permanent and sustainable manner. It deals with the dynamics of human behaviour. Corporate entrepreneurship refers to the process of continuous innovation within an existing organization. Why do some firms remain innovative and proactive and others struggle to fight against inertia? The answer to this question seems to lie in whether their prevailing corporate culture is bureaucratic or entrepreneurial. Entrepreneurial behaviour is triggered by corporate culture. The need to fully understand this relationship has led me to write this book. It analyses, in a systematic and comprehensive way, the impact of both bureaucratic and entrepreneurial corporate cultures on employees’ behaviour in the workplace. It discusses the concept of organizational culture, its creation, evolution and transformation. Culture is to the organization what personality is to the individual – unique and tied to the past. This biographic approach to organizations implies the need for an awareness of each firm’s history and leaders’ values prior to any cultural transformation process. Entrepreneurship is about creating corporate value by bringing together a unique combination of resources to exploit an opportunity (Stevenson and Gumpert 1985). Bringing new products and markets into existence involves an element of risk. There is a fundamental uncertainty that provides an opportunity for profit. Individuals vary in their perception of such risk and also in their aptitude and capacity to deal with and manage it.



Creating and Re-Creating Corporate Entrepreneurial Culture

The ability to explore new capabilities through innovation as well as exploit existing knowledge to the full has proved fundamental for long-term survival and organizational success. Entrepreneurial cultures require management to develop ‘ambidextrous’ leadership skills, including both ‘order’ and ‘diversity’ (Nemanich and Vera 2009). ‘Order’ means that leaders are expected to focus attention on current markets (products and services). Diversity means that it is important to innovate for future market demands. It is a leader’s task to master the balance between these two opposing approaches. How is it achieved? Top management, and their teams, are responsible for creating autonomous working groups that challenge the ‘status quo’ in order to create diversity. These teams take risks and suggest new ideas for working practices, products or services within a safe climate. New ideas are analysed and accepted on a consensual basis which can lead to innovation. The process of achieving such a ‘thinking outside the box’ type of behaviour from employees and managers is complex and often challenging. The difficulty lies primarily in the fact that the organization’s traditional working practices are usually based solely on order and do not include diversity. A management culture based on traditional values of obedience and bureaucracy is not entrepreneurial; this prevailing set of values and beliefs must be transformed and evolved. Entrepreneurial management culture requires that new ideas are welcomed from lower levels of the hierarchy and that working teams learn with each other in order to create value for their organizations through innovation. Such a learning culture can only be achieved if managers embrace a transformational leadership style. The links between entrepreneurial and learning cultures are again so strong that one could say that entrepreneurial culture implies a learning culture. It is often assumed that large, established organizations are constrained by bureaucracy and are not as flexible and entrepreneurial as small new firms. There are, however, examples of large complex enterprises whose top leaders have been able, over time, to energize their teams in order to keep their organizations innovating continuously to sustain a competitive advantage, for example, Apple, Shell, 3M and Google. In many other cases, however, continuous innovation simply does not happen. Inertia can be the result of success enjoyed in the past by an organization and it normally triggers a reactive management attitude. In such situations, a need for re-creating the original zest for innovation becomes a survival

Introduction: Corporate Entrepreneurial Culture



strategy. A process of cultural transformation is necessary to recover the original entrepreneurial management attitude. Some leaders fail to organically transform their firm’s corporate culture through internal development. In those cases, organizations can become financially unviable and exposed to potential buyers. Firms can transform and grow organically, that is, through internal resources. Alternatively, firms can also choose to grow non-organically, acquiring other firms to achieve expected entrepreneurial synergies. This text explores these two forms of organizational transformations. Entrepreneurship, as seen in this book, is a process closely related to leadership styles and learning culture. It is important, therefore, to understand in detail the links between entrepreneurship and the role of leaders. Those links are clearly explored in the stories described and explained in Parts II, III and IV.

Aims of the Book My intention in writing this book is to create a useful and enlightening text illustrating how entrepreneurial management culture can accelerate organizational growth and enhance competitiveness. It offers both theoretical and practical approaches and suggests different models that can be applied globally and in different industries. These approaches are based on research and on consultancy experience. The latter has taken the form of helping executives and consultants in both (a) transforming a traditional bureaucratic culture into an entrepreneurial innovative culture through the use of organic growth strategies, and (b) in creating entrepreneurial synergies during the integration process in mergers and acquisition growth strategies. The book starts with an overview of entrepreneurial behaviour and cultures: Part I is devoted to exploring how leaders can create an organization culture that unleashes people’s entrepreneurial attitudes and behaviour despite their past history. Part II describes the process of culture creation, offering a biographical approach by analysing the history of BA, Jaguar Cars, BNFL and BAA. It offers a cross-case analysis of these firms when experiencing culture change triggered by market deregulation and fiercer competition. Human resources management and leaders are emphasized as facilitators of the change process. Drawing on the corporate histories outlined in Part II, Part III focuses on the organic process of organizational change. It explains the six steps of



Creating and Re-Creating Corporate Entrepreneurial Culture

the successful transformation process from bureaucracy to entrepreneurial culture: the universal model. Four different chapters describe and analyse in detail four large complex UK firms and their strategies for corporate culture transformation. A special chapter within Part III describes and explains in detail how the process of becoming a market-driven economy – such as in the case of Xerox do Brazil – can represent a trigger for entrepreneurial behaviour within a firm. Parts II and III include the same stories; however, the text analyses them from different perspectives. Part IV focuses on the process of creating entrepreneurial synergies through cross-border acquisitions. The Conclusion discusses the future of the entrepreneurship process. Some of the examples discussed in the book – the UK stories – are classic cases that illustrate how organizations have dealt with the challenges of creating value through the development of a more entrepreneurial organizational behaviour and culture. The transition theory (from A to B) has proved to be timeless. Human behaviour can develop and change, following procedures which have their foundations in principles of social psychology. Hence, the ‘process of change’ seems to be similar, despite differences in each story: the type of industry, the country’s values and the period when the transformations occur. The variances in context may affect the content of cultural change (what changes and why) but not necessarily the process of change (‘how’). The book is the result of ongoing in-depth research and consultancy activities developed over the last 20 years by the author in organizational culture and its links with business success.

References Nemanich, L.A. and Vera, D. (2009). Transformational Leadership and Ambidexterity in the Context of an Acquisition. The Leadership Quarterly, vol. 20, 19–33. Stevenson, H.H. and Gumpert, D. (1985). The Heart of Entrepreneurship. Harvard Business Review, March/April, 85–94.

PART I

Entrepreneurial Behaviour: An Overview

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Unleashing Entrepreneurial Behaviour

1

Entrepreneurship is the response to the disequilibrium between the perceivable opportunities and their exploitation at any point of time. Tripathi 1971

Introduction Corporate entrepreneurial culture is created when employees at all levels of the organization unlock their potential for innovation and proactive thinking. The process of unleashing entrepreneurial behaviour is the leader’s primary task. Entrepreneurship can be seen as a particular style of leadership process. For instance, a leader can adopt a bureaucratic, authoritarian or entrepreneurial style in their approach to managing people within an organization. The aim of this chapter is to explain how top leaders can develop activities which will trigger innovative and entrepreneurial behaviour, that is, how they can develop an entrepreneurial style of leadership. Stevenson and Gumpert (1985) hold that entrepreneurial management, defined as a set of opportunity-based management practices, can help firms remain vital and contribute to firm and societal-level value creation. Entrepreneurial initiatives are fundamental to the economic growth of a society (Tripathi 1971). As stated by Drucker (1985), ‘the essence of economic activity is the commitment of present resources to future expectations and that means accepting uncertainty and risk’. For Drucker, entrepreneurial activity is a learned behaviour rather than a personality trait. The concept of entrepreneurial behaviour is linked to the acquisition of attitudes and mind sets by management and employees that would create a sustainable competitive advantage. This session focuses on the process of unleashing management and



Creating and Re-Creating Corporate Entrepreneurial Culture

employees’ entrepreneurial behaviour that is necessary for the survival and growth of organizations. Entrepreneurs are agents of change and growth in a market economy and they can act to accelerate the generation, dissemination and application of innovative ideas. They can act by creating a new venture either for themselves or within an existing firm. Entrepreneurs not only seek out and identify potentially profitable economic opportunities but they are also willing to take calculated risks. Entrepreneurial events, such as the formation and development of business to pursue an opportunity, have attracted special interest from both scholars and practitioners. The entrepreneurial process – all the functions associated with the abilities to perceive potential opportunities and the creation and the implementation of strategies to pursue them – has generated considerable interest among professionals. Entrepreneurship is central to the functioning of market economies. Hence, promoting entrepreneurship is viewed as part of a formula that will reconcile economic success with social cohesion. Therefore, increasing management attention should be directed towards a greater understanding of the factors that increase the supply of entrepreneurs in an economy. Traditionally, the entrepreneur has been defined as one who starts their own small business. However, as explained by Drucker (1985), ‘indeed, not every small business is entrepreneurial; in fact just a minority are.’ There is a clear distinction between small business and entrepreneurship. Not all ventures are entrepreneurial. The two critical factors that identify entrepreneurs from non-entrepreneurial managers and small business owners are ‘innovation’ and ‘the growth process’. There is no agreed definition of entrepreneurship. It is, however, widely recognized that entrepreneurship involves the creation of new business, but if this new business is created within a large organization, the process is called ‘intrapreneurship’. The invention of the iPod by working teams at Apple is an example.

Unleashing Entrepreneurial Behaviour



Acquiring Entrepreneurial Skills Entrepreneurship can be analysed under two different perspectives (Low and MacMillan 1988): the context and the process.

The Context This approach explores how environmental forces can affect entrepreneurial behaviour in individuals, for instance, the influence of national values and industry values. Environmental characteristics, such as a country’s value systems, can trigger entrepreneurial behaviour. For example, if you were born in Russia, traditionally you would not be encouraged to develop entrepreneurial behaviour. These cultural influences are not linked to innate traits or learning skills but acquired behaviour. Entrepreneurial patterns vary among developed and developing countries and societies in transition. Regulatory and cultural differences between countries may mean that the pursuit of new opportunities for enterprise takes forms other than the founding of a new firm. See, for example, how some European countries and Japan differ in their approach to entrepreneurship. The characteristics of some industries emphasize creativity and engagement in innovation, that is, advertising and fashion. Other types of industries traditionally require some elements of bureaucratic behaviour in their prevailing culture, such as banking.

The Process This approach explores how an individual or group develops new ideas and looks at the steps they follow to achieve innovation. This process can potentially be taught to others – as learning skills – and can be unrelated to the industry or the values of a particular country. The focus on process is less deterministic and more developmental. The emphasis on process means that it is imperative to investigate the knowledge acquisition required to grow and innovate, that is, the process of the creation of a new idea, product or service. The focus on the ‘discovery’ and ‘exploitation’ of opportunity is a key aspect of the entrepreneurship process and it represents the first step in this whole process of creation.

10

Creating and Re-Creating Corporate Entrepreneurial Culture

A focus on process implies: 1.

The creation of structures within the firm that will reinforce innovation, that is, team activities.

2.

Management training and a reward system that focus on developing and also reinforcing aspects of an entrepreneurial type of behaviour, such as creativity, flexibility, risk taking and problem-solving.

3.

Leadership skills that would encourage entrepreneurship to flourish within any type of enterprise or national culture.

Therefore, focus on process is a more dynamic and proactive approach than the previous focus on context only. Although it is important to analyse the causes of entrepreneurial behaviour – context or process – it is ultimately the outcome of the exploitation of entrepreneurial opportunities that determines the contribution of entrepreneurship to economic growth development.

Entrepreneurial Characteristics: Does the Individual Matter? Management and consultants have traditionally tried to define the field in terms of the entrepreneur’s psychological traits, such as innate personality traits. In addition, an emphasis on the success or failure of individual entrepreneurs and firms has also been the focus of attention. This approach seems deterministic: it is focused on the entrepreneur’s profile and what exactly successful entrepreneurs have or haven’t achieved. It does not offer too much space for a transformation process – it is a matter of ‘being’, not ‘becoming’. This book, by contrast, offers a dynamic and transformational perspective on the process of creating and recreating entrepreneurial culture and behaviour within large firms. It assumes that the entrepreneurship process is a learned behaviour. In order to understand the entrepreneurship process, the following questions need to be answered:

Unleashing Entrepreneurial Behaviour

11

•

Why, when and how do opportunities for the creation of new goods and services in the future arise in an organization?

•

Why, when and how are some able to discover and exploit these opportunities while others cannot or do not?

•

Finally, what are the economic, psychological and social consequences of this pursuit of a future market not only for the pursuer, but also for other stakeholders and for society as a whole?

Shane and Venkataraman (2000) claim that a distinctive way to perceive this field is necessary. As they explain: Entrepreneurship seeks to understand how opportunities to bring into existence ‘future’ goods and services are discovered, created, and exploited, by whom, and with what consequences. In summary, one of the most neglected questions in the entrepreneurship field is where opportunities to create future goods and services come from. It is one thing for opportunities to exist, but an entirely different matter for them to be discovered and exploited. At the core of these premises is the belief that people are different and that these differences matter. Some authors believe that there is a genetic component – up to 40 per cent – explaining this entrepreneurial behaviour. Others believe that entrepreneurial behaviour is triggered as a consequence of information received and accumulated and also by specific education. Others believe in a combination of these factors. The possession of useful knowledge varies among individuals. This variable strongly influences the search for and the decision to exploit an opportunity, and also its relative success (Shane and Venkataraman 2000). The characteristics of a typical entrepreneur or ‘intrapreneur’ vary considerably from those of most people who choose to remain employed by a firm or the government. Independence is the most prominent characteristic of an entrepreneur. Entrepreneurs generally place a higher value on career independence than non-entrepreneurs. Similarly, responsibility and leadership rank very highly with entrepreneurs compared with the general population. Their working values differ: potential entrepreneurs place a higher value on being responsible for their own future, on having a position of responsibility, working in a less hierarchical organization and having more independence than scientific workers with no entrepreneurial interest. By contrast, potential

12

Creating and Re-Creating Corporate Entrepreneurial Culture

entrepreneurs place less importance on a secure income and pension than do those with no entrepreneurial potential. Entrepreneurial success can be influenced by ethnic background, educational background, and whether the entrepreneur already has had entrepreneurial experience. As already previously discussed, entrepreneurs/intrapreneurs are agents of change and growth in a market economy. They are also willing to take risks, as their ideas could succeed or fail. Successful entrepreneurs/intrapreneurs are those who try new ideas, implement them and eventually fail, fall and get up again and again and again. Persistence and optimism are two characteristics of successful entrepreneurs/intrapreneurs. The process of entrepreneurship is mainly about recognizing and taking advantage of new profit opportunities – a proactive attitude – instead of focusing on simply maintaining competitive advantage on an existing market position – a reactive attitude. It is interesting to observe the two quotes below which at first sight seem to have opposite meanings. However, after looking at them carefully they seem to be the same. Anyone can become an entrepreneur. (Kirzner 1973) Entrepreneurs have different skills from other people. (Weber, Schumpeter and Knight 2002) These two statements are not divergent. They both imply that entrepreneurship can be developed in individuals, as skill development. This approach is opposite to the ‘traits theory’ which holds that only certain special groups of individuals are, in fact, able to develop entrepreneurial activities. This book embraces the latter perspective, that is, that there is a need for managers and consultants to further understand the process involved in entrepreneurship (both within the existing corporation and as new ventures) in order to develop models or theories to bridge the gap between normal people and those entrepreneurs, hence, contributing to the creation of more entrepreneurs within the society, a development approach. An entrepreneur is an innovator who brings change through the introduction of a new technological process or product. An entrepreneur is, therefore, regarded as a creator and a catalyst for change. They are associated with a dream, a vision and an impulse to fight. They exalt the joy of creating and getting things done,

Unleashing Entrepreneurial Behaviour

13

which may lead to creative destruction of existing combinations of courses due to new products and processes (Schumpeter 1934).

Summary It is a common belief that in most societies the majority of markets are inefficient most of the time. Therefore, providing opportunities for enterprising individuals to enhance economic growth by exploiting these inefficiencies is important. Traditionally, entrepreneurship has primarily been concerned with the start-up of new firms. Recently, however, entrepreneurship has to an increased extent become accepted as a firm-level phenomenon. This is based on the understanding that entrepreneurship is relevant to managers irrespective of the size or age of their organizations. The firm’s degree of entrepreneurship could be seen as the extent to which they take risks, innovate and act proactively. The specific manifestations of opportunity-seeking may vary from one firm to another in industries of a different maturity, technology and market structure. At present, entrepreneurship is encouraged throughout the economy and many managers are looking for ways to make their organizations more entrepreneurial. However, this is not a straightforward process and it requires a change of the old corporate culture into a new corporate culture. This process of organizational culture transformation required for organization survival and growth is explained in detail in the following chapters and illustrated in the stories analysed in Parts II and III of this book.

References Drucker, P.F. (1985). Innovation and Entrepreneurship: Practices and Principles. New York: Harper and Row. Kirzner, J.M. (1973). Competition and Entrepreneurship. University of Chicago. USA. Low, M. and MacMillan, I. (1988). Entrepreneurship: Past Research and Future Challenges. Journal of Management, vol. 35, 139–61. Schumpeter, J.A. (1934). The Theory of Economic Development. Cambridge, MA: Harvard University Press. Shane, S. and Venkataraman, S. (2000). The Promise of Entrepreneurship as a Field of Research. Academy of Management Review, vol. 25, no. 1, 217–26.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Stevenson, H.H. and Gumpert, D. (1985). The Heart of Entrepreneurship. Harvard Business Review, March/April, 85–94. Tripathi, D. (1971). Indian Entrepreneurship in Historical Perspective: A Re-Interpretation. Economic and Political Weekly, vol. 6, no. 2, 59–68. Weber, M., Schumpeter, J.A. and Knight, F.H. (2002). Entrepreneurship and Economic Development. Journal of Evolutionary Economics, vol. 12, nos. 1–2 (Special issue).



Culture and Behaviour: What are the Links?

2

This chapter discusses how entrepreneurial culture can be nurtured and developed. It further analyses how an appropriate corporate culture can trigger entrepreneurial behaviour within organizations. Although this is predominantly a practical chapter exploring examples extracted from the world of firms, it also develops a few theoretical ideas in order to clarify different concepts and their interrelationships. The important lesson that I have learned throughout my consultancy projects with organizations over the years is that: ‘to change people’s behaviour and attitudes it is fundamental to deal with people’s ways of thinking, their ideas and values first’. This chapter aims to explain how different groups of people think differently, and why. It provides an overview of the literature on culture per se, on corporate culture and on corporate culture change.

What is Culture? E.B. Tylor, in 1871, was probably the first to use the word ‘culture’ in English (Laraia 1986, Kroeber and Kluckhohn 1952, Hofstede, Neuijen, Ohayv and Sanders 1990). He emphasized the human being’s capacity to learn and transfer their knowledge to others. Unlike the biological attributes of mankind, culture is the result of a learning process. The ideas of continuity, creation, accumulation and transmission of culture independent of biological heredity were the key issues for Tylor (Kroeber and Parsons 1958). The anthropologists, Kroeber and Kluckhohn (1952) considered that, although some aspects of culture are nearly universal (such as child care, smiling, crying), groups differ culturally according to their specific history and learning experiences. For example, different cultures, such as the American and the Japanese, place different emphases on time (Hick and Gullet 1981).

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Creating and Re-Creating Corporate Entrepreneurial Culture

In summary, culture means all forms of collectively learned human behaviour. It varies from group to group. For instance, what is accepted within one group can be considered absurd within another group. Hence, culture influences what behaviour is approved or disapproved. This is illustrated by Laraia (1986): Culture is a great source of security that frequently tells us what is right or wrong in a particular group or society. (p. 15) There are two major schools of anthropology that have influenced the current concept of culture: the adaptionists and the ideationists. The first is based on what is directly observable about the members of a community (speech, language, dress). The latter school prefers to look at what is shared in the community members’ minds (aspirations, values, beliefs and other ideas people have in common). This book deals with corporate culture under these two perspectives, that is, analysing the directly observable and the values, beliefs and assumptions of the members of different organizations. The concept of culture is usually reserved for societies, but can be applied equally to other human collectivities: organizations, professions, religions or families. In a very simple and general way, the current use of the term ‘culture’ refers to the specific way of life of a group of people.

Culture and Social Systems Kroeber and Parsons (1958) tried to explain the ‘confusion’ among the concepts of culture and social systems. According to them, for a considerable period, there was a condensed concept of culture and society. This condensed concept was perhaps a consequence of Durkheim (1953) speaking of society as meaning essentially the same thing as Tylor (1871) meant by culture. Nowadays, however, it is believed that further distinctions need to be made in the use of these two concepts: culture and social systems. The following paragraphs explain these differences. Kroeber and Parsons (1958) refer to culture as transmitted and created content and patterns of values, ideas and other symbolic meaningful systems as factors in the shaping of human behaviour and human artefacts. They suggest that the term ‘social systems’ be used to designate relational systems of interaction among individuals.

Culture and Behaviour: What are the Links?

17

From all this, I concluded that the distinction between culture and social systems is a matter of levels of understanding. Systems of social interaction can be superficially observed and also described. However, they are rooted in culture, that is, rooted in the transmitted and created patterns of values and ideas (see Figure 2.1). The image of an iceberg may represent my way of seeing them:

•

‘Social systems’: It is like the visible part of the iceberg and it is easy to observe.

•

‘Culture’: It is like the hidden part of the iceberg, it is larger, stronger but invisible.

As with an iceberg, in order to effectively deal with the social systems, it is necessary first to deal with culture.

Figure 2.1

Culture and social systems

What is Corporate Culture? This section is devoted mainly to different concepts of corporate culture. While there are multiple definitions, they tend to be vague and overly general. This situation stems from the many disciplines interested in this topic, which increases richness, but does not necessarily increase clarity. Anthropologists, sociologists, psychologists and others bring with them their particular paradigms. This creates difficulties in reaching a consensus on construct definitions as well as on making them operational.

18

Creating and Re-Creating Corporate Entrepreneurial Culture

Much attention has been paid to either simple descriptions of corporate culture, ignoring its ambiguities (Watson 1963, Harrison 1987), or to exploring ways of manipulating, changing and reshaping cultures (Kilmann et al. 1986). This present review, however, aims first to devote some time to clarifying this complex concept, second to explore the mechanisms that create and maintain corporate culture, and third to explore the idea of cultural change. The concept of corporate culture has been widely applied by organizational theorists and researchers to explain mainly those patterns of behaviour which differentiate one organization from another. The emphasis has been mainly on showing how each organization is unique. Nevertheless, some authors, ‘the typologists’, tend to use the concept of corporate culture to classify the similarities among organizations. For example, Harrison (1987) classified organizations into four different groups: the power culture, the role culture, the achievement culture and the support culture. Although he has explained how each of these types of culture functions, he fails to link them to each organization’s history. Therefore, Harrison’s approach to culture seems to be static (based on ‘real time’ data analysis), rather than a ‘processual’ one (based on both historical and real time data analysis). Through avoiding historical analysis, his study lacks information about how these types of culture were created and developed. Definitions of corporate culture vary from author to author in the available management literature. Nevertheless, some common definitions are shown in Table 2.1. Jaques (1951) was perhaps the first to use the concept of culture for studying organizations. He speaks of the superficial level of culture – the way of doing things – and relates this to the history of an organization. Van Maanen’s (1977) definition of corporate culture emphasizes its role in the socialization process, especially of newcomers. Harrison (1987) refers to culture as a combination of the social norms, values and preoccupations of an organization. Deal and Kennedy (1982) refer to culture also as social norms, but they emphasize the power of those norms or rules as a managerial control system. Pascale and Athos (1981), in turn, see culture as a philosophy concerned mainly with human resources and marketing issues.

Culture and Behaviour: What are the Links?

19

Both Sathe’s (1985) and Schein’s (1985) definitions of corporate culture refer to a hidden part of the iceberg (see Figure 2.1). They both consider culture as a set of ‘assumptions’, often unstated and pre-conscious. For them, in order to decipher these assumptions, it is not enough to carry on observations (a technique used by ethnomethodologists): probing interviews are necessary in order to uncover the assumptions and taken-for-granted values, that is, how people think instead of just what people do. This is the approach adopted by this present research book. Table 2.1

Definitions of corporate culture

Jaques 1951

The culture of the factory is its customary and traditional way of thinking and doing of things, which is shared to some degree by all its members, and which new members must learn, and at least partially accept, in order to be accepted into service in the firm (p. 251).

Van Mannen 1977

The rules of the game for getting along in the organization, the ropes that a newcomer must learn in order to become an accepted member (p. 35).

Pascale and Athos 1981

The philosophy that guides an organization’s policy towards employees and/or customers (p. 43).

Deal and Kennedy 1982

A system of formal and informal rules that spell out how people ought to behave most of the time (p. 78).

Schein 1985

A pattern of basic assumptions developed by a given group as it learns to cope with its problems of external adaptation and internal integration (p. 8).

Sathe 1985

The set of important assumptions (often unstated) that members of a community share in common (p. 44).

Harrison 1987

A combination of values, preoccupations, social structure, norms and mores (p. 11).

How Corporate Culture Differs from One Organization to Another Morgan (1988) stated that we now live in an ‘organizational society’; organizations share many common attributes and influence most of our waking hours in a similar way. However, studies of corporate culture do not focus primarily on those attributes of culture which are similar among organizations. They concentrate on understanding those which distinguish one organization from another.

20

Creating and Re-Creating Corporate Entrepreneurial Culture

To understand culture and ‘grasp it’ requires an integrative ‘mind set’; this differs from that required for dealing with other organizational issues such as profits and amount of sales. Culture seems to result from a combination of interlinked elements. These are discussed below.

The Influence of National Values McClelland (1961) in his studies suggested that attitudes toward achievement and work vary quite widely from society to society. For example, according to him, society influences organizations and people through the educational system and other social institutions. If we believe that McClelland is right, we consequently believe that national values affect organizational culture. People in organizations reveal previous conditioning by society and many instilled attitudes and beliefs – a prior culture already in place (Adler 1983).

The Influence of Industry Dominating Values Different industries reveal distinctive norms and particular values. They have developed different cultural patterns to suit their business demands. Thackray (1986) holds that to gain credibility, the corporate culture movement must somehow build bridges between the culture of society and that of the industry. It is observed that there are some industries where there is little variety in corporate culture; oil and gas, for instance, or steel and chemicals. In other industries there might be more latitude for firms to evolve distinctively: retailing, fast-foods and air transport, for instance. The culture of a small business and a conglomerate will have obvious differences. These dominant values in an industry affect norms about secrecy, political actions, dress and acceptable moral behaviour.

The Influence of Founders Strong links that exist between corporate culture and founders’ and past leaders’ values have been highlighted by different organizational theorists, in particular, by Schein (1985). Based on his consultancy experience, he concluded that leaders create and manage corporate cultures. As he states: Founders put their imprint on the culture by bringing in people who share certain beliefs and values with the founder and those people will eventually share them with others as they identify increasingly with the founder and the enterprise. (Schein 1985, p. 18)

Culture and Behaviour: What are the Links?

21

Schein (1985) highlights the process of learning culture. He says that people in organizations repeat what works and give up what does not. He argues: For example, if a company is created with its founder’s belief that the way to succeed is either to provide good service to customers or to treat employees as the organization’s major resource or always to sell the lowest priced product in the market place, and if action based on that belief succeeds in the market place, then the group will learn to repeat whatever worked and gradually to accept this as a shared view of how the world really is, thereby creating its own culture. (p. 32) Gordon (1985) also reinforces the influence of leaders’ values in creating culture. He considers that if a Chief Executive Officer (CEO) is strongly committed to the concept that profitability is driven primarily by cost control, and is further committed to the stability and growth of quarterly earnings, it is unlikely that a single unit, department or division will develop a culture that values programmes that are innovative, long-term, expansive and risky. In order to sum up the important elements which seem to be responsible for the creation of culture in organizations, a framework is appropriate (see Figure 2.2). Contrary to many introspective approaches on corporate culture (see Schein 1985 and his emphasis on leaders’ values), this framework reveals a wider perspective. Besides the influence of top leaders’ values on creating corporate culture, it also considers the dominating values of the industry and of the nation in this process.

Founders’ and leaders’ values

National values

Corporate Culture

Type of industry (technology) How managers are expected to behave Figure 2.2 How corporate culture forms

22

Creating and Re-Creating Corporate Entrepreneurial Culture

What is Corporate Culture Change? This book analyses one aspect of the process of change within organizations, namely culture change – from a bureaucratic to an entrepreneurial culture. Any organizational change is a culture change. (Deal and Kennedy 1982, p. 15) That quotation implies that any modification occurring in the way firms operate will always require new working related values. Thus organizational change is synonymous with culture change. According to Tichy (1982), strategic organizational changes are divided into three distinct areas as shown in Figure 2.3.

•

The technical area: The way how work is organized and products are sold. This involves assessing the environment, aligning structure to strategy and fitting people to roles.

•

The political area: Distribution of power, balancing power across groups and managing successful policies.

•

The cultural area: Selection of ‘adequate’ people to build or reinforce culture, development to mould organizational culture and arrangement of rewards to shape culture.

Figure 2.3 Strands of strategic change

Culture and Behaviour: What are the Links?

23

As Tichy (1982) suggests, an effective organizational strategic change should ideally include an alignment of all three areas. However, to understand the process of change, it is necessary to concentrate upon the individual strands as shown in Figure 2.3. This book is limited to looking at the last aspect of strategic organizational change, as classified by Tichy, namely corporate culture change. The investigation of culture change in this book basically involves the analysis of how the organization goes through the process of modifying some of its values, beliefs and assumptions and ultimately altering how managers are expected to behave: from bureaucracy towards entrepreneurism, from inertia towards renewal and internal innovation.

References Adler, N.J. (1983). Cross Cultural Management Research: The Ostrich and the Trend. Academy of Management Review, vol. 8, no. 2, 226–32. Burgelman, R.A. (1983). Corporate Entrepreneurship and Strategic Management: Insights from a Process Study. Management Science, vol. 29, no. 12, 1349–64. Deal, T.E. and Kennedy, A.A. (1982). Corporate Cultures: The Rites and Rituals of Corporate Lives. Reading, MA: Addison-Wesley. Durkheim, E. (1953). Sociology and Philosophy. London: Cohen and West. Gordon, G.G. (1985). The Relationship of Corporate Culture to Industry Sector and Corporate Performance, in R.H. Kilmann, M.J. Saxton and R. Serpa (eds). Gaining Control of the Corporate Culture. San Francisco: Jossey-Bass. Harrison, R. (1987). Organization Culture and Quality of Service: A Strategy for Releasing Love in the Workplace. Association for Management Education and Development, London. Hick, H.G. and Gullet, C.R. (1981). Multinational Management. New York: McGraw-Hill. Hofstede, G., Neuijen, B., Ohayv, D.D. and Sanders, G. (1990). Measuring Organizational Cultures: A Qualitative and Quantitative Study Across Twenty Cases. Administrative Science Quarterly, vol. 35, no. 2, 286–316. Jaques, E. (1951). The Changing Culture of a Factory. London: Routledge and Kegan Paul. Kilmann, R.H., Saxton, M.J. and Serpa, R. (1986). Issues in Understanding and Changing Culture. California Management Review, vol. XXVIII, no. 2, 87–94. Kroeber, A.L. and Kluckhohn, C. (1952). Culture. Massachusetts Museum.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Kroeber, A.L. and Parsons, T. (1958). The Concept of Culture and of Social System. American Sociological Review, vol. 23, no. 4, 582–3. Laraia, R.B. (1986). Cultura. Rio de Janeiro: Zahar. McClelland, D.C. (1961). The Achieving Society. Princeton: Van Nostrand Co. Morgan, G. (1988). Riding the Waves of Change: Developing Managerial Competencies for a Turbulent World. London: Jossey-Bass. Pascale, R. and Athos, A.G. (1981). The Art of Japanese Management: Applications for American Executive. New York: Simon and Schuster. Sathe, V.V. (1985). Culture and Related Corporate Realities: Homewood, IL: Irwin. Schein, E.H. (1985). Organizational Culture and Leadership. San Francisco: JosseyBass. Thackray, J. (1986). The Corporate Culture Rage. Management Today, 67–9, February. Tichy, N. (1982). The Essentials of Strategic Change Management. Journal of Business Strategy, vol. 3, no. 4, 55–67. Tylor, E.B. (1924). Primitive Culture. Gloucester, MA: Smith (first published in 1871). Van Maanen, J. (1983). Qualitative Methodology. CA: Sage. Watson, T.J. Jr (1963). A Business and its Beliefs: The Ideas that Helped Build IBM. New York: McGraw-Hill.

PART II

Biography of Organizations and Culture Transformation

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3

Biography of Organizations: A Key for a Transformation Process

This chapter explores the links between an organization’s biography and its development. Corporate entrepreneurship implies a process of organizational change. This chapter highlights the strong relationship that exists between the past, present and future of an enterprise. Awareness of an organization’s past can help leaders understand its present behaviour and create a plan for its future. This chapter offers an overview of different studies to illustrate the use of biography as a method of understanding and analysing organization growth and transformation. The process of re-creating entrepreneurial culture within an organization implies a process of organizational transformation. That is the reason I included this chapter prior to the studies of specific firms and their transformation processes towards entrepreneurship.

Background Organizational development approaches have been predominantly static and ‘ahistorical’ (Kimberly and Miles et al. 1980). This trend assumes a relatively fixed organizational structure and behaviour and therefore does not inquire into its etiology. This chapter argues that a historical approach represents an alternative and dynamic way for managers and consultants to better understand organizations. Previous studies have pointed out that phenomena which cannot be measured, such as history and ideology, are indeed the most relevant phenomena in organization analysis. As Minzberg (1979) stated: ‘to miss this … is to miss the very life blood of the organization.’ A specific element of the historical/biographical approach is that it focuses on contexts and also on describing the phenomena and the context richly. Thus, just as an individual’s development can be understood through their particular

28

Creating and Re-Creating Corporate Entrepreneurial Culture

life history (birth, youth, maturity), so can an organization’s. As with human beings, organizational passages from childhood to adolescence and adulthood can be stormy and marked by crisis and turbulence. Freud considered that past experiences provide insights to patients which can help them to make better choices in the future. For Freud (1940) the individual’s cure is achieved through self-awareness. This involves the deep process of self-analysis. Once the individual is aware of the past, they are free to choose the future. Ignorance of self can lead one to make inadequate choices and to an unhealthy self-development. It is important to note that organizational history/biography is not the same as organizational age. As observed by Kimberly and Miles et al. (1980), some studies have used organizational age as a variable in their analysis. However, as in individual therapy, chronological age may have little to do with the individual’s or the organization’s particular history, that is, past events in the firm’s biography. Organizations often have rhythms and cycles that are quite independent of their chronological age. It seems that companies, like people, are always tied to their past (Wilkins and Patterson 1985). Kimberly, using the metaphor of biology, states that the behaviour of both organizations and people are shaped by a combination of environmental and internal factors. He devotes special attention to understanding how biology can provide certain concepts and models which, at first glance, appear to have some relevance for understanding organizational cycles. After all, he says, one can speak of organizational birth and death; and terms such as conception, gestation and birth trauma are useful for describing some important events in organizational life. For organizations, as for people, conditions of birth and early infancy may shape later development in significant ways.

Organizational Biography: An Overview This section describes five studies on organizational biography: Jaques (1951), Greiner (1972), Pettigrew (1979), Dyer (1986) and Salama (1991). These five authors used a ‘processual’ rather than a static analysis of organizations to understand organizational change. Jaques (1951) was perhaps the first author to investigate organizational development using the firm’s history. He looked at the organizational past in order to understand its current process of change. In his book Changing Culture of a Factory he emphasizes the history of ‘Glacier’ (a fictional company name)

29

Biography of Organizations

and its development process, growth speed and the most relevant events that occurred since Glacier was created. Jaques’ study of Glacier’s biography led him to conclude that in order to understand the present situation, it is necessary to consider the dynamics of certain outstanding historical events in the life of the organization, events whose definite mark has been left on the pattern of the present.

Growing organizations PHASE 1

PHASE 2

PHASE 3

PHASE 4

PHASE 5

Size of organization Large" 5: Crisis of? Revolution stages Evolution stages

4: Crisis of RED TAPE

3: Crisis of CONTROL

5. Growth through COLLABORATION

4. Growth through COORDINATION 2: Crisis of AUTONOMY 3. Growth through DELEGATION

1: Crisis of LEADERSHIP

2. Growth through DIRECTION Small

l. Growth through CREATIVITY

Young age of organization

Figure 3.1

The five phases of organization growth, Greiner (1972)

Greiner (1972), in his theoretical paper, discusses five stages that comprise a company’s life cycle. Some of these stages are considered by him as ‘evolutionary’ and others as ‘revolutionary’. He holds that a company’s

30

Creating and Re-Creating Corporate Entrepreneurial Culture

past has clues for management that are critical to its future success. Greiner maintains that growing organizations move through five distinguishable phases of development, each of which contains a relatively calm period of growth that ends with a management crisis. He argues that since each phase is strongly influenced by the previous one, a management with a sense of its own organization’s history can anticipate and prepare for the next developmental crisis. His article provides a prescription for appropriate management action in each of the five phases, and it shows how companies can turn organizational crises into opportunities for future growth. The key managerial attitude seems to identify where one is in the development sequence. Every organization and its component parts are at different stages of development. The task of top management is to be aware of these stages, otherwise it may not recognize when the time for change has come, or it may act to impose the wrong solution. Greiner considers that top leaders should be ready to work with the flow of the tide rather than against it; yet they should be cautious, since it is tempting to skip phases because of impatience. Each phase results in certain strengths and learning experiences in the organization that will be essential for success in subsequent phases. A child prodigy, for example, may be able to read like a teenager, but they cannot behave like one until they age through a sequence of experiences. We can learn from Greiner’s ideas that managers must be educated to think and act from a developmental perspective. Dimensions of time have been missing for too long from management theories and practices. The intriguing paradox from Greiner’s viewpoint is that ‘by learning more about history we may do a better job in the future.’ Pettigrew (1979) states that a longitudinal analysis is more likely to be interested in language systems of ‘becoming’ than of ‘being’. In an empirical study of a British boarding school, he offers a speculative look at some of the concepts and processes associated with the birth and growth of organizations. The school was founded by an individual with a ‘strong personality’ who had an impact on the organization’s values and beliefs. Data collection began in 1972, with a ‘before’, ‘during’ and ‘after’ analysis of the impact of a major structural change on certain aspects of the organization, such as climate and structure. Interviews and questionnaires were administered to staff and pupils during the springs of 1973 and 1974. The cross-sectional and processual analyses were complemented with a historical analysis of the birth and evolution of the school from 1934 to 1972. This retrospective analysis was based on long interviews

Biography of Organizations

31

with former masters, governors, and pupils who were at the school from the 1930s until 1972. He thought that an organization as well as any other system may profitably be explored as a continuous system, with a past, a present and a future. Organizations shift to market, environmental or social forces. These shifts are hard to detect when they occur, but they are easy to recognize in retrospect. Learning to identify these events is part of a top executive’s job. Dyer (1986) studied the culture of US family firms. He carried out in-depth case studies looking at the history of firms and the way they evolved. His method of investigation included comparing and contrasting the firm’s evolutionary patterns and cultures. He gathered historical data from more than 40 businesses and was able to intensively and systematically explore the different problems which leaders of family businesses faced at various stages of their firm’s life cycles. The firms ranged from giants such as Du Pont to smaller operations. Even large corporations had very humble beginnings, and the founders and families that started those firms encountered many of the same problems that family businesses face today. By studying these large firms in retrospect and over long periods of time, he achieved a greater understanding of the dynamics of family firms at various developmental stages. Dyer concluded that the history of a family firm largely determined its ability to survive. He concluded that the effects of history and cultures were so consistent that, to compete in a dynamic and often uncertain world, managers of family businesses must be aware of their cultures and must be skilled at managing cultural change. He describes the process of change, emphasizing the role of founders and leaders in the process of organizational cultural evolution and change. Pedler et al. (1991) described the ‘Learning Company’ whereby individual and group development is key to organizational survival. Under this dynamic approach they use the metaphor of ‘firms as organisms’ which change over time and pass through a number of life stages, experiencing turbulence. Each firm faces practical problems and circumstances which are linked to their own specific past experiences. From Greiner’s viewpoint, they suggest some generalizations regarding ‘predictable’ stages of a firm’s life cycle. The limitation of their approach may be that by trying to fit companies into pre-scheduled stages of development, they miss particular events which might be crucial to understanding organizational development. Although some common paths can be found (birth, maturity, death) there must be a uniqueness of events which differentiates one organization from another. The approach taken in this book attempts to fill this gap.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Creating Corporate Culture at BA, BNFL, Jaguar and BAA Personality as a Metaphor to Understand a Firm’s Development Process Personality is created as a result of the interaction between both inherited factors and learning experiences. It is not static but develops during life through new experiences in different social environments (family, schools, church, job, colleagues, club). Some personalities remain relatively constant, possibly because they are insulated from the external environment. In such cases, individuals tend to retain the same set of values and beliefs that they developed in their childhood. Others, however, are more flexible, possibly because of a greater openness to contextual change. In such cases, they are likely to question their original values and beliefs, and eventually change some of them. Hence, both individuals and organizations evolve when they are open to the environment. Applying this analogy, I investigated how the personalities of Jaguar, British Nuclear Fuels Ltd (BNFL), British Airways (BA) and British Airports Authority (BAA) were formed and transformed, as perceived by managers. Using an ethnographic analysis, a consensus was found among managers within the same organization as to the historical organizational culture or personality. Hence, the former personalities of these four firms were described by the interviewees as follows:

•

Jaguar: dynamic, sophisticated, traditional and authoritarian.

•

BNFL: static, difficult to move and bureaucratic.

•

BA: slow, looking at details, conservative, not imaginative and never looking for new procedures.

•

BAA: informal, open, very communicative and always commercially biased.

As I observed, these ‘personalities’ have been gradually changing to reflect market deregulation and fiercer global competition. To cope with the current environmental constraints, adjustments in the prevailing culture are required. In other words, different organizational values and, consequently, different management behaviour seem to be in demand during the process of culture change. This retrospective approach was based on semi-structured interviews with employees who were in the organizations before, during and after the process

33

Biography of Organizations .

of culture change had been launched. The results show that the biography of each firm represented the origins of the underlying values and beliefs shared by most members in each firm. In turn, the way managers were expected to behave in the past was associated with the history and shared values and beliefs of the organization’s leaders. As shown in Table 3.1, culture reflects (a) the founder’s values, and (b) the dominating values of a specific industry. Table 3.1 How culture was formed in Jaguar, BNFL, BA and BAA

Jaguar

Top leader’s values

Industry’s values

Charismatic founder

Luxury manufactured car 

Historical expected managerial behaviour

• sophistication

• ‘high profile’

• formal

• formality

• engineering-biased

• dynamicy/restless

• authoritarian

• individualism

• enthusiasm (restless)

 

• drive, dynamism

 

→

• enthusiastic • ‘hard worker’ •technically competent (eng.) • work in isolation

Senior management values

BNFL

Nuclear industry 

• bureaucracy

• perfectionism

• paternalism

• safety

• benevolence

• secrecy

• ‘a good chap’

 

• technically-biased

 

Senior management values

BA

• obey the system

→ Airline

• perfectionist-specialist

 

• bureaucracy

• safety

• military regimented

• engineering-biased

• formality

 

• specialist

• political

 

 

Charismatic founder

BAA

 

• formal/regimented

→

Airports management 

• technically competent

 

• informality

• commercial-biased

• commercial awareness

• creativity

• customer-oriented

• innovation

 

• openness

 

• customer-oriented

 

 

• generalist

→

• participative • openness

34

Creating and Re-Creating Corporate Entrepreneurial Culture

The founders’ values and attitude Historically, top management’s values in these four companies varied enormously. Both Jaguar and BAA have always had charismatic leaders, although these have varied in their individual styles. Jaguar’s founder was described by managers as an ‘authoritarian charismatic’ leader (a view supported by the press). He believed in formality and distance between employees and managers, and the expected managerial behaviour established by the founder as a way to ‘get on’ in Jaguar meant working in a dynamic way and for long hours. BAA also had a charismatic leader (the chairman) who had remained in his post from the creation of the organization until the time of this research (1989). As with Jaguar, the values of BAA’s charismatic leader were reflected in the way managers were expected to behave. However, the founder’s values in BAA seemed to be completely different from those in Jaguar since he was described as prizing openness, flexibility and innovation and having a very analytical mind. It is observed that BNFL and BA did not have such charismatic leaders. Consequently, each department reflected its own senior executive’s values and beliefs.

The industry dominant values The investigation of these four firms’ biographies showed that different industries develop, over the years, different cultural patterns to suit their business demands. For example, as shown in Table 3.1, the culture of BNFL seems to be influenced by the perfectionism and secrecy of the nuclear industry; in Jaguar, by the drive and sophistication of luxury-car manufacturing; in BA, by the technical bias of the airline industry, and in BAA, by commercial awareness of the airport management business. These four studies have emphasized biography as a research method for understanding organizational development. Following a psychoanalytic approach to organizational studies one can conclude that, like a child’s development process, the firm’s biography reveals clues for understanding the firm’s current crisis and can also facilitate the choice of an appropriate strategy for development.

Summary To study an organization’s biography means to understand its past and its culture. This cultural approach to organizations implies that the best manager

Biography of Organizations

35

for a specific organization may be the one who can understand and respect the organization’s history and help the firm in its further development. Thus, a crucial aspect of management development programmes would be the study of each organization’s process of birth and development. In other words, following Greiner (1972), more emphasis should be given by managers and consultants on inside factors. Instead of just analysing market situations we should ask: ‘What do we know about the evolutionary process of a particular organization?’ This chapter discusses the importance of organizational history/biography as a tool for understanding organizational transformation. It argues that organizations cannot fully be understood other than by their histories. It implies the use of in-depth historical case studies rather than an ahistorical organizational culture analysis. Although it sounds relevant to identify the firm’s common life cycles, it also seems important to deepen the knowledge of how a particular organization went through its evolution and revolution processes. It implies the use of personality as a metaphor for understanding the organization’s development. Every company must be understood as an individual with its own idiosyncrasies. An analogy can be made between management/consultants and anthropologists. Both need to study the particular characteristics of a group and their own specific way of life, and pay attention to what differentiates one organization from another in order to understand why they have different ways of living. Perhaps, in their anxiety to find generalizations, organizational consultants have missed out the most important element – the firm’s own identity. Paraphrasing Freud: ‘every organization has a different story to tell.’

References Dyer, W.G. (1986). Cultural Change in Family Firms. London: Jossey-Bass. Freud, S. (1940). An Outline of Psychoanalysis. International Journal Psychoanalysis, vol. 21, 27–89. Greiner, L.E. (1972, 2007). Evolution and Revolution as Organizations Grow. Harvard Business Review, vol. 50, 37–46. Jaques, E. (1951). The Changing Culture of a Factory. London: Routledge and Kegan Paul. Kimberly, J.R. and Miles, R.H. (1980). The Organizational Life Cycle. London: Jossey-Bass.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Minzberg, H. (1979). An Emerging Strategy of ‘Direct’ Research. Administrative Science Quarterly, vol. 24, December, 582–9. Pedler, M., Burgoyne, J. and Boydell, T. (1991). The Learning Company: A Strategy for Sustainable Development. London: McGraw-Hill. Pettigrew, A.M. (1979). On Studying Organizational Cultures. Administrative Science Quarterly, vol. 24, December, 570–81. Salama, A. (1991). The Impact of Cultural Change on Managerial Careers. PhD thesis, CSML, Lancaster University, Lancaster, UK. Wilkins, A.L. and Patterson, K.J. (1985). ‘You Can’t Get There From Here’: What Will Make Culture-Change Projects Fail? in Gaining Control of the Corporate Culture, R.H. Kilmann, M.J. Saxton and R. Serpa (eds). San Francisco: Jossey-Bass.



Organizational Culture Transformation: Cross-Case Analysis

4

Although the previous chapter analysed in depth the process of corporate culture creation through a biographical approach, this chapter explores the process of culture transformation using a cross-case perspective. It reports the experience of four British organizations – Jaguar Cars, British Nuclear Fuels Ltd (BNFL), British Airways (BA) and British Airports Authority (BAA) – during major change in their traditional organizational values. This chapter explores the roles of leaders and human resource practices, in particular managerial career systems, in facilitating the process of change from a bureaucratic to an entrepreneurial culture.

Culture-Change Process: An Overview All organizations have within them the possibility and the capacity to change (Kerr and Slocum 2005). A static view of an organization’s culture implies that either the environment is static or that the organization is closed to influences from environmental changes. Just as the personalities of individuals change over the years as a result of interaction with their social surroundings, so do organizational cultures. The impact of human resources management (HRM) practices, specifically reward systems and management development, in facilitating culture-change processes within organizations, has been identified by management and consultants as relevant to facilitating the emergence of new management and employees’ behaviour within an organization. Whilst some authors (for 

This chapter is based on previous work developed together with Professor Mark Easterby-Smith.

38

Creating and Re-Creating Corporate Entrepreneurial Culture

example, Brown and Payne 1991) are critical of the intensive use of those practices as powerful instruments for cultural change, others believe that there is a relationship based on causality between corporate culture and human resource systems. Burack (1991), for instance, in his work argues that HRM has a crucial, challenging role to play in successfully ‘orchestrating’ strategic culture change. In this present analysis, corporate culture is regarded as an organizationspecific system of widely shared assumptions and values that are responsible for typical behaviour patterns. Whilst large companies often have distinct subcultures within different functions (for example, engineering, marketing, R&D and manufacturing), I have concentrated in this study on the ‘core’ values and assumptions which are common to all units, that is, those which represent the dominant culture. Previous studies have identified that culture is to the organization what personality is to the individual. The metaphor of ‘culture as an organization’s personality’ may yield significant insights into how culture is formed and changed. Personality seems to be created as a result of the interaction between inherited factors and learning experiences; just as personalities evolve, so do organizational cultures. When a business is established, basic assumptions necessary for long-term survival are adopted by leaders. As a result of a gradual learning process, these assumptions become part of the company’s culture. The influence of founders’ and leaders’ values on corporate culture has been highlighted by different organizational theorists, in particular by Schein (1985). From his action research, he concluded that leaders create and manage corporate cultures. Corporate culture has been increasingly central to company change and revitalization. When a company’s industrial environment changes (for example, when it becomes more competitive), behaviour based on past assumptions and values is likely to be ineffective and the company is likely to experience negative results. Such a condition creates pressure for change. Sixty-two semi-structured interviews were held with middle and senior managers (15 or 16 in each company). The managers covered a cross-section of departments in each case and had served with the company for a minimum of five years. In each interview, managers were asked to discuss the main changes they had experienced in the company during the preceding years. Follow-up questions then focused on the history of each firm, past and current leaders’

Organizational Culture Transformation

39

values, the type of behaviour expected from managers (before and after privatization), a description of the organization as if it had a ‘personality’, the criteria being used to select and promote managers, and the reward and appraisal system. The values, beliefs and taken-for-granted assumptions of managers were deciphered through probing interviews. Human resource directors and managers were also interviewed in order to investigate the nature and impact of a range of human resource interventions around the period of privatization. Interview data were followed by an examination of internal documents (special forms being used in human resource practices), publications (such as annual reports), and by relevant press commentary. All interviews were tape-recorded and literally transcribed. Major themes emerged from the interviews. Each company received an individual data analysis. The data analysis employed an interpretative paradigm to find a consensus on the managers’ perceptions of their own organization’s culture-change process. A cross-case study was accomplished as a further step. The interviews attempted to explore not only the attributes of culture and the change process in each organization but also the rationale for that culture. Historical explanations were found for the ways things were done in each organization.

A Cross-Case Analysis of Jaguar, BA, BNFL and BAA This section analyses some issues already explained in the previous chapter. However, here additional data are analysed in detail. During the period of this investigation, all four companies had to cope with two major external new demands. They were:

•

Change in ownership (from government-owned to private).

•

Change from a ‘mild’ to a ‘fierce’ competitive market environment.

I summarize below the main cultural features of each company, that is, ‘the historical culture’ as described by managers. I also consider some of the factors that may have had a significant influence on the formation of these cultures, notably, the values of early leaders and founding fathers, and the influence of the wider industry in which the company operated. I will subsequently focus on how these cultures changed, and how those factors either might facilitate or constrain future changes.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Top Leaders’ Values If one examines the characteristics of leaders and founders, the similarity between Jaguar and BAA is that they have always had ‘charismatic’ leaders (see Table 3.1), although these have varied in their individual styles. Jaguar was founded in 1922 by Sir William Lyons, who remained with the company until his retirement in 1972. He was a crucial force in the management and development of the company. He is remembered by those who knew him as an ambitious man who combined drive and energy with a shrewd business mind. Lyons was an autocratic boss. Managers recalled that he rarely bothered with board meetings and addressed people by their surnames only. His greatest quality was his eye for style – he understood the importance of style, and all his products had it. Lyons’s ideas, combined with a precision engineering emphasis, produced a culture that valued dynamism and style within a formal and authoritarian organization. Sir Norman Payne, who was chairman of BAA from the creation of the organization in 1966 until July 1991, was also a ‘charismatic’ leader. According to the senior managers interviewed, the attributes prized most by the chairman were openness, flexibility and the ability to innovate. As one senior manager commented: We were always an adventurous company. The chairman was always open to new ideas. In the old days, neither BNFL nor BA had leaders who were quite as charismatic as those in BAA and Jaguar. Hence, according to the managers, there was variation between departments which reflected the values and beliefs of each departmental head. However, there were also consistent patterns across each company. Until the appointment of Christopher Harding as chairman of BNFL in 1984, there was no one dominant character at the top. Because of its origins as a branch of the Ministry of Defence, there was a strong civil service influence in the company. The consequences of this were elaborated by a middle manager: The culture of civil service doesn’t tell people what they need to know. Sellafield (which comprises 90 per cent of BNFL) was like a mysterious person holding secrets. Everybody in this organization knows what we mean by the ‘need to know’ philosophy.

Organizational Culture Transformation

41

Managers were also influenced considerably by the importance of technical safety within the nuclear industry as a whole, and because of the isolated location of Sellafield to the west of the Lake District there was also a benevolent awareness of the need to provide employment to the local community. The overall result was summarized by another manager as follows: Sellafield, in the past, looked like a social rugby team which goes out and tries to win, but basically wanted to have a good game. BA was also quite bureaucratic in the sense of having clear procedures and formal/impersonal relations between different grades of staff. This did not originate from the civil service, but from the close contact with the Royal Air Force. Pilots and managers were frequently recruited from the RAF, and this lent a strong ‘operational’ flavour to the organization. One of the senior engineering managers commented to us: We couldn’t get away from the fact that we were running an operation. The operation was everything. The customers were just an unfortunate add-on. This did not help relations with customers, as a senior member of the customer service department said: Before 1983 we were quite ‘arrogant’. We tended to know what was best for our customers. It was one of our beliefs that customers didn’t know what was best for them. The former CEO and chairman encouraged formality within the organization, and were personally very distant from staff. They did not believe in participative management: The old managers preferred to tell people what to do instead of involving them in decisions. They wanted distance from the staff. They also thought it was a matter of status being far from the staff.

The industry dominant values The investigation of these four firms’ biographies demonstrates that, over the years, different industries develop different cultural patterns to suit their business demands. For example, as shown in Table 3.1, the culture of BNFL

42

Creating and Re-Creating Corporate Entrepreneurial Culture

seems to have been influenced by perfectionism and secrecy; in Jaguar, by the drive and sophistication of luxury car manufacturing; in BA, by the technical bias of the airline industry; and in BAA, by commercial awareness of the airport management business. BAA is different from the other organizations, as from its beginning there had been a strong commercial awareness. This stemmed from the nature of BAA’s core business of providing an efficient service through the catering, retailing and duty-free activities.

From Bureaucracy to Entrepreneurship Although the process of culture creation was similar in these four firms (the influence of leaders’ and industry’s values), the implementation of culturechanging strategies varied. This phenomenon seemed to be related to each CEO’s leadership style and their perception of environmental changes. The course of privatization was remarkably similar in each of the four companies. It started with a clearly identified ‘trigger’: a government announcement followed by the appointment of a new chief executive. The new chief executive developed a mission statement and then stayed with the organization throughout the period of culture change and privatization. After the initial trigger, a great deal of energy went into preparing each company for a major transformation. Most of the changes were felt to have taken place during this transitional period. The point at which ownership formally changed was, therefore, the end of the most dramatic period of change, and ushered in a slower pace of change. The different strategies and approaches adopted by each firm are summarized in the following paragraphs.

Jaguar Cars The investigation of the Jaguar change process covers two periods: a historical period before 1983, and the prevailing, that is, the transition period (1983–1987). Jaguar’s historical culture was most appropriate at the time of favourable economic conditions: better exchange rates (US$ and £ Sterling), mild market competition and financial support from the government. At the time the research was conducted, however, the costs of the product had become too high, and the company had become unable to compete successfully in the marketplace. The only ‘way out’ which senior managers could identify for the

Organizational Culture Transformation

43

company’s survival was to gradually replace some of their working values: for example, from an authoritarian to a more participatory style of management; from an engineering bias to a commercially-oriented bias; and from a traditional outlook to an innovative outlook (see Table 4.1). Interestingly, none of the managers interviewed perceived the organization’s culture as being in the process of change. The ‘appropriate’ culture was described as the ‘desired’ one. Nevertheless, ‘how to get there from here’ seemed to be the problem in Jaguar at that time. Managers revealed that the CEO’s style of management and consequently the ‘role modelling’ was perhaps the key barrier to culture-change process at Jaguar. The systems which communicated and reinforced management attitudes had not been modified according to the ‘new culture’; new managers were selected (from outside) and evaluated under ‘old’ or ‘historical’ criteria. The only human resources sub-system which changed was training and development. Management training and development activities in isolation do not, however, stimulate the necessary changes in managerial behaviour. Senior executives in Jaguar expressed dissatisfaction with the limited change achieved in people’s behaviour. Several expressed the hope that in the future, managers would be more flexible and willing to listen to employees, that they would be more willing to work on teams, and that people would be less afraid of the consequences of making mistakes by suggesting new ideas. These are, however, reflections of the espoused culture, as opposed to the prevailing culture. This conflictive situation (old and new values) can be illustrated by a manager’s account: Although we are aware that innovation in management terms is fundamental for the organization’s survival, it is still necessary to be very persistent if you want to get new ideas implemented, that is, we are not asked to be creative managers in day-to-day life. The Jaguar case culture had been quite resistant to change. Jaguar’s top executives were gradually recognizing the strong links that exist between corporate culture and HRM (specifically, managerial career systems). However, there was a distinctive time-lag between the realization and the implementation of necessary changes in career management. This slowed down the required process of organizational change. Jaguar was sold to Ford in 1989. Twenty years later, Tata Motors – an Indian conglomerate – acquired Jaguar Cars from Ford. A more detailed analysis of this story is offered in Chapter 7.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Table 4.1

Culture change and managerial careers at Jaguar Prevailing

Culture

• dynamism technically-biased • authoritarian/traditional • formality enthusiasm

Careers

• managers as specialists • individualism • authoritarian management style • ‘dynamic’ managers

Appropriate/desired Culture

• commercially-oriented teamwork

Careers

• managers as generalist (business  oriented – MBA) • cooperation • participative management style • ‘thoughtful’ managers

BNFL The investigation of the BNFL change process covers two periods: the historical period (1971–1984) and the prevailing period (1984–1989). The rationale for culture change in BNFL was that the organization needed to become more competitive, both nationally and internationally, in order to survive in the electricity-supply business. As shown in Table 4.2, historically, BNFL’s mission was to offer jobs to the community and to provide a safe product. From a ‘bureaucratic’ and ‘secretive’ historical culture, BNFL’s current culture seems to have come to value openness, innovation and creativity. Managers are now challenging the traditional working practices. Career management had been modified from the historical to the prevailing period. The modifications in senior management selection and promotion represented the priority action towards culture-change process in BNFL. ‘Deviant’ managers of the past (those who were willing to implement new ideas) were being promoted to senior positions as the criteria for selecting/ promoting managers have changed. Historically, managers were assessed by their technical skills. Today, ‘general expertise’ is required for managers to climb the career ladder. BNFL tends to select managers for key positions from within the organization. It believes that people can change if they are given the appropriate tools and responsibilities. Currently, career progression is ‘faster’ than during the historical period; that is, ‘young’ managers are promoted to senior positions if they have the necessary skills. Whereas, historically, rewards were based on seniority, today they are based on performance.

Organizational Culture Transformation

Table 4.2

45

Culture change and managerial careers at BNFL Historical

Prevailing (new)

Mission

• offer jobs to the community • be safe

Mission

• be a commercial organization • be safe

Culture

• safety secrecy • technically-biased • bureaucratic, paternalism

Culture

• business-oriented • valuing management skills • valuing innovation

Careers

• towards specialization • slow career moves (rewarding by   seniority) • conformity

Careers

• towards ‘general’ expertise – MBA   faster career moves • performance-related rewards • initiative, creativity, flexibility

BA The investigation of the BA change process covers two periods: the historical period before privatization (1973–1983), and the prevailing period, that is, postprivatization (1984–1987). The privatization of BA happened in 1987; however, the decision to privatize the airline marked the start of a culture-change programme. The need for a culture change in BA lay mainly in the transitional phase of the economic environment. The airline industry in the UK and globally has been suffering fiercer competition: historically, it worked under a highly regulated market; now it works under a highly deregulated market. The data revealed that following the privatization decision, the historical values and beliefs in BA underwent a ‘dramatic’ process of change. As shown in Table 4.3, the organization’s mission in the past was to ensure that aircraft flew safely. Competition and profitability were not major issues. BA’s historical culture was characterized as technically biased, authoritarian, formal and bureaucratic. Technical competence was the main criteria for selecting managers. Promotions were based on length of service and experience in a particular job within the organization. The historical culture valued the number of years of experience in the same job, not broad management experience. Thus, careers developed slowly within BA in a very ‘narrow’ way. The reward system was unrelated to performance. Management had no incentive to implement changes or to improve its performance.

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Creating and Re-Creating Corporate Entrepreneurial Culture

The process of understanding the BA ‘prevailing’ culture was more complex and difficult than the previous investigation of historical culture. It is probable that this was due to the transitional phase of culture change which managers perceived as a mixture of old and new values. Since 1984, BA had been in a transitional phase – replacing some of its main historical values and beliefs to be consistent with the new mission. A CEO was appointed in order to accomplish this required cultural change. New training programmes and appraisal systems were introduced in all areas to stimulate changes. However, in some areas, other managerial career sub-systems (such as selection and promotion), have not experienced major modifications. In keeping with the theory, different areas of the organization held different sets of values and beliefs. Therefore, some were already utilizing management skills as criteria for selecting and promoting managers. Others, however, were still choosing the ‘good specialist’ for managerial positions. At a corporate level, managers are now rewarded according to performance. Nevertheless, the use of the new appraisal system varies across functions as the criteria for ‘good performance’ differ between departments. This inconsistency probably stems from the fact that the human resources department (HR) had ignored the different subcultures. It had been trying to ‘impose’ its own values and beliefs on the rest of the organization. It had been identified by the CEO and a new structure for HR is being developed in order to give the units more autonomy. As a consequence of this non-integrated culture-change process, managers were receiving different messages regarding the way they were expected to behave. The data analysis reveals that this contradictory situation reflects a lack of consensus regarding the ‘appropriate organizational culture’ as viewed by top management. Table 4.3

Culture change and managerial careers at BA Historical

Mission

• to be a safe airline

Culture

• formality bureaucracy • technical-bias • authoritarian • safety

Careers

• towards specialization (technical   competence) • slow careers (length in the service) • rewarding by seniority

Prevailing Mission

• to be a safe and competitive airline

Culture

• formality vs informality • bureaucracy vs innovation • technical bias vs commercially-oriented • participative vs authoritarian

Careers

• customer-oriented training (across   functions) • participative management style   training • performance-related rewards • selection/promotion, technical   competence vs management skills

Organizational Culture Transformation

47

BAA The investigation of the BAA change process covers two periods: the historical period (1976–1985) and the prevailing, that is, the transition period (1985–1989). The process of culture change in BAA differs from previous case studies in intensity and pace. BAA’s culture has always been characterized as ‘innovative’ and receptive to environmental change. As an evolutionary process, both culture and careers were modified in response to environmental demands over the years. In the preparation for privatization, however, a more accelerated process of change occurred. The organization’s core mission has changed to emphasize profits rather than services. Radical changes have taken place in the organizational structure (decentralization). As a consequence, managers’ responsibilities have increased. As shown in Table 4.4, features of culture before and during privatization periods were similar – as in the past, BAA valued flexibility, innovation, openness and a participative management style. Financial skills are more valued at BAA currently than they were before privatization. In training, much attention has been given to teaching managers about budgets and other necessary financial tools. In selection and promotion, financial skills have now become more relevant than before. Appraisal and reward systems are now, at least partially, based on the level of profitability achieved by managers. A unique characteristic of BAA culture, as compared with the previous case studies, is that BAA has always been managed by generalists. Growth and diversification have only re-emphasized its need for generalists. For example, as a consequence of the decentralization of the personnel area, managers are expected to deal with personnel issues which in the past were delegated to the HQ. As in BNFL but unlike Jaguar and BA, managers in BAA seem to be aware that different subcultures require different managerial profiles. However, some core values are constant and seem to be consistent throughout the organization: innovation, communication, flexibility and adaptability. While BAA has never tried to change people’s values, it tried to change those of the company. Efforts were made to give managers different responsibilities as the business evolved. Human resources’ main objectives have been to equip managers (via specific training and an organizational re-structuring process) with management tools to help them to act proactively

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Creating and Re-Creating Corporate Entrepreneurial Culture

to changing environmental demands. BAA’s top management does not believe that new managers necessarily need to be selected from outside. BAA’s human resource philosophy is to provide managers with a wider view of the business because it believes that most managers are capable of changing their own behaviour. Table 4.4

Culture change and managerial careers at BAA Pre-privatization

Mission

• provide good service • be profitable

Culture

• commercially-biased • flexibility • innovation • openness

Careers

• towards general expertise • participative style of management • teamwork • communication skills

Post-privatization (new) Mission

• be profitable • provide good service

Culture

• financially-oriented • flexibility • innovation • openness

Careers

• towards general expertise • financial skills (budgeting) • personnel management skills • participative style • teamwork • communication skills

Summary This chapter explored how entrepreneurial culture can be triggered by managerial career systems. Results show that environmental changes require modification in top management’s values to make culture change successful. Managers with different business values are likely to be recruited and promoted in order to facilitate the changing process from a bureaucratic to an entrepreneurial style of management and leadership. The chapter brings evidence that the content of culture change varies between the four firms as a consequence of their diverse history. Nevertheless, the similarities among these companies lie in their process of change: all four companies have applied the following management tools to change/hasten the process of culture change:

•

Organizational self-analysis (including history).

•

New mission (vision of the future).

Organizational Culture Transformation

•

New HR practices.

•

New organizational structure.

49

The results regarding how much change was achieved by each company are, of course, related to the way different firms dealt with the above managerial tools. As shown throughout the chapter, human resource practices reflect organizational cultures which perpetuate the founders’ and leaders’ values. This statement does not apply solely to founders, such as John Williams at Jaguar and Sir Norman Payne at BAA. It also applies to the leaders who find it necessary to remodel their companies at any particular point in their history – leaders who have the determination and perseverance to effect change such as Colin Marshall at BA and Christopher Harding at BNFL. The results of the study suggest that changing culture is a complex, longterm undertaking. It involves coordinated efforts by top management to change its own values/behaviour and the signals it sends to subordinates and others in the organization. Such changes must be reinforced by shifts in management education, selection and promotion. Culture cannot be managed as distinct from the rest of the organization. This chapter demonstrates that integrated actions are necessary.

References Brown, A. and Payne, R. (1991). A Human Resource Approach to Management of Organizational Culture. Working Paper 200, MBS, UK. Burack, E.H. (1991). Changing the Company Culture: The Role of Human Resource Development. Long Range Planning, vol. 24, no. 1, 88–95. Kerr, J. and Slocum, J.W. (2005). Managing Corporate Culture through Reward Systems. Academy of Management Executive, 19, 130–38. Schein, E.H. (1985). Organizational Culture and Leadership. San Francisco: Jossey-Bass.

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PART III

From Bureaucracy and Inertia to Entrepreneurship: Preparing Firms for Organic Growth

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Causes of Inertia and an Integrative Model for Culture Evolution and Transformation

5

This chapter has two objectives. First, it will present a model for strategic culture change. The model implies that an integrative approach to culture change is vital and it highlights six steps which have proved relevant for such transformation. This model can be useful in helping organizations belonging to different industries and also those which operate in different national cultural contexts. Second, it will offer a background to the reasons for inertia and bureaucracy, particularly with regards to the UK stories analysed in Chapters 6, 7, 8 and 9. The model presented in this chapter has its foundations in the empirical investigation of six firms undergoing major cultural transformation as a result of discontinuous changes that occurred in their industrial and economic markets. The study took place in Britain from 1987 to 1991, and in Brazil from 1992 to 1995. Results indicate that no step in isolation, no matter how perfectly it is implemented, is wholly responsible for the success of the transition from culture A (historical/bureaucratic) to culture B (desired/entrepreneurial). An integration of all stages is fundamental. Furthermore, when dealing with culture change, one might prefer to think in an ‘evolutionary’ way rather than in a ‘revolutionary’ way. It means that historical culture needs to be deciphered, understood, challenged and improved, not destroyed. This approach helps to prevent or minimize resistance from those who have been contributing to the firms for a long period of time.

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Creating and Re-Creating Corporate Entrepreneurial Culture

The Integrative Model of Culture Change A model is a very simplistic way to describe reality. However, this model proved to be useful as a basis for class discussion in the MBA and general management short courses at the European School of Economics (UK), Cranfield Management School (UK), COPPEAD (Rio de Janeiro), PUC (Rio de Janeiro), London School of Economics and others. It gives the managers an overview of the process and explains how the different steps integrate with each other. This model encapsulates primarily what has been learnt from the major research conducted in four firms in the UK which have been experiencing major changes provoked by market deregulation and privatization. Furthermore, this model has been tested in a major Nipo Brazilian steel organization (USIMINAS) and in Xerox do Brazil. The model describes the six specific steps which were made evident by the analysis of the implementation of culture change in the six firms under investigation. These steps are not intended to be comprehensive, but instead indicate some of the common managerial actions which are utilized by firms and have proved essential for a smooth transition process. Although the context of culture varies between companies and countries, the process of culture change is similar. This means that the steps companies pursue in their battle for transforming their well-established culture are actually the same. The success of the culture-change process relies, however, on how well a company accomplishes each of these six steps (see Figure 5.1).

Step 1: Organizational Self-Analysis The first step towards achieving a successful transformation is to undertake an analysis of the past history and prevailing culture of the organization. Corporate culture is created by founders and top leaders to help organizations in their survival and growth process. This culture is built around a central set of values that pervade every aspect of the company’s operations. Employees are indoctrinated to internalize these values, and those who fail to do so rarely last long. These values are the lifeblood of the firm, creating the standards and providing direction for growth and development.

55

Causes of Inertia

Culture

Environment

New mission and vision

Organizational self-analysis

Integrative culture change process

New human resource practice

New organizational structure

Figure 5.1

Communication

Involvement

The integrative culture-change process

To ensure an appropriate fit of the culture to the environment, a constant assessment of this relationship is necessary as the business’s environments change quite rapidly. Therefore, to maintain an appropriate culture, top leaders would initiate an analysis of this fit on a regular basis. The analysis of the culture-environment fit is fundamental to prevent any problems of mismatching between the way people think and behave within an organization and what is dictated by the competitive global business. When a gap is found in the culture-environment fit, a need arises for the implementation of a culture-change strategy. This gap often occurs as a consequence of a long period of organizational inertia, that is, the lack of technical and/or management innovation. This inertia leads firms into bad financial situations where a crisis can occur. The size of the gap will dictate whether it will be a major intervention or a subtle one becomes necessary. The outcome of Step 1 will be the answer to the following question: which organizational values should be retained and which should be modified? This is then the starting point of the culture-change process: an awareness of the strengths and weaknesses of each company in cultural terms. This step can be accomplished by top team management in conjunction with external consultancies.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Step 2: New Core Mission and Vision A corporation mission reflects what it stands for. The vision reflects where the firm wants to be in the future. Often, when a gap in culture-environment fit is found (Step 1), a need for rethinking a new core mission is perceived. The new mission is established and then communicated across the organization. Building a ‘shared’ vision is desirable but not always accomplished (Senge 1990).

Step 3: Communication All available means of communicating the new core mission and vision are then applied to convey, in a positive way, the new direction of the firm and the reasons for it; information on the culture-environment fit analysis is given; this includes discussion of the strengths and weaknesses of the historic culture as well as the changes necessary for organizational survival and growth or the vision.

Step 4: Involvement Empowerment is important and this is achieved through a participative leadership style. Seminars, training activities and workshops are utilized to foster active participation in taking the organization from culture A to culture B. Views from different groups are analysed. This movement is more effective if initiated at the top level, cascading down to the shop-floor level, following the organizational structure. Commitment must come from top management if a smooth process of change is expected. Imposing new ways of behaviour is certainly the easiest path to bring about resistance. Involvement is vital.

Step 5: New Human Resources Practices New criteria for recruitment, selection, new training and development programmes, and new reward and appraisal systems are necessary. As a new core mission and vision are established, getting there requires a different frame of mind. Leaders are now challenged to review their own behaviour and values. Training and development are useful tools in this direction. New criteria for the recruitment, selection and promotion of leaders must be established.

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Causes of Inertia

Appraisal and reward systems are redesigned to reinforce different behaviour. If these measures are successfully accomplished, new culture starts to emerge gradually within the organization (see Figure 5.2). National values Industrial values Founders’ and leaders’ values

Culture (behaviour, values, beliefs) How managers are expected to behave

•

• •

HR o Recruitment o Training o Rewards Leaders Structure

Figure 5.2 How corporate culture is reinforced

Step 6: New Organizational Structure Changes in organizational structure can facilitate cultural and behavioural transformation within organizations. Porter and Lawler (1965) suggested that a flat structure is better for fulfilling autonomy and self-actualization needs. A proliferation of hierarchical levels of management encourages centralization of authority and job specialization (Chandler 1962). These structural characteristics lead to low levels of job autonomy with suppression of personal judgement and initiative and failure to develop managerial talent. Redesigning the organization structure will facilitate the emergence of a different relationship between people and areas within the organization. For example, a flat organization design, together with other tools (such as training) can facilitate a closer relationship between supervisor and employee. A matrix organization design can facilitate the emergence of flexible workforce behaviour. However, there is no better way to organize the work. The organizational structure is usually revised by top management according to the specific needs to be achieved and the new mission and vision. As explained through the above steps, implementing a culture-change strategy is a lengthy and demanding process, especially when the firm has been static for a long period of time. The extent to which this internal adjustment is achieved through a kind of controlled chaos built around innovation, risk-taking and proactivity will define the successful organizational cultural transformation.

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Creating and Re-Creating Corporate Entrepreneurial Culture

Senior management must take the lead in setting new organizational goals, opening communication, accepting failure, empowering middle management, and creating an environment in which new ideas are welcomed. Middle managers are the catalysts in terms of overcoming the natural barriers, implementing new structures and systems lessening bureaucracy. The strategic model for culture change described in this chapter highlights the six steps that can help firms to achieve a successful culture-change process. However, the model alone does not allow the reader to understand the ‘ins and outs’ of each step, the problems CEOs encounter when implementing culturechange strategies and the ways they manage to overcome their difficulties. This is explained in detail in the case stories in Part IV.

Some Reasons for Organization Inertia Related to the UK Stories Although the current wave of worldwide privatization was launched in 1979 in the UK, the economic case for privatization is not new. Two centuries ago Adam Smith (1776) argued that: In every great monarchy in Europe the sale of the Crown lands would produce a very large sum of money which, if applied to the payment of the public debts, would deliver from mortgage a much greater revenue than any which those lands have been afforded to the Crown. When the Crown lands had become private property, they would, in the course of a few years, become well improved and well cultivated. Worldwide interest in privatization has increased due to the desire of many nations to promote free market principles and to establish an enterprise culture. The privatization programme in the UK is the oldest endeavour of its kind in the world. Under the leadership of former Prime Minister, Margaret Thatcher, Britain’s government promised ‘to roll back the frontiers of the state’. In 1979, privatization became an important element of the British government’s economic strategy of involving the private sector in activities previously carried out by the public sector in order to reduce the size of the state. The original term ‘privatization’ appeared in Britain at the beginning of the 1980s as opposed to the term ‘nationalization’ of the 1960s and 1970s. Since the 1980s, privatization has been a major preoccupation of governments of diverse political persuasions, and countries at widely divergent stages

Causes of Inertia

59

of development (Fraser 1988). Privatization is the full or partial transfer of government responsibility for an activity or asset to the private sector. It is an attempt to diminish the role of governmental bureaucracies and enhance the responsibilities of the private and commercial sectors.

Implications for Management Practices: The Introduction of Entrepreneurial Behaviour The reduction of direct government ownership and regulation enables firms to reveal their talent and potential, following the belief that the role of the ‘market’ is an important factor in incentives and motivation. Improved performance, however, is not an automatic effect of this complex decision. The introduction of entrepreneurial behaviour is required to provide ex-state enterprises with the dynamism needed for the expected transformation in the efficiency of the organization. The selling of shares in state-owned industries alone cannot create powerful new management, nor can it guarantee a company’s survival. When privatized, a company is forced by external influences to re-think its future. A management with long-term vision will anticipate this change (whilst still state-owned) and prepare strategies for managing it. In developing these strategies the management must address the issue of entrepreneurial vision. In order to do that, changes in the employees’ work-related values are necessary. A transformation in the organization culture is then required before a new global organizational strategy can be formulated. How do companies change from being bureaucratic and conservative to being innovative and entrepreneurial? An emphasis on cost-cutting, innovation, commercial awareness and adaptability to the market are encouraged. These changes are fed through the line managers, who are seen as some of the main agents of change. They can become the ‘delivery mechanism’ for the new culture, through enhanced roles in employee communications, and as ‘designers and drivers of change’. Managers are encouraged to be on the lookout for new growth opportunities. Entrepreneurship is encouraged, especially where companies are trying to diversify into new markets. Management control systems are reformed to devolve much greater authority to the line. Operational managers are expected to develop a ‘business orientation’ rather than concern themselves primarily

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Creating and Re-Creating Corporate Entrepreneurial Culture

with the technicalities of production management. Considerable delegation of authority takes place in the areas of personnel and industrial relations. The justification for privatization is based on the belief that private sector organizations are necessarily better at managing business than the public sector. However, much attention and consideration must be given to how these managers and organizations can acquire the necessary skills for success in a private sector environment: from bureaucracy to entrepreneurship.

References Chandler, A.D. (1962). Strategy and Structure: Chapters in the History of the Industrial Enterprise. Cambridge, MA: MIT Press. Fraser, R. (1988). Privatization: The UK Experience and International Trends. Longman Group. Porter, L. and Lawler, E. (1965). Properties of Organization Structure in Relation to Job Attitudes and Job Behavior. Psychological Bulletin, vol. 64, no. 1, 23–51. Senge, P.M. (1990). The Fifth Discipline: The Art and Practice of the Learning Organization. Doubleday. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. London: W. Strahan and T. Cadell.



British Airways Story

6

This chapter describes and explains the process of transforming British Airways (BA) military culture characterized by traditional values since its foundation in 1922, almost one century ago. Following the biographical approach employed throughout this book, this chapter explains in detail the strategy which top management implemented to transform BA traditional values into entrepreneurism. In particular, it reports the main difficulties, challenges and management resistance to the culture-change process.

The Need for a Change at BA In the early days of BA, civil aviation was very much regulated between different countries. The industry then started to move towards a more deregulated business. As stated by Bruce (1987): Complexity, turbulence and geographical distance are critical features of the operating environment for BA today. At the same time, deregulation, with fierce competition for markets, is breaking up the comfortable cartel of earlier years. (pp. 21–6) Today, increasingly, any airline can fly any route wherever they like. So, we came from a highly regulated industry to a highly deregulated industry. That is why the need for change started. (Bruce 1987) As a consequence of market deregulation and fierce competition, BA has been facing gradually increasing international competition. Thus, there was a need for change from a technically-biased organizational culture towards a market-oriented and entrepreneurial culture. This is illustrated by a senior manager’s account:

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The airline was inward looking. We were insulated, we did not recognize competition, and it was an introverted culture which did not focus itself outside. Consequently, early in 1985, BA became financially non-viable as a business, but at that time the company was protected by the government. The possibility of privatization exposed the company’s unprofitability.

A Briefing on BA BA is one of the world’s largest international airlines. Its principal activities are the operation of international and domestic scheduled and charter air services for the carriage of passengers and cargo. In August 1989, the time when the story was originally analysed, BA group employed 40,252 staff; 29,000 of whom were located in the London area, mainly at Heathrow Airport, over 5,000 in other UK locations and another 5,000 overseas.

History BA can trace its origins back to the pioneering days of civil aviation after the First World War. The world’s first scheduled daily international air service commenced on 25 August 1919 and was operated by Aircraft Transport and Travel Limited, which was combined in 1924 with a number of other privatelyowned air-transport companies to form Imperial Airways Limited. A number of smaller UK air-transport companies merged in 1935 to form the original privately-owned British Airways Limited, which became Imperial Airways’ principal UK competitor on its European routes. Following a government review, Imperial Airways and BA were nationalized in 1939 to form the British Overseas Airways Corporation (BOAC). In 1946, British European Airways (BEA) was established as a separate statutory corporation to take over and develop the European services of BOAC. BEA also developed a domestic network to various points in the United Kingdom. From 1946 until 1960, there were two government-run airlines in the UK: BOAC (for long routes) and BEA (for Europe). In 1973, BOAC and BEA were merged to form British Airways (BA). The merger of BEA and BOAC had left the airline overstaffed with duplicated tasks and with a low sense of identity within the company. ‘This first culture change was a significant exercise in itself. It was really painful for most of us’ (a senior manager’s account).

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After that, BA had not changed that much until 1984 when Colin Marshall, the new CEO, came and prepared the company for privatization. This case describes the BA culture in two periods: 1.

1973 to 1984: BA ‘old culture’.

2.

1984 to 1989: BA ‘new culture’.

The Historical Period: BA ‘Old’ Culture: 1973 to 1984 British Airways’ mission, in the past, was to be an efficient airline-operating company. To keep the aircraft flying in a safe way was the chief aim of the organization. Quoting a senior manager interviewed: ‘We couldn’t get away from the fact that we were running an operation. The operation was everything. The customers were just an unfortunate add on.’ As explained by Young (1989), BA’s new CEO understood the need to clarify the organization’s past and the appropriate values for the future. He diagnosed the situation as follows: BA was an organization that did not really understand the word profit that was very fearful of moving into the private sector. It was also obvious to me that the organization was extremely introverted, had really no grasp of what the marketplace wanted, what the customer wanted. This idea was reinforced by a senior customers manager: Before 1983, we were quite ‘arrogant’; we tended to know what was best for our customers. It was one of our beliefs that the customers didn’t know what was best for themselves (the manager laughs as if disagreeing with this past belief). BA was designed around the armed forces. The people who originally ran the company moved from a military to a civil airline. As mentioned by a manager interviewed: ‘It was a military type of culture: We used to have, until recently, a management dining room – the management mess – and the canteen for the other employees.’

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It was a formal work environment as reported by managers. ‘People in the past were called by their titles not by their names. The job titles would come first in any list of people.’ Managers were also respected for their position and status within the organization. The historical management style was described as inflexible, formal, bureaucratic, authoritarian and the level of initiative required by managers was very low. Managers were expected to behave with a minimum of freedom as ‘the rules of the game’ were well written in manuals. This management behaviour was described as follows: We were, in the past, a bureaucratic organization, and highly hierarchical. There was a very strong sense of what was right or wrong, systems were very stable. Things happened in a particular way, behaviour was always very predictable. We had a big operating manual to dictate our behaviour. We were a management team which really had their hands tied behind their backs. BA had a highly hierarchical organizational structure. BA employees did not have the opportunity to express their own views regarding working practices or any other issues: Communication was poor, and the lack of cooperation among areas was seen as a constraint on progress. In the old style of BA, each department was a fortress, and spent a lot of time battling against the other departments. Managers were not very visible to the staff. They never went out and talked to them. There was a gulf between managers and the staff in terms of communication: There was a traditional hierarchical approach to problem-solving in the airline, in which the task was handed down from A to B to C. (Bruce 1987) Therefore, decisions were made in isolation, without involving other areas affected by the issue to be decided. The historical management style in BA was ‘too formal’ which coincides with the former CEO’s values:

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Our former CEO and chairman were different people if we compare them with the current ones. They were very distant from the staff. We, then, had different models to follow. Another important trait of the historical management style was the authoritarian and non-participatory style of management which, once again, coincides with past leaders’ values: According to managers’ accounts the ‘old managers preferred to tell people what to do instead of involving them in decisions.’ They also thought that it was a matter of status ‘being far from the staff’. In the past, people were selected or promoted just to fill a position at that moment, not as part of a future vision, or a career perspective. They were promoted because of their technical experience. As explained by a manager interviewed: In the old days, people were promoted when it was ‘their turn’, when they were in the company for a certain number of years. It was common to hear this comment: ‘I will be promoted in two years’ time because it will be my turn’. Another criterion used for selecting and promoting managers was a reflection of the political environment: ‘who knows whom?’, ‘who is a friend of whom?’ Training activities were focused on developing skills for a specific task: how to answer the phone, to how to conduct an interview. Quoting a senior manager: It was a very introvert organization. We were very parochial. We didn’t care about what was happening in other companies, in other industries or in other departments. Managers’ knowledge was limited to their own particular areas. The more senior they got, the better they became in their own particular areas. The quotation below gives some evidence of this situation: For example, someone getting to the age of forty who has never experienced finance, marketing, production, people management, and so on. They had their careers limited. There are a large number of managers of that age with very narrow experience in the company.

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Appraisal and reward systems in the past were unrelated to performance. Goals were unclear for most managers. Nobody would be given objectives or even feedback about how they were performing. The reward system was just based on length of service. This is reflected in the quote below: I have worked in this company since 1970, very rarely somebody would talk to me about my performance. To give goals, never. You were always in the dark; you would ask yourself what is expected from you. When someone said ‘we do not like what you are doing’ it was a big shock. We thought we were humane. But we would have been more humane if we had given the chance for a person to change. The appraisal system was considered political and subjective. There was no formal appraisal system. Each department had its own appraisal system. Some departments never had appraisals. It was a localized decision; different parts of the airline used different methods to appraise their people. This type of reward system was unsatisfactory: What motivation could you have, when you worked your fingers to the bone and the person in the next office just sat there, read the paper, drank coffee, and you both have the same kinds of rewards.

BA New Culture: 1984 to 1989 BA’s core mission had changed from its focus on the operation to be customerfocused as illustrated by a manager’s accounts: Flying the aeroplane is now a part of getting the business to work, not the thing that everybody needs to have experience in or be a professional in. Customers are everything now, and the operation is subsidiary to the customers. There is a great emphasis on the primary purpose of the business: getting people to travel and to be pleased with their experience, and to come back several times. When Lord King became chairman of BA in February 1981, he started to stress competition as a new value to be introduced in the organizational culture:

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My endeavours will be concentrated on doing all I can to see that British Airways has all the resources it requires to maintain and improve its standing as one of the greatest carriers in the world. (Young 1989) We aim to be the best and the most successful company in the fields of travel, tourism and transport. Furthermore, the front page of a BA News letter in 1989 quotes Lord King’s statement: Once again we achieved record profits. We are in the forefront of the world’s most profitable airlines. We are aware of the need for constant attention to costs. Internal training programmes such as ‘to be the best’ also communicated the intention of BA to become more competitive. Although different managers described the new culture in different ways, they all agreed that the historical values had been gradually and slowly changing. Both the managers, who had worked for BA for 20 years, and the newcomers shared this view. To quote a newcomer who had worked for BA for three years: The company is no doubt changing, slowly, changing for the better. I see the organization as having type A (business man) and type B (nonbusiness man) people. Type A is increasing in number. But at a very slow rate. Type B are passengers, or workers, never managers, they are not thinking about the business at all; they are thinking about their own area, but not the business as a whole. As a consequence of this new mission, a customer service department was created. Emphasis was placed on marketing activities and the quality of passenger-handling was then highly valued compared with before. ‘Customer surveys are more respected’. However, management style seemed to be moving towards different directions in different areas. Some areas, such as sales and marketing, are considered more open and participatory than others, such as engineering. This can be illustrated by a quotation from a senior manager: ‘We engineers were trained to be narrow-minded.’

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By contrast, a sales manager’s account: Today the management style is much more based on teamwork. It is not so important the position you are in, but the power of your argument. An overall change: managers in general, felt freer to manage their own areas than they did before. Personal accountability came to be more important than bureaucracy: We are exposing our abilities as managers. We had to put away the great operating manuals. Today we say to our staff: do not just complain about this, do something yourself, you know more than the manuals. Informality among peers was gradually emerging in all areas of BA. There was more openness, more involvement. The staff were more ready to come up with new ideas. Contrasting with the old style when decisions were made in isolation within each department, it became essential to get a consensus among different areas before deciding anything related to the business. Nevertheless, the transition phase was leading the organization to the other extreme in the decision-making process: If we were guilty in the past of not considering the implications of one decision in other areas, now we are guilty of taking too long to make decisions. Then, when we take it, it is with regards to everybody else but it is too late. Differences of values and beliefs among departments (such as marketing, finance and engineering) represented a significant barrier to achieving a homogeneous new managerial style in the organization as a whole: Parts of the company which are exposed to our customers had to change very quickly. Other parts of the airline have hardly changed at all. Hence, there is a wide gap between departments. This gap seemed to be a constraint in the process of communication among areas, making harder the decision-making process and ultimately affecting business achievements.

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In the past, managerial careers were made by opportunities arising. A careerplanning programme specially designed for ‘high flyers’ was implemented during the culture-change process. Managerial selection, promotion, development and appraisal in British Airways were re-structured. The aim was to replace some of the ‘old values’ with ‘new ones’. In an effort to change its image, the human resource department replaced the personnel department. Some managers thought that changing such titles was just a cosmetic action, as the role of the department remained the same: to control people. Job security was no longer an accepted value in BA. Staff and overheads were cut down radically in the early 1980s. The number of people was reduced by 30 per cent, from 50,000 to 35,000 employees. High instability among top management occurred as a consequence of the new human resource philosophy. Eighty senior managers were asked to take early retirement. The company invested significantly in trying to change key managers and directors, looking for younger people to implement changes in working practices. A few managers, however, saw this strategy to change culture from a different angle: they did not agree with the idea of ‘replacing a massive number of managers’. Instead, they considered that ‘managerial targets and outputs’ must be changed. In other words, managers should be given a different framework. These managers believed that almost everyone could change their behaviour if given a chance. They also thought that by dismissing people, the company was losing important managers. As said by a customer services manager: ‘We are losing people who have a lot of knowledge about our business and that is crucial.’ Training and development in BA aimed to be the lever for helping the organization to build a new corporate culture. Hence, the CEO decided to invest intensively in training the customer service group. He focused primarily on the staff who dealt directly with customers. Less than two months after taking charge, he said: We may need to put people through refresher courses to really concentrate on teaching staff how to sell the airline and its services. (Bruce and Moult 1988) The immediate result was a series of seminars called ‘Putting People First’ (PPF) which was first held in November 1983. The key message was: If you feel ok about yourself you are more likely to feel ok about dealing with others.

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Over two days the participants were treated to a mixture of presentations, exercises and group discussions. Staff were invited to review their personal experience of dealing with people in a broad way (at home and at work). They were introduced to concepts of setting personal goals and of taking responsibility for getting what they wanted out of life. There were confidencebuilding exercises and an analysis of the power of expectation. The giving and receiving of attention was an important area of analysis. Simple techniques of behavioural modification were also taught to help staff develop new approaches to dealing with upsets, coping with stress and developing a more positive attitude to themselves and others (Bruce and Moult 1988). These initiatives were aimed at the junior staff level, but there was an increasing recognition that a change in management style was needed: If they wanted staff to treat passengers as individuals, thus showing care and concern for passenger problems, then they have to do this to staff. (Bruce 1987) There was an underlying dilemma: managers were asked to care for their people but they did not feel they were cared for at a personal level themselves. Therefore, another course was designed as an attempt to fill this gap. Under the human resources director, Dr Nick Georgettes (appointed CEO in September 1984), a one-week seminar was developed specifically for the 1,400 BA managers, entitled ‘Managing People First’ (MPF). Its specific aim was to implement the philosophy of ‘emotional labour’ by changing the historical impersonal culture into a culture which reinforced ‘the business of caring and trust’. This type of approach was radically different from the ‘cold, but fair’ personnel philosophy in the past. Although MPF had apparently the support of the CEO (as he attended 80 per cent of the meetings), senior line managers were not at all involved in its implementation. Besides, it appears also that the board of directors did not support this initiative. It seemed that the HR department was responsible for the programme and, as a consequence, was perceived as imposing a strategy to change management style. MPF was perceived by managers as disassociated from the changes occurring in other areas of the organization. For example, MPF emphasized ‘trust’ as an important new corporate value. However, as the philosophy of job security had been abolished, the issue of ‘trust’ became unclear for most managers:

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People now can lose jobs if something goes wrong. We don’t have security any more. Perhaps we are here only for today. Trust is based on security. There were contradictions in the messages managers were receiving during this transitional phase of the organization: The message of MPF was that it was important to have a ‘warm’ organization. However, managers interviewed felt the workplace environment was ‘warmer’ before this process of culture change. This contradictory situation might reflect a ‘clash’ in values between different layers in the organization. Some people saw an inherent conflict between the values being promulgated by MPF and the reality of the management style in the workplace. They concluded that there is something more important than training to change managerial behaviour; top managers have to ‘model’ the behaviour they want from staff (Bruce and Moult 1988). Managerial behaviour change implies first a modification in the ‘role models’. This is reinforced by another manager’s account: There is not a lot of point in taking water out of a muddy pool and purifying it, if all you are going to do is pour it back in the pool. Another initiative coming from the human resources department was providing managers with MBA courses. Additionally, managers were moved around the organization in order to be exposed to different areas and, therefore, to widen their knowledge of the organization. Some other training needs were identified during the process of change: The problem is, of course to be a successful businessman; you have to have some numerical ability. There are few people with this knowledge in the organization. Everybody is interested in talking, meetings, putting their views on how the culture should change. People need to be trained to read the numbers properly. The information comes from the databases and people do not know how to interpret them, how to analyse the data in order to be able to highlight what is most important to be focused on. The IT area has changed significantly its approach:

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We are now more open to developing ourselves. For example, we are having a series of seminars on information technology which help us not only to talk with managers from other areas but also to discover how other companies and industries are doing regarding specific issues in information technology. Although many managers were trying to select new people utilizing the new criteria (‘management skills’), some of them preferred doing it in an oldfashioned way, promoting and selecting people who were good technicians. The following two quotations emphasize the conflict between old and new values in the selection and promotion process: ‘It is a disaster because if you choose a technician to be a manager, he dies like a plant if you don’t water it.’ Managers were still being promoted under the old criteria. They were not coping well in this change process. They ignored the signals around them; they kept doing what they did in the past: I am disappointed by how much recruitment has been biased by ‘people knowing people’. The old boy network to a certain degree still works very strongly. It is probably because we do not have any faith in any other systems to identify potential at the moment. I do not think consequently, that we are getting appropriate people for jobs. Many good people do not get the chance for jobs. They should get a chance. But just because they are unknown, more attention should be given to this issue in order to avoid the usual mistakes we make. In marketing areas, the criteria for choosing managers had changed from technical to management skills and abilities. They looked for people who were able to implement change and had the flexibility to work in different areas: We select people based on their personalities and managerial abilities rather than their experience because the world is changing so fast for us; experience is not necessarily an advantage. Because you could have been in companies where they use mindsets which are no longer relevant. Experience is only valuable to help you to do things in the future. If the future is very different from the past, then, the experience is not valid at all. We prefer people with less experience than those carrying a ‘big bag’.

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Although BA had introduced, as a corporate initiative, a very sophisticated method for management appraisal, it had not worked as expected; each department appraised its people in a different way. Performance-related payment was introduced. Some areas, however, kept rewarding managers according to the old values. For example, they were still rewarding people based on their technical knowledge, instead of on their leadership skills. The metaphor of BA culture as a personality as seen by managers interviewed:

The ‘Old’ BA Personality An ageing colonel, cold, introverted, I can see a picture of an old colonel sitting in his chair with his stick and not moving. Very pudding-like, very stuck in the mud, perhaps lethargic, apathetic in terms of how it was seen by the outside world. Very slow, looking at details, conservative, not imaginative, never looking for new procedures, never asking staff for new work methods. Completely formal, boring. It was stuffy, it was slow, like a bear, moving about slowly, ponderously, it was impersonal, there were a lot of rituals and things that you could not do. Much more awareness of status in the organization.

The ‘New’ BA Personality We are inconsistent. You cannot go to one part of the organization and know the whole. It all depends on where you are. It is still quite formal. There is a formality and informality. It is structured and not structured. It is everything old-fashioned and modern. Again, it depends on where you are in the company. For IT and sales managers, BA’s personality is much more dynamic than it was before: Fast moving, flexible. A sparkling personality, high profile, energetic.

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A person who welcomes challenges, looking for new opportunities. This new person has a more positive approach to the working environment we are in today. Yesterday we were very negative. Relatively very fast moving (not enough for the real world), more business oriented than before. Managers from more technical areas do not feel that BA’s personality had changed as was expected. One manager reported that the only noticeable change was: ‘We used to call people by surnames. Today we use their first names in all our internal documents. That is all I can tell you about changes in BA’s personality.’

Summary A critical analysis of the BA culture-change process suggests that the organization culture did not transform itself according to top management expectations. During that transformation, BA modified some personnel practices, and some transformations in the organization structure were also achieved. Managers reported a slow process of clear change in appraisal systems. Perhaps, communication and involvement (important steps in the integrative model for culture change – see Chapter 5) were difficult to achieve due to the strong traditional BA culture. In its process of organic growth, BA has moved away from its traditional culture. However, due to the strong organization subcultures it seemed that there was a mix of old and new values in the prevailing corporate culture in 1989.

BA Today: Looking Forward It is clear that today (2010) there is still a gulf between management and employees at BA and perhaps this is reflected in the recent strikes. BA culture is still strong on the safety-technical bias and that represents a BA competitive advantage. BA is currently in the process of creating a business collaboration – strategic alliance – with Iberia. The collaboration represents a possibility for organizational learning, synergies and growth process through diversification. If successful, the analysts believe that the alliance will make the combined firm

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the third biggest airline in Europe after Air France–KLM and Lufthansa. Both airlines would retain their current brands and heritage while achieving the expected synergies as a combined force.

References Bruce, M. (1987). Managing People First: Bringing the Service Concept to British Airways. Industrial and Commercial Training, March/April, 21–6. Bruce, M. and Moult, G. (1988). Moving into the Mainstream. Management Education and Development, vol. 19, no. 3, 187–200. Young, D. (1989). Putting Customers First. Unpublished paper, David Young Consultancy Services.

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British Nuclear Fuels Story

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This chapter describes and explains the process of organizational transformation experienced by British Nuclear Fuels Ltd (BNFL) during the late 1980s. BNFL went through a major transformation in management values and practices to survive in the new business environment characterized by government deregulation and fiercer global market competition in the energy sector.

Why BNFL? BNFL, during the period of this investigation, was a state-run enterprise. Since its creation, and up to 1971, BNFL was financially and politically supported by the government. As a result of government policy in 1986, the company was a candidate for privatization. However, as stated by the chairman, Christopher Harding: ‘Quite a few problems have to be resolved first, mainly; we need a change of culture.’

A Briefing on BNFL BNFL is the most experienced nuclear fuel company in the world, having supplied nuclear fuel-cycle services in the UK and overseas for over 50 years. The company supplies the fuel for the UK’s nuclear power programme which produces over a fifth of the country’s electricity. In addition, a substantial export business has been developed with nuclear power plant operators in western Europe, Japan and North America. In 1986, BNFL employed over 15,000 people. BNFL’s plants are situated in north-west England and southern Scotland. Nuclear fuel and fuel-products are manufactured at Springfields near Preston, uranium enrichment by centrifuge process is carried out at Capenhurst

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near Chester, and reprocessing and waste management services are based at Sellafield in west Cumbria. The company’s headquarters and engineering design facilities are at Risley, near Warrington. BNFL also owns and operates two nuclear power stations at Calder Hall on the Sellafield site and at Chapel Cross in southern Scotland.

Sellafield Historical Culture: 1971 to 1984 BNFL’s culture had been inherited from the Civil Service. The historical values and assumptions reinforced the concept of a ‘benevolent’ organization where the core mission was not to be profitable. Rather, the core mission in the past was to offer jobs to the community and be technically perfect as a scientific type of firm. Managers perceived Sellafield in the past to be a very pleasant working place. There was a lack of competitiveness and an enjoyable working environment. Managers’ perception at Sellafield was that of an organization which was not willing to change or create new working methods. Traditional in management practices, the company was considered as ‘old fashioned’ in its way of managing people, tasks and money. According to managers, this ‘slow’ pace of improving management practices is linked to the type of industry BNFL is in. That is, because of the long life of Sellafield’s waste products, it is difficult to respond rapidly to change. From the conception of a plant to the start of the operation takes at least 20 years, hence, the process of change is slow; as someone said, ‘It would be easier to respond to change if we made dish washers.’ Although described as a ‘static’ organization with regards to new management practices, Sellafield was considered very dynamic in developing new technologies directly linked to the quality of their products or services. BNFL, like the whole nuclear industry, is characterized by almost ‘continuous small-step technical improvement’. Thus, the concern of BNFL managers in the past was technical excellence: ‘let’s do it right’. Every time the managers saw some small thing to improve, the attitude was ‘let’s change it’ – either the product or the service. It did not matter too much what the cost of the change would be. Management agreed that Sellafield had a reputation for a high level of achievement in the service. Sellafield was like an ‘old fashioned doctor’, ‘an expert’, an ‘old-fashioned specialist’, technically competent but holding oldfashioned ideas. BNFL was also seen as a ‘secretive organization’.

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The culture of the Civil Service is not to tell people what they need to know. Sellafield was like a mysterious person holding a lot of secrets: ‘Everybody in this organization knows what we mean by the “need to know philosophy”.’ The organization was considered benevolent and tolerant as regards spending money and costs. For example, in the past, travelling expenses were not tightly controlled. If a manager had to undertake a work trip, taxi expenses were not controlled as they are today. Sellafield was very bureaucratic. The ability to write was an important requirement of management skills as it was reinforced by the historical appraisal system. Managers in Sellafield and the rest of BNFL used to have a ‘job for life’. They felt secure and relaxed; they were under no pressure concerning overall organizational results. Employees at Sellafield used to work from 8.30 a.m. to 4.00 p.m. and also had long coffee breaks. This attitude reflected the very relaxed managerial attitude of the past: ‘We were not committed to the company’s results.’ Managers, in the past, lived under a non-innovative, low-risk system: ‘all had to be safe at all costs’. BNFL was viewed as a low-risk system: Although security was not essential in 90 per cent of what we did, the philosophy of safety, stemming from the inherent dangers of the nuclear industry, seemed to affect management attitudes in all other situations. Following the belief in a high level of security, managers were also discouraged from new ideas in day-to-day activities. To fit the old corporate culture, in the past, managers were required to ‘obey’ the system. However, some managers, in isolation, eventually acted in an innovative way. They would be supported only if their ideas were successful: You are OK if you get success. But, if you get one or two failures, you get knocked down. People will remember your failure and I hope this attitude is starting to change. Line managers on plants were considered to have responsibility but, very often, no authority. For example:

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I was allowed a lot of freedom in one way in terms of the technical part of my job, but I was not allowed freedom in terms of the way I manage my staff. It was regimented … it was all negotiated elsewhere … I didn’t consider myself a manager really. The delegation process was poor. As a manager says: You had to report back all the time to your superiors, as opposed to management at lower levels. Everybody wants to check. They are overconscious, those who are working for them. There was a very bureaucratic management attitude: ‘We tended to follow the rules’. For example, if the finance department did not allow the manager freedom of choice, then he would find a way to obey the system. It was an inflexible management system ‘like a brick wall’. A senior executive in Sellafield has described the past managerial attitude as like that of a ‘policeman’. It was important just to make sure that the rules were obeyed. In addition, communications between senior managers and the rest of the organization were very poor: ‘They (senior managers) kept sending notes through the post instead of talking with managers … I never met the senior manager!’, a middle manager said. There follows the descriptions of the historical personality of Sellafield as seen by the interviewees: As a person, Sellafield was very slow. This person, in the past, reminded me of an elephant. He didn’t want to move or change, not a challenging person, he would not improve, innovate. We were not a good proven system in management terms. It is like a piece of machinery. A big wheel rolling along. It is like a lumbering bureaucratic giant. Old, lethargic, not a dynamic organization. A very academic person: a perfectionist, overconscientious, not very flexible. A dogmatic person who enjoys living under many rules.

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Among the very rich and expressive statements that managers came out with during the interviews, the one below most represents the historical organizational mission: Sellafield, in the past, looked like a social rugby team which goes out and tries to win but, basically, wanted to have a good game. Everybody tried hard, but at the end of the day it did not matter very much as long as you had had a good game. It was clear that personnel practices in the past reflected the historical culture of BNFL. The personnel department has always kept a very strong administrative role: Personnel practices in the civil service are like the military system. Nothing was negotiable; there was no flexibility in personnel procedures at all. For example, people still take leave; they do not go on holiday. There was no negotiation between top management and the other levels within the organization. The personnel department’s main role, in the past, was the recruitment and selection of graduates. ‘I don’t think personnel officers choose people for the company, except for the graduates.’ They selected graduates from public schools and Oxford and Cambridge. The graduates were usually chosen by academic qualification. The best were briefly interviewed and assessed by ‘feeling’, intuition or by identifying ‘clones’, people with similar backgrounds and outlook. The criteria for choosing the graduates (in fact, the future managers) were based solely on technical competence and academic qualifications. Sellafield had a very low employee turnover. It tended to prepare its own managers by providing young graduates with the appropriate on-thejob technical training. As a consequence, today such managers lack business experience and they ‘had never been exposed to real managerial roles’. Managers were promoted to replace people immediately above them, rarely to replace managers in other places or departments. They were promoted largely according to seniority. The ultimate questions used to be ‘How old are you? How long have you been doing your job?’ It was a very subjective assessment, very personal, not linked to performance. The promotion decision depended on the senior managers and on what were their criteria; there were no overall

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company criteria. The profile of managers located in different departments reflected the senior managers’ values in that department. Every post and layer of management was filled and managers would argue that the importance of the job could be seen by the number of employees located below them. In fact, managers in that old structure had small jobs. According to some, this system was faulty because even if there was no vacancy but a person was considered ready for promotion, they would be promoted. Consequently ‘we created a very fat organization, with too many people’. A manager who ‘got on’ at Sellafield had the following characteristics: technically competent, tolerant with people, personable (a good chap), experienced in the area, and capable of writing reports. It is interesting to note that different sub-systems in ‘historical’ managerial careers were reinforcing a bureaucratic culture: If you did your job efficiently you did not get noticed. However, if you used to write lots of reports, at least you would become recognized by senior managers. Certainly, if you did catch the right people’s attention (senior managers) you were bound to be promoted. As regards the profile of a deviant manager in the old days, it was clear that creativity was regarded as negative. Some managers described the deviant manager as follows: People who had opinions which contradicted their bosses, someone who sticks his neck out, or is adventurous in terms of management style, that is, let’s try this, let’s try that. That attitude tended to represent a block to their promotion. Management development was considered poor in the past. Graduates were given a structured, two-year on-the-job training. The objectives of this training were mainly to update them in technical aspects of the industry. After these two years, however, they would be left on their own. They would be stuck in the structure, working for many years at the same job, and ‘decades on the same site’. Thus, the usual thought in the past was: ‘I have been working for many years in this job, on this site; I want to continue here.’ Consequently, the senior management in the company at the time the research was conducted encountered difficulties in identifying managers who were prepared either to replace people who were retiring or to fill new jobs

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as the organization was expanding. For example, it was very common to find managers at grade 12 (high in the hierarchy) who had very narrow experience in the company. They had been working for 10–12 years on the same site, doing the same job. They knew everything about their plant but their knowledge about the organization was very limited. Moreover, these people had locked the information within themselves rather than in the system. Thus, there was a belief that ‘if we moved these people to other departments, their original sectors would collapse’. As a reflection of a secretive historical culture (as explained earlier), managers in Sellafield were secretive about careers, jobs and money. The payment system was purely a function of the length of time managers had worked for the organization. ‘If you did a good or a bad job you would still get the same pay.’ The structure was viewed as very rigid; managers were not allowed to negotiate salaries with their employees. This idea is illustrated by a manager’s accountant: ‘If I wanted to give more money to someone who did a particularly good job, I had no authority for that.’ As a reflection of the ‘non-achieving’ past culture, the ‘historical’ appraisal was not connected with performance. Quoting a senior manager: ‘Managers would be paid whether or not they were committed and contributed at a high or low level to the results of the company.’ Historically, the appraisal system was not regarded as important. It was just one more piece of paper to be filled in, like a school report. The manager had to comment on different aspects of an employee’s behaviour, such as how he got on with colleagues and superiors (reflecting a very conforming type of expected managerial behaviour), and on his report-writing ability (reflecting the bureaucratic culture). According to managers, the appraisal system was subjective, and reminded them of a ‘clerical’ system. In this process, managers were very reluctant to make any negative or derogatory comments which could risk their relationship with their staff: ‘It was easier to keep the staff happy in this way’. It seems that the appraisal system in the past was reinforcing a benevolent and bureaucratic culture.

The Need for a Culture Change in BNFL According to the human resources director (Risley HQ), during the few years prior to the research for this book, the organization had been going through a major process of change, mainly as a result of a more competitive international

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market and the possibility of privatization. Over the previous decades, the need for major change had gradually emerged, primarily with commercial environment factors. As said by a senior manager, ‘BNFL is becoming increasingly commercial’. As senior managers stated, the company’s mission had changed:

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To ensure that nuclear-generated electricity in the UK was competitive with other sources of electricity generation.

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To become internationally competitive, because its main customer, CEGB, was starting to buy energy from abroad.

The years 1971 to 1984 were a very stagnant period for organizational change at BNFL – characterized by inertia. This can be illustrated by the HR director’s account: We had a main captive customer, CEGB … Most of our contracts were customer based ‘costs plus profits’. The actual cost to run the company plus a ‘mark up’ for profits determined the selling price of the product. In such a system, there were no incentives for the organization to reduce its costs let alone to become more efficient. Therefore, while BNFL was a monopoly supplier to the UK generating boards, prices were agreed at a ‘cost plus basis’. In the past, there had been no external pressure forcing the company to innovate, but now that had changed. To quote a senior manager: If the company has to join a scramble for orders, it must be able to quote fixed competitive prices comparable with those obtainable elsewhere in the world, and look to its operations to ensure a reasonable profit. BNFL’s services were comparatively expensive and its customers were reluctant to pay these rates. If the company did not become more efficient, it would lose its customers to France or other major competitors.

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The Transitional Phase of BNFL Culture Change: From the ‘Old’ to the ‘New’ BNFL was passing through a phase of culture change. As such, there was a conflict situation of two cultures: an ‘old’ and a ‘new’ Sellafield was described by managers as ‘schizophrenic’: We can perceive two cultures in one. Some people fight not to change. Others are fighting to change, that is, a number of people are trying to push the organization off the civil service course into a more competitive type of organization, others are blocking this process. In the past, BNFL offered ‘a job for life’; hence, the average age of a manager today is relatively high. Many of them are now near retirement; these people tend to resist change. This situation was well explained by a manager who has been working for BNFL for over 40 years: If you are a senior manager and have just four or five years to work before retirement, you really don’t care about implementing changes. You just sit at your desk and wait for your pension. Whereas if you are twenty years younger, you are still keen on getting promoted. Consequently, while the older managers complained about the high speed of organizational change, most of the young managers seemed to be frustrated with the slow rate of change: The company is moving very quickly, according to some old managers. The young ones are more impatient, for them we are moving very slowly. According to the young managers, the majority of people in BNFL used to work in a very ‘slow way’: If you push hard, they feel very uncomfortable within the new rhythm … we are much more under stress, we have to justify our contribution … we have got to be committed.

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BNFL New Culture: 1984 to 1989 Sellafield had changed from its emphasis on research and development, and on technological improvement, to being a business enterprise. The main preoccupation became how to run the organization. Most of the historical values described in the previous section had become dysfunctional as the organization faced a highly-competitive business environment. In 1989, BNFL was struggling to replace some of the ‘Civil Service’ practices. The new top management were aware that developing a new culture to reinforce competitiveness was a necessary task for organizational survival, as illustrated by one manager: BNFL’s Civil Service origins have left their mark, and we are having to expunge them in order that the organization may prosper in a wholly commercial environment. Senior managers perceived more clearly the changes in corporate values, beliefs and, consequently, management attitudes. They are, in fact, agents for change, and thus more sensitive to change. Middle managers, however, have difficulty in identifying major changes in day-to-day organizational life. According to them, ‘the company was trying to become different’, but ‘there is a long way to go to change our culture’; ‘we are very far from being what we need to be’. Managers were gradually developing a much clearer idea of what their group, section or department was expected to achieve to further the business plan. Decisions were now made based on business objectives. ‘We have to make our decisions based on balance: safety, R&D and commercial issues.’ The style of senior management’s leadership had changed significantly. They were trying to innovate and to find new ways to do their jobs. They were more aware of their own role as businessmen: We are becoming less bureaucratic. Today, if the system does not work, we ask why? We ask: how could we bend the rules to suit the company needs? What can we do in order to make sure the company gets value for money in any decision …? Now we need fewer rules … fewer policies … broad policies are enough for senior managers to make business decisions.

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Attention to subcultures is an important issue. Nevertheless, some core managerial profiles were the same for all management jobs: Flexibility to work in a changeable environment, capacity to understand the historical culture and ability to gradually implement changes in the direction of a desired or ‘appropriate’ culture. Top management were aware that a full understanding of the organization’s own stages of development and its own ingrained values and beliefs, and also its subcultures (on different sites) was necessary for successful managerial performance.

The New Managerial Careers Systems In the past, decisions on managerial careers were localized, and reflected various senior managers’ criteria. Now, top management realized the need to create a corporate strategy for managerial career planning: We need a very strong direction from Headquarters. We need a corporate strategy for career systems in order to assure the appropriate pattern of management behaviour and to control the quality of our managers’ selection. We should not rely on the system today to say who has potential or not, because it is very personal. Top management involved in organizational change believe that to achieve adequate culture change, a lot of the ‘old’ personnel systems need to be replaced. Some of the old personnel practices have already gone. But there is still a long way to go for organizational survival. The philosophy of prevailing career systems was well expressed by a senior line manager at Sellafield: ‘To win the rugby game, we need to choose the players carefully and place them in strategic positions.’ It is also well expressed by an HR top executive in BNFL at Risley (HQ): We need to learn how to identify people’s skills better, we need to be more skilful in managing people, and we need to be wonderful leaders. According to this senior executive, to become ‘wonderful leaders’ implies a radical change in management attitudes. Managers’ attitudes will be changed:

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… by rotating them (placing managers in different areas for a preestablished period of time); by setting an example (ensuring that the top management attitudes are appropriate); by rewarding by results (implementing new appraisal, promotion and rewards systems). For the last few years, there had been a tendency to recruit managers from outside the organization. Top management were gradually recognizing that people from related industries can bring essential skills to the organization. Sellafield is no longer selecting people on technical expertise alone. They are looking for the following in candidates: communication skills, leadership qualities (leading to a solution via group decision-making), problem-solving, adaptability and how they react to change. To reach the top, a manager needs to understand three to five major areas in the company. There are, therefore, more cross-site placements. To ‘get on’ today, managers need to understand the financial implications of each decision and also the implications of any decision in other areas. Managers agree that the old rules for placing people in different jobs were too rigid. Certain jobs were regarded as suitable only for people with first- or second-class degrees. In many cases, however, they realized that people with lower educational achievements would be better at some jobs than more highly qualified graduates. The company was making efforts to introduce more competition among managers. There was less job security; people no longer felt they had a ‘job for life’. The modifications in senior management selection and promotion represented the priority action towards the culture-change process in BNFL. Historically, managers were assessed by their technical skills. Today, a general expertise is required from managers. While in the past, the length of experience was an important criterion for senior managers’ promotion, today, the individual’s attitudes are more relevant. Managers who are willing to implement new ideas are being promoted to senior positions as the criteria for selecting/promoting managers had changed. In November 1988, top executives at the Risley HQ, together with the career development department, developed a consensus regarding the profile of a future BNFL senior manager. A new career development system had been implemented on an experimental corporate basis. This system tried to identify future managers to meet the requirements of the different sites. At the assessment centres, senior personnel managers, external consultants, senior line managers and directors act as referees to evaluate the manager’s potential. BNFL’s criteria for promoting senior managers in 1988 seemed to differ significantly from those described in the historical system. The company is now looking for people who are able ‘to create the rules instead of following them’. A recently promoted

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senior manager said: ‘I was considered a rebel some years ago, a deviant. Now, I am a senior manager.’ More dynamic and creative people are now being promoted to senior posts. One example of that was the appointment of the new management director for Sellafield who had been working for BNFL for 20 years in various positions. In 1987, he was promoted by the new chairman. The new general manager (GM) for Sellafield, a ‘charismatic’ and ‘participative’ leader, and his predecessor, were considered as ‘very quiet and reserved’ managers. It was recognized by management that expected managerial behaviour was changing. They should address the problems themselves, that is, they ought to be able to say: ‘this is my problem’, instead of avoiding it, using the defence mechanism which, according to managers, was the typical ‘historical’ managerial behaviour. The profile of a good manager is summarized in the following manager’s words: The key thing is the ability to live with change. For this, a manager ought to be self-confident and able to propose different ideas. His ability to cope with change and work in a fluid situation is extremely relevant. Great emphasis is given to communication skills because, in a changing situation, the need to communicate is greater than in a static situation when things do not change over years and years. ‘If you stay always doing the same job, you do not need to explain anything to anybody.’ Emphasis is given to commercial awareness, enthusiasm (in order to facilitate the process of changing habits in people), initiative, ability to get things done, accepting responsibility and delegating responsibility. A deficient manager today is described by managers as a ‘contemplative person, “slavish”, sticking to old ideas.’ According to top managers involved in the culture-change process, the appraisal system is a critical part of managerial career systems because it represents an effective vehicle to communicate the new organizational values. However, as expected with culture change, this process has been implemented gradually in BNFL. New appraisal and reward systems have been implemented only at senior levels. Contrary to the secretive nature of ‘historical’ managerial behaviour, the communications over an individual’s performance have been

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more effective over the last few years. There is more openness. However, ‘this is only a small move’, says a manager. There is a great demand for performance, for results and there is pressure towards better managerial achievement. It implies a demand for greater output in each area. The method the organization uses to judge performance is still purely number-based: ‘same number of people, doing more work’. This seems to contrast with the historical reward system in which managers’ salaries were linked to the number of staff for which they were responsible. Today, it is the contrary. For example, a senior manager explained, ‘I manage fewer people today than before my promotion to senior management’. As observed by senior managers, these new criteria for appraisal and reward based upon performance have not yet been applied to middle managers and to the lower levels. The existing appraisal and reward system for these levels is still reinforcing the old organizational values. However, for senior managers it reinforces new organizational values. While the personality of Sellafield yesterday was perceived as ‘relaxing’, it is now seen as ‘restless’. Ten years ago, this organization was perceived as ‘static’ and technically competent. Today, the corporate image is different. Sellafield is perceived by employees as more ‘dynamic’, with ‘lots of drive and determination’. Contrary to the ‘policemen’ of yesterday, Sellafield’s senior managers today see themselves as ‘citizens’. One of them tried to explain this metaphor: We try to understand the rules of the system instead of just following them, because, at the end of the day, to win the rugby match is what now matters in Sellafield. BNFL’s process of change appears to be consistent (across functions) and gradual and to employ a participatory style of management to lead it. In the process of implementing a more participatory management style, managers in Sellafield decided to reshape the organization’s structure. This was considered a tool to be used by BNFL senior managers in order to change their culture: ‘we are nearer the employees than before’. Thus, a two-way communication would be facilitated. According to top management, the new organizational structure aims to cut down the number of levels in the hierarchical organization.

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Summary This chapter reveals how BNFL went through the process of replacing its historical bureaucratic behaviour in order to survive within the new economic environment. The role of human resources practices in changing culture is analysed. The BNFL success story brings about empirical evidence of how a large British organization went through the six steps described in the Integrative Model of Culture Change. This is a success story about how changes in management behaviour and culture towards entrepreneurship were perceived, analysed and documented.

BNFL Today: Looking Forward British Nuclear Fuels Limited is today a private company owned by the UK Government through the Department for Business Innovation and Skills. BNFL has continued to be a highly influential and respected nuclear company with operations across the UK and overseas. In December 2003, the BNFL board agreed a new strategy for the company consistent with the UK Government’s objectives for the creation of a competitive market place for nuclear decommissioning and clean-up in the UK.

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Jaguar Cars Story

8

This chapter analyses both external market pressures and, more importantly, the internal factors that contributed to Jaguar Cars’ re-creation of a corporate entrepreneurial culture. Almost 100 interesting years elapsed between the creation of this fascinating English car manufacturer and its sale to Tata, an Indian conglomerate, in 2010.

History: 1922 to 1984 Sir William Lyons established the company in 1922. In 1935, Jaguar was floated as a public firm. During the late 1950s and early 1960s, a number of small independent car-manufacturing companies emerged. Internal competition took place in the UK in the 1960s, when all car companies, including Jaguar, struggled and many failed. In the mid 1960s, Jaguar was merged with other car companies and the government took over. Production levels rose between 1970 and 1974 despite considerable management and structural changes taking place, for example, the retirement of Sir William Lyons in 1972 and the gradual merger of Jaguar with British Leyland Motor Company (BLMC). From 1972 to 1980, Jaguar was managed by a succession of different people and almost every year there was a different person in charge. In 1979, there were manufacturing problems. Production fell due to serious difficulties with the quality and reliability of the cars. The continuation of the production shortfall in 1980, together with a poor United Kingdom sales performance, adverse exchange rates and a strike over job grading, gave rise to substantial losses. In April 1980, Sir John Egan was appointed chairman and chief executive of Jaguar with the task of improving the Jaguar business and continuing the process of re-establishing it as a separately identifiable operation. During 1980, the company passed through a critical period. Forty per cent of employees became redundant in order to make the organization viable. ‘Mediocre’ managers were

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replaced and after the cutbacks, morale-building campaigns were initiated for the remaining employees. By the end of 1982, Jaguar’s reputation for setting high standards of quality and reliability was well on the way to being re-established, and demand increased, particularly in the United States. Increased demand was matched by increased production rates and a favourable exchange rate generated a substantially better performance. In August 1984, the company became private again. Since then, it has expanded to compete with its main competitors: BMW, Mercedes and Porsche. During 1986, Jaguar recruited 1,385 new employees to support the key expansion areas of the company. ‘It was a successful year for the company’, said Sir John Egan in the 1987 Annual Report.

Jaguar Historical Culture: Founder’s and Leaders’ Values Jaguar’s founder, Sir William Lyons, is remembered as an ‘ambitious man’ from the earliest days of the enterprise. He combined drive and energy with a shrewd business brain. He was an ‘autocratic boss’ who rarely bothered with board meetings and was famous for calling everyone by their surname. His greatest quality was his ‘eye for style’. He understood the importance of style and all his products had it. The chairman at the time of this analysis – Sir John Eagan – was perceived by the managers as holding similar values to those of the founder. Jaguar’s management perceived their culture as a clear reflection of their ‘charismatic current leader’. The ‘personality’ of the organization coincided with the ‘personality’ of the chairman. Both were described as being full of enthusiasm, energy and drive, active and prepared to accept any challenge. These values were reflected in the management of careers. Hence, the organization tended to select and promote dynamic, enthusiastic and energetic managers.

Jaguar Cars’ Culture-Change Programme Jaguar’s top executives involved in organizational change believed that the starting point for any necessary cultural modifications was to gain insight into the existing culture. In this particular case, a manager described it as,

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‘a strong feeling of belonging, a desire to succeed and close identification with the product’. These were some of the shared values of most Jaguar employees from its creation in 1922 until 1989. When interviews were conducted for this study, Jaguar’s prevailing culture was revealed as very traditional. For example, as they well described, the managers tended to use traditional methods of work – resisting both new technologies and also innovative personnel management practices. They described the human resources department as having a ‘macho type of philosophy’: You are supposed to work many hours and be seen to be very active. A deviant manager is the one who does not appear to be ‘a hard worker’. Some managers still believe that only money motivates people to work. For most of the managers the social environment was seen as being like a ‘family’. As one manager remarked: It is informal, and we all feel part of the company as members of the family. The recruitment policies in the past used to encourage families of employees to apply for jobs in the company. Jaguar was considered by managers interviewed to be typical of many engineering organizations. They hired a high proportion of engineers to fill available management posts in different areas (production, purchase, finance, human resources). These engineers tended to be highly skilled in numerical and technical disciplines. However, the top executives felt that these graduates lacked the commercial skills needed to deal with an increasingly competitive external environment. One of them said: ‘Our culture is characterized by commercial naivety.’ Many saw themselves as individualists. Managers were promoted if they were good in their own jobs rather than if they worked in cooperation with other areas. There was a tendency for different departments to work in isolation. A car company, as perceived by the senior strategic manager, requires a teamwork attitude. Although the style of management varied in different sub-sectors of the organization, a particular trait seemed to predominate in these different subcultures: the authoritarian. Managers were expected to be ‘hard but fair’. The organization expected a good employee to do what he was told. As stated by a manager: ‘It is necessary to be very persistent to get new ideas implemented.’

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It might be a reflection of the transitional cultural phase that, by 1989, Jaguar was viewed as having a ‘split personality’. Externally, it was identified with the product: there existed a general image of a high-profile, dynamic, energetic, extrovert, sophisticated and luxurious type of organization. But internally, the image was different. It was that of a young organization, trying to find its own way; it was like ‘an adolescent’, indecisive about its future.

Jaguar’s Appropriate and Desired Culture Jaguar had reached a stage where it found that some elements of its culture had become dysfunctional, hence the organization was exploring the possibility of evaluating and changing its culture to make it fit with the new business objectives. Essential values were identified and preserved: loyalty, close identification with the product and a strong desire to succeed. There were, however, some vital elements of the culture which were not compatible with the new objectives. Quoting a manager interviewed: Tradition (rather than innovation), rigid attitudes, one-way communication, emphasis on results (rather than on the process) and a reactive rather than an interactive attitude in communications with peers. In order to promote the desired organizational changes, top management had decided to implement a companywide strategy: ‘TQM’ or Total Quality Management’. However, it did not achieve the expected results, perhaps due to the prevailing corporate culture. As perceived by top executives in Jaguar, people would manage in the future without fear of making mistakes. They would try out new ways of improving the job. They would be able to work in teams and cooperate within the organization. They would be more open about constant changes. They would listen more to the employees. They would be more flexible in their attitudes. They would show more ability to revise plans, and consider alternatives which would allow greater adaptability to cope with new work situations.

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Most of the managers interviewed thought that the type of managerial attitude which was appropriate when the company was public became inappropriate due to new environmental demands following privatization. Different eras demand different skills and abilities. Career management in Jaguar clearly reflected the transitional phase the company was going through in its culture-change process: the conflict of ‘old’ and ‘new’ values. Historically, career planning in Jaguar was based on specialists. Careers were vertically developed. No cross-department or rotating jobs were encouraged. However, as perceived by top executives, to fit the desired new culture, a manager needed to be a generalist, hence, the new managementdevelopment programme’s main objective was to give the managers an opportunity to rotate and work in different departments. By submitting themselves to this development programme, managers could acquire a broader view of their own business. It was expected that this programme would lead the executives to a less individualistic approach when managing their own areas. Additionally, managers were encouraged to undertake an MBA parttime course The career development programme, therefore, was intended to reinforce the new culture by giving a positive demonstration of what is expected from people’s attitudes. Modifications of criteria for selecting and promoting managers had been made at a much slower rate than changes in management training and development. This resistance to modifying certain criteria was explained by the managers as a consequence of the tradition of the firm. They had ‘inherited’ this type of system. In the preparation for privatization (1983/1984), Jaguar brought into the organization people with the necessary experience and qualifications – ‘expertise’ – to undertake specific managerial posts which were created as a consequence of privatization. However, they overlooked the candidate’s values, for example, the capacity for teamwork and openness to new ideas and innovation. In the past, the main criteria used in decisions about hiring or promoting managers were the candidate’s high level of IQ and their technical qualifications, together with the number of years of experience in the motor-car industry. The type of candidate considered right for Jaguar in the past also had to be energetic, dynamic and active. These characteristics were a clear reflection of the prevailing corporate culture, not the desired new culture. Perhaps, top executives were unaware that they were, in fact, reinforcing old culture instead of creating a new culture within Jaguar.

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It is interesting to note that the process of assessing the potential of managers has become more sophisticated, but the system in itself still reinforced the ‘old values’. Hence, the assessment centre aimed to evaluate the managers’ attitudes and behaviour through psychological tests, role-playing and interviews. This in-house programme consisted of observing the manager in different situations. Although it was a new programme, each individual final report was based on the analysis of certain characteristics which were considered relevant for the ‘old culture’ (drive, energy, dynamism, influence). The leadership style required for the managers to fit the new culture was participative, explained the top managers interviewed; however, this final report seemed to look for managers who still used their own charismatic and powerful influence to get the work done. This programme, according to the managers’ accounts, had not yet been modified to convey the new values and attitudes. There was, therefore, a split situation: top executives urged a change in management attitudes in order to cope with the current fluid situation that the organization faced. More proactive and interactive teamwork was required: managers with more open attitudes, a less traditional style of management, executives who could listen to the employees, instead of top-down management expecting that subordinates would blindly obey them. Nevertheless, new personnel procedures which foster these new values had not yet been fully implemented.

Summary: Critical Analysis of Culture Change at Jaguar Cars Jaguar’s top management were concerned about how to change the organization’s culture in order to adapt to the new environmental constraints. Jaguar’s historical culture was appropriate when economic conditions were more favourable: better exchange rates (US$ and £ Sterling), mild market competition and financial support from the government. By 1989, however, the costs of the product were too high and the company was unable to compete successfully in the market place. The only ‘way out’ senior managers saw for the company’s survival, without a takeover, was to gradually replace some of their working values: for example, from authoritarian to a more participative style of management; from engineering-biased to commercially-oriented; from traditional to innovative. However, the group of managers interviewed, as a consensus, thought the organization’s culture was not actually in the process of change. The appropriate culture was described as the ‘desired’ one. Nevertheless, how to get from here to there was the problem at Jaguar at that time 20 years ago.

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Managers revealed that the top-down style of management and, consequently, the ‘role modelling’ was the key barrier in the culture-change process in Jaguar. Furthermore, the systems which communicated and reinforced management attitudes had not yet been modified according to the ‘new culture’. New managers were selected (from outside) and evaluated under ‘old’ or ‘historical’ criteria. The only sub-system which had changed was training and development. However, management training and development activities in isolation do not stimulate the necessary changes in the managerial behaviour (see the integrative model in Chapter 5). As a consequence of these internal management difficulties associated with the external pressures, Jaguar became financially non-viable and unable to compete. Jaguar was sold to Ford in 1989. In 2009, 20 years later, Ford sold Jaguar to an Indian group, Tata Motors.

Jaguar Today and Looking Forward It is clear through this story and also through current business analysis (see Gomes et al. 2007) that at the time of the Ford take-over in 1989, Jaguar did not have the critical mass to manage the firm. There was a lack of entrepreneurial behaviour/skills. The culture-change process planned by management had not succeeded in transforming its culture. Reward systems were inappropriate, as were other important internal processes such as a lack of empowerment. During the Ford ownership, perhaps a few issues were overlooked by management. Entrepreneurial synergies associated with international acquisitions are normally created through a learning process triggered by integration strategies to merge the two different entities. Benefits of an acquisition are accomplished through the entrepreneurial synergies achieved (for details see Part IV). The Indian motor group, Tata and the British Jaguar merger process is already achieving positive signs of entrepreneurial synergies. It is interesting to observe that both firms do hold complementary working values: Indians tend to behave in a collective manner and the British in a more individualistic way. The leadership style at Tata seems to differ from that both of Jaguar’s original leaders and also of the traditionally American Ford. The integration strategy employed by the Tata group in acquiring Jaguar is to recognize both the synergetic opportunities and also the need to keep the brand identity at Jaguar.

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The process of re-creating an entrepreneurial culture has been re-established and this represents an optimistic prognosis for Jaguar.

References Gomes, E., Donnelly, T., Morris, D. and Collins, C. (2007). Improving Merger Process and Management Skills Over Time: A Comparison between the Acquisition Processes of Jaguar and Land Rover by Ford. Merger, 31–57. Porter, P. (1988). Jaguar. London: Sidgwick and Jackson.



9

British Airports Authority Story Why BAA?

Contrary to the three previous UK stories, the managers of British Airports Authority (BAA) reported that its culture had been an evolutionary one. This characteristic seems to be a reflection primarily of the constant growth of the airport industry. According to managers interviewed, BAA was never a static organization. The company was seen as always having been open to change.

A Briefing on the Company BAA’s core business is the ownership and operation of airports. Through its subsidiaries at Heathrow, Gatwick, Stansted, Glasgow, Edinburgh, Southampton and Aberdeen, it handled – during the time of this analysis – 70 per cent of UK passenger traffic and 85 per cent of air cargo. Since flotation on the Stock Exchange (1987), BAA had expanded into areas complementary to the core airport business, including property development, hotels, air travel and international airport operations. In December 2009, BAA sold Gatwick airport. This was due to pressures received to create competition and to eliminate the monopoly situation that the organization had enjoyed in London.

BAA’s History BAA was created in 1966. Prior to its creation, various government departments were responsible for the operation of the UK airports. Therefore, BAA employees generally possessed a Civil Service background. In the past, managers perceived

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themselves as not ‘that strongly led by profits’, but more paternalistic, that is, ‘concentrating on the welfare of the employees’. The majority of managers interviewed had been employed by BAA for over 20 years. One of them describes her perceptions of people’s behaviour in the past as: Civil service. Gives you a whole scenario of how people behave, what they were expected to do, how much freedom, how much initiative, and how much thinking was required of them. Everything was run by rules; there was a tendency to look backwards to make sure that you were absolutely fair to everybody under all circumstances. As a reflection of the mainly Civil Service style of culture, BAA’s structure was highly centralized. Consequently, most decisions were made by the ‘heavy head office’. Managers didn’t have to make decisions about their staff. At the time of the interviews (1990), BAA employed 8,000 people in the UK, 3,600 of whom were located at Heathrow.

BAA ‘Historical’ Culture: 1966 to 1975 BAA’s core mission (contrary to Jaguar, BNFL and BA) always reflected a commercial orientation. A manager commented: ‘We aimed to give good service but also to make some profits.’ The Annual Report (1966) defined the mission of the organization thus: To be an efficient commercial enterprise dedicated to the task of providing at its airports worthy gateways to Britain. To promote a sound financial policy, while concentrating upon steadily improving service to the travelling public, the cargo shippers, the airline and all other users of its airports. (p. 3) According to managers, commercial awareness stemmed from the nature of BAA’s core business. In other words, there has always been an emphasis placed on the development of value-added services to complement the core airport business:

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Our culture grew commercial because we had always had a duty-free operation. We were providing retailing and catering opportunities. In some instances we provided the necessary investment in facilities (shops) and, in return, we retained a share of either the profits or the income. Another manager’s account reinforces this idea of a commercial culture: In the past ten years we have been aware of value for money, we never saw ourselves as a drain on resources from the government. On the contrary, we were contributing. Managers in the past believed that, as a consequence of position and status in the organization, the staff would respond to them. As one manager remarked, ‘because there was a very rigid hierarchy, it was not that important which kind of style you adopted.’ There is a consensus among managers that, historically, the company employed generalists in the majority of the key positions rather than specialist managers: I describe myself as a generalist as I had to develop a degree of knowledge about catering, commercial and public relations. I relied on my colleagues who were specialists (personnel, finance or engineering) to help me in managing other areas. It was also clear from data analysis that managers perceived the day-today working practices of the past as slower than those of the few years prior to the interviews. ‘It was better to get it 100 per cent right even if that took a long time previously. Perhaps it was not such a crime if things took a long time to get done.’ As seen by the interviewees, this type of slow response, however, had been modified over the years as a consequence both of new demands from the growing industry and of the type of people being recruited. They saw themselves as becoming gradually more open to environmental demands as a way to survive in the airport industry.

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BAA’s Prevailing Culture: 1976 to 1989 In 1976, a new managing director was appointed and gradually implemented changes in working practices. In 1985, a new CEO was appointed and introduced further changes in the organization, reshaping the organizational culture.

Pre-privatization period: 1976 to 1985 Following the appointment of a new MD in 1976, managers were encouraged to present new ideas to higher levels of the organization. A senior manager reported his views emphasizing the top management values: We were always an adventurous company. The chairman was always open to new ideas. The MD and the directors were then responsible for presenting him with new strategies to be implemented. Also, one manager emphasized another reason for the innovative and open culture: the type of industry BAA is in: We do not produce anything; we provide services, we need to be able to react to the needs of our customers – mainly the passengers and the airlines. Airlines have very significant demands which are always changing: new aircraft, bigger aircraft – noisy, with higher wings, lower wings. You have to be prepared to be flexible. And yet, because it is so expensive to run an airport, facilities must last a long time as well, so this requires being adaptable, being open to change. Data revealed that BAA was concerned about the role of communication. Jaguar’s managers tried to present a sophisticated image, BNFL’s managers were secretive and reserved, and BA’s were very formal and reserved; BAA managers, however, were welcoming, and friendly communication, trust and correspondence were the predominant tones throughout the interviews. A manager said: The company is very keen on improving staff relations, and doing a better job in terms of communications and cascading information down to staff. We do not have quality circles as such, but we try to work on that sort of basis. We try to communicate to staff at all levels. In other words, we try to keep the morale up.

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Evidence which corroborates this interpretation is seen in the way some managers described the pre-privatization decision-making process. Before 1985, there was an executive committee run by the MD, where all the directors of central functions – Finance, Engineering, Airports – sat together and made the decisions. The MD was trying to get a consensus. He listened to everybody and made the decision. It was his decision, after considering everybody’s points of view. It seems that, since 1976, BAA has been run with a management style where two-way communication has always been encouraged. However, the final decision was always left to the MD.

Privatization Period: 1985 to 1989 It was clearly a decision taken by the chairman that the company would have a CEO who would introduce a financial mindset which would be welcomed by the City. In the same way, when they were a nationalized industry, the chairman put a lot of effort into establishing a proper relationship with the government. ‘He was very conscious of this new need.’ Pressures from shareholders and City financial institutions have led to a greater emphasis on the ancillary businesses such as hotels and catering which were deemed to offer a higher rate of return. This re-orientation could be attributed to the new CEO’s financial background. This measure, however, was not well accepted by managers, who regarded this as against their successful historical culture. A senior manager says: Eighty-five per cent of our activities are airports. The new CEO (just appointed after the privatization decision) was placing most of his energy and time in the other fifteen per cent: other business activities. This issue was concerning the Executive board. If we continued thusly until the end of the century, the main business would go downhill. A middle manager’s account emphasizes the strong culture within BAA: We are good at managing airports. The skills required to run airports are what we are uniquely good at. Because no one else in the UK has those skills, we have tried to develop managers in managing airports and we need to keep that. We can sell our experience overseas. We

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are not as good in doing other activities or we have no experience of other things! There seemed to be a contradiction in management responses regarding the perception of the organization’s new mission. Although managers tend to deny that privatization has brought any drastic changes, at the same time, the data revealed that people suffered a ‘cultural shock’ when the new mission was established by the CEO: Ten years ago the main idea was to give good service with high quality, safety and security and to do that at a reasonable cost. Not to be extravagant, not to waste money, but on the other hand not too concerned about every pound used. The majority of people felt that it is not immoral making profits, but that it should be done in a more considered way. They were shocked by the statement ‘100 per cent profits’ imposed by the new CEO. Although BAA had always been a commercially-oriented organization, the emphasis on the financial aspects of the business became more intense after privatization, according to the managers. The following account illustrates this interpretation: The use of the word ‘profits’ was not very common. It was not at the front of people’s minds. After privatization, the word ‘profits’ became a more common feature for people, and people’s pay became more linked to profits. The culture-change process instigated transformations in the organization’s structure. Each airport was set up as its own limited company, with profit centres, producing its own financial results. This gave a great degree of independence to each of these companies. This was in great contrast to the old structure where the head office dictated policy to the individual airports. Instead, they each created a small corporate office, close to the city of London. The responsibility and budget control were delegated to each subsidiary: Everything now is much more immediate. We can control what we want to do at a much more local level without having to refer to the centre. As each airport is a limited company, it has to solve its own problems locally. The large centralized personnel department was pulled apart, dismantled, and pushed down to the subsidiary companies.

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Human resources is now a service to line managers. ‘A huge transformation’. Gradually, the personnel department devolved. This movement started around six years before the interviews took place and was accelerated by privatization. The change was made ‘overnight’. There is no longer a personnel director in BAA. They had a saying: ‘Managers must manage their own people, not Personnel.’ In order to fit into this new structure, managers needed a much broader view of the business: they needed to be a ‘more complete manager’. Managers saw themselves as under pressure to be faster moving: We require a style of management which achieves things in a much shorter period of time. Some of the timescales we achieve now, in the past you would have said, it is impossible. Now, whether or not we cross every T and dot every I, the fine details, getting all the words absolutely right; this is not the question. If we achieve the end objectives by introducing this or that, that is how we are judged now. As a consequence of the new mission, plan and structure, the style of management and the expected behaviour were adjusted accordingly. Managers became more business oriented and financially aware and were given greater individual freedom to operate their particular airports independently. The centrally controlled and planned nature of the business, traditionally associated with its Civil Service origins, had disappeared: In the past, if you had a problem with your money, the financial department would deal with it; if your staff had problems, Personnel would deal with it. The turnaround in what was expected from managers was ‘absolutely incredible’: We realize now that there is more scope for us to do things and do things differently. Managers are more business conscious, certainly more financially aware with more emphasis on costs than there was when I first joined the organization ten years ago. Although most decisions were delegated to the companies, the decisionmaking process regarding finance had become more bureaucratic, ‘many controls were introduced’. ‘We gained some freedom, also some additional controls.’

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Q: Is there any link between the CEO/founder’s style and the management style as a whole? A: Yes. It is inevitable. This matches what Schein (1985) says: ‘Managers, in a sense, impose their own style upon organizational life’ (p. 75). In considering the relationship between the leaders’ values and culture, the perceptions of the management style of the chairman (working in BAA from 1963 to present), the MD (working in BAA from 1965 to 1985) and the new CEO (working in BAA from 1985 to 1989) were investigated. Managers described top management values in a positive way: Although our origins lie in the public sector, we had people at the top (Chairmen) particularly in the 1970s, who wanted to run this company as a business not just as a public utility. So, to some extent we were fortunate, in my view. The Chairman is open. He listens to people, goes out into the organization and sees people. From approximately 1975 to 1985, two top managers were running BAA: the chairman (a fairly ‘strong’ style) and the MD, who came from industry and was ‘highly participative’ (his emphasis), with a very open management style: He was highly respected and out and about in the business, going places, seeing people, talking with people, talking to people on the shop floor. The MD and the Chairman made a good team, a balanced team: one very strong, one very smooth. The result was very good. The Chairman was looking to the business, the policies. The MD was the gear box, converting the energy and power of the Chairman into action, controlling and applying his energy. As perceived by managers, both the chairman and the ex-MD held values which encouraged two-way communication and a participative style of management. They were seen to be looking into things. The company has had the same chairman all the way through. He exemplified a very analytical type of management, as seen by managers, reflecting his engineering background. The new CEO (from 1985 to 1989), however, practised a totally different management style from the MD. His style derived perhaps from his background

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as an accountant. He was ‘very autocratic, with a “totally closed management style”. It didn’t work’. ‘Low profile’, he was interested in the ‘bottom line profitability of the business’ and essentially concerned with the bottom line results. The contrasting styles of the chairman and CEO had an impact on the way the organization was run: The impression we had from our CEO (perhaps due to his background) was that he was trying to push this organization for short-term thinking and acting (you had to think about next month, next year) instead of long-term. This conflicting situation in organizational culture was clearly reported, in a consensus, by all senior managers interviewed. As perceived by interviewees, the top management’s new strategy of dealing with people within the organization was ‘killing the well-established corporate culture’, those values and beliefs which had been reinforced by past leaders’ ‘role models’ (chairman and MD) and by the success of the company so far (as reported by interviewees as well as annual reports). This conflict reduced the morale of employees and also affected productivity. As one manager said: ‘When you receive different guidance from the top, then the managers become confused regarding their priorities.’ This management conflict, however, is better reflected in this remark: ‘Directors and managers tend to try to mirror whoever they perceive as running the organization. Otherwise they don’t stay, do they?’ This CEO had left the company just before the interviews took place. A few managers reported that he resigned; many others, though, reported that he was dismissed as ‘he did not fit into the BAA culture.’ Traditionally, personnel functions were centralized and managers were almost ‘hiding behind Personnel’. They had, in the past, a ‘very dominant personnel department’, hence, recruitment decisions were made centrally. As perceived by the interviewees, the recruitment and selection systems impinged in a very significant way on the process of culture change in BAA. Different people coming in had reshaped BAA culture:

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This is my experience during the first ten years I worked here – 1968 to 1978: In the beginning practically everybody was a civil servant. Over that ten year period, a lot of other people came from outside. So it was a gradual process of changing people. At the end of the ten years, BAA was an entirely different organization. It was more innovative, more commercial. But changes have occurred gradually, almost imperceptibly. Only at the end of these years, looking back, we can see that it has changed. But it was not the same kind of change which came with privatization. The later change was more drastic. BAA managers revealed a great awareness of the need for a managerial profile to reflect subcultures within the company rather than a uniform managerial profile throughout the company. They realized that they needed people with two types of skills, that is, planning skills (‘thinking ahead’) and immediate skills (‘solving immediate problems’). A senior manager commented: The nature of the business requires managers to take a lot of instant decisions. If an airplane needs to land suddenly, we have to be quick, to be immediate. A lot of managers live in a world of immediacy. So managers get a lot of points for action. We also need people who think in the future, the planning people. We know that to build a terminal we need ten years. Managerial promotion, in the past, was much slower. There were many different bureaucratic criteria to be met if managers wanted to get up the career ladder. Length in the job and age were the most weighty criteria: Indeed, in my first promotion opportunity, I was not allowed to apply because of my age. I could not get that level of job until I was twentyone. All that has gone now. In the past, every single job in the company had to be advertised companywide. There was a three-man interview board, and ‘too many procedures’: I do not think that ten years ago someone of my age would have been expected to do this sort of job within the organization. Several of my peers, certainly three out of four, are in their early 30s. Now the managers are younger and use a more modern approach. Some of the old managers were bypassed in the process. Either they retired or other

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managers were promoted on top of them. When we have this kind of mix, the culture spreads out by itself. Apart from administrative rules (such as age and length in the job), the performance criteria also differ from the past. For instance, stress tolerance and persuasiveness were not important traits in the past. A manager explained why: We did not have high levels of industrial security. When I started to work at Gatwick, we were dealing with 4 million passengers a year, now it is 21 million. In the past, managers in BAA were ‘made’, not trained. The best technician would be promoted to be a supervisor or manager. Afterwards, he would be sent to some kind of training, usually general courses. Thus, in the past, managers were not prepared for the jobs. Gradually, the emphasis on training and developing, as a way of preparing managers before actually taking charge, increased. It is interesting to note that interviewees themselves made the links between top management values and managerial career systems: In Gatwick our emphasis on training can be explained as a reflection of the MD: An ex-personnel manager. In the past, BAA’s appraisal of performance was quite separate from salary. There were budgets, objectives to be achieved, but they were not pay related. The annual appraisal included no discussion regarding salaries. It changed very gradually, but not as much as it has changed during the last ten years. During the process of interviewing managers in BAA, the issue of change was always mentioned by them even when talking about historical culture or historical career systems.

‘Prevailing’ Managerial Careers: 1976 to 1989 For the purpose of the analysis of ‘prevailing’ managerial careers, both phases – before and during privatization – have been integrated in this study since they appear very similar to each other. However, when differences occur, these will be indicated in the text.

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Since 1976, major changes in managerial recruitment occurred. Because of the expansion of the airport business, BAA did not have the necessary managers to fill all posts. Therefore, they used external advertising as well as being ‘more critical’ in hiring people. ‘We are looking more critically at managers for the future – the 1990s onwards.’ According to managers’ perceptions, it is fundamental, during this process of culture change, that top management is an integrated team: We need a balanced team at the top, the right group mix. The dynamics of the team at the top is crucial. If they do not interact well, there is trouble. BAA introduced the ‘criteria interview method’ to select managers. ‘We are now more critical in identifying who gets selected and promoted.’ There is a consensus that the ‘participative’ style of management is one criterion being used to select managers since a new MD was appointed: In the early days of BAA, there was a rigid hierarchy and the style of leadership that managers adopted was not relevant. Then gradually, a great need for leaders to understand about involving the work force, had emerged. Participative style became very important. There is also a consensus that ‘teamwork’ was necessary to accomplish tasks. Because changes in the business occur much faster, there is a realization that no one person could do it on their own. The only way to get things done in a service organization is through the people you employ: We are so dependent on people on the line that teamwork is vital. You cannot operate in isolation, you have to relate well with peers. ‘Analytical skills’, ‘adaptability’ and ‘openness’ became very important for all levels of management in BAA. Again, this seemed to reflect the chairman’s own profile. He has been described by managers as ‘having a very analytical personality’. A manager explains why the managerial style today is different from the past:

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Because the world does not stay still, we need good decision-makers and hard workers. Because, in the old days, the rhythm of work was slower, there was not much pressure. Now, without commitment to hard work you cannot survive in the organization. We want people who can manage change, who are not frightened by new ventures or new concepts, who have skills to take the work force with them, and also who understand the importance of training. Managers in BAA seemed to be aware that this management profile is unique to each kind of organizational culture: If you go to another organization you will have a different order of criteria for managerial requirements. It must be a product of ‘internal search’. (his emphasis) Historically, there was an element of chance in whether somebody was successful or not. People are now being promoted according to their performance: For example, in the past, because my boss was retiring and I was his assistant, I would automatically get the job. Today, this job could be filled by someone from another department; Maybe by a person who had been working in this company for only a short period of time. If we think he is the chap, he will get the job. The company became more systematic about its own needs, and also about matching people and jobs more accurately. ‘We need to have a clear idea of a manager’s potential and also the requirements for a specific job.’ The privatization process forced the organization to become more financially oriented. Before privatization, it was possible for managers to come up in the organization without really having any financial awareness. Today, they cannot do a job at a senior level unless they have that financial understanding. BAA is now looking for people who can manage change: We need people who know what to do when tomorrow is different from yesterday, and the day after will be different again, people who can cope with various different pressures who know what sort of information they need in order to be able to cope with change.

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To summarize the necessary profile for a BAA manager: They must have knowledge of finance, IT, marketing. As individuals, they have to know how to build a team, and how to develop its members personally as well. Managers are being promoted under a wider range of criteria: financial skills, personnel skills, a much broader range of skills than historically. BAA seemed to be aware of the different subcultures within the organization. To fit these subcultures, different management profiles are necessary, as explained by a manager. Taking two streams, we need two different kinds of managers: One job is running an airport, the other is heading the planning sector at corporate level. For the latter, we need the academics, the theorists. In a financial or engineering sector, we need a totally different person. It is important to get the right fit. For example, the criteria BAA use to select candidates to be an airport manager are: Flexibility, stress tolerance, participative style, leadership, adaptability, persuasiveness, problem analysis, judgment, decisiveness, management control and delegation. It was noticeable that managers felt proud when talking about their human resource practices, mainly their training and development activities. ‘We consider ourselves a very advanced company regarding management development.’ Managerial training needs had changed in response to different management requirements. In the past, for example, they used to train people in ‘how to perform their own jobs’. Now they are trying to make them aware of the help they can receive from other staff areas, for example, from information technology. Many senior managers grew up in a pre-computer era, so they are not aware of the sort of information they can get and the effects of this in the decision-making process. The training philosophy at BAA during the process of culture change was not based on changing people’s values in a direct way via behavioural

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workshops. They aimed to equip people with the skills they need to do the job in a changing environment. One thing they identified was the need for financial training and budget experience. Managers now have to understand the impact of costs on the business. As the core values shift from an emphasis on service to an emphasis on finance, training activities reflect this. The emphasis on finance seemed to stem from the new corporate mission established by the chairman and CEO. Although rarely explicitly stated, the concept ‘corporate culture’ is present in BAA managers’ thinking. They realize how unique BAA is as an entity with its particularities; therefore, they value ‘in house’ training and development: We cannot buy managers from elsewhere because there are no other organizations doing the same thing. For example, if a chemical company has a shortage of chemical managers, then they hire some chemists from elsewhere. Another manager’s account reinforces this idea: Running an airport is like running a small town. Everything you visualise in a town is actually in an airport. It is not easy. You can’t go outside and just recruit managers because they are not there. In order to make sure that the managers were equipped to handle their own problems, much effort went into: Training managers, and giving them responsibility for matters that previously belonged to the personnel or finance department. Gradually, managers became responsible for running their own human resource systems. However, they can still come to personnel for advice. ‘It seems to be a more healthy relationship.’ In the assessment centres, line managers with the support of personnel managers (who act as facilitators), try to highlight weaknesses in managers that can be improved, for example, ‘stress tolerance’ or ‘management control’. A lack of these characteristics can be identified in order to give the appropriate direction to the manager’s development. ‘Assessment centres are certainly good ways to identify training needs.’

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Although BAA also uses external consultants to train their staff, managers or experts from BAA are invited to participate in the training sections as tutors. They use case studies as a method of exploring real situations. This training strategy seems to reinforce the organizational culture. As tutors, managers can present their own ideas of how to handle specific situations on a day-to-day basis in BAA. In BAA, the appraisal system is one of the tools for management development. Appraisals are used for changing jobs even if that does not involve an increase in salary. BAA had implemented a new appraisal system: managers were assessed on performance against targets. Their strengths and weaknesses as managers were evaluated and the potential for progress identified. There was a feedback process. It ensured that the manager and the subordinate knew what the subordinate was supposed to be doing. The performance-related appraisal system was introduced by the chairman. The chairman was the first of a nationalized industry who had his own salary related to his performance. He wanted to be judged by performance. The chairman supported the idea of performance-related pay for many years. Since privatization, however, a significant part of a senior manager’s pay became profit-related.

Summary The process of culture change in BAA differs mainly from the previous stories regarding its intensity/pace. BAA’s culture had always been characterized as ‘innovative’ and receptive to environmental change. An evolutionary process, both culture and careers were modified in response to environmental demands over the years. Radical decentralization took place in the organizational structure. As a consequence, managers’ responsibilities increased. This constant process of gradual change is explained by managers as being linked to two causes: 1.

The dynamism which characterizes the airport industry and its growing process.

2.

The chairman and ex-MD’s management profile.

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A unique characteristic of BAA culture, compared with the previous studies, is that BAA has always been managed by generalists. Diversification away from the core business and the acceleration in the rate of industrial and organizational growth have only re-emphasized the need for generalists. For example, as a consequence of the decentralization of the personnel area, managers were expected to deal with personnel issues which in the past were delegated to the HQ.

BAA Critical Analysis of Culture Change Following the patterns of previous stories, the mission, culture and careers systems were modified. As in BNFL, but unlike Jaguar and BA, managers in BAA seem to be aware that different subcultures require different managerial profiles. However, some core values are constant and seem to be consistent throughout the organization: innovation, communication, flexibility and adaptability. Perhaps the most important issue that this story can teach us about the culture-change process is that BAA never tried to change people’s values, but to change those of the company. In other words, efforts had been made to give managers different responsibilities as the business evolved. Human resources departments’ main objectives were, over the years, to try to equip managers via specific training with the necessary management tools for them to respond to changing environmental demands. BAA’s top management did not believe that new managers necessarily needed to be selected from outside. BAA’s human resource philosophy lies in the idea of providing managers with a wider view of the business because they believe that most managers can change their own behaviour. Looking at the integrative model for culture change (Chapter 5) it is interesting to note that BAA had gradually implemented the six steps described in that model.

BAA Today: Looking Forward In 2006, BAA was bought by a consortium led by the Spanish Grupo Ferrovial. Since then, BAA has expanded and diversified into international operations. In August 2006, BAA officially delisted from the London Stock Exchange. Ferrovial is one of the world’s leading infrastructure companies with 104,000 employees and operations in 43 countries in a range of different sectors of industry. BAA’s two London airports have helped to make London one of the world’s best connected cities.

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References Schein, E.H. (1985). Organizational Culture and Leadership. San Francisco: JosseyBass.



10

Xerox do Brazil (XBRA) Story

The aim of this chapter is to analyse the changes in managerial behaviour that occurred as a result of different corporate values being introduced at Xerox worldwide during the 1990s. The process of organizational culture change is explored by examining the role of top leaders and their strategy for transforming employees’ ways of thinking and behaving in day-to-day working life. In addition to that, the chapter highlights the impact of the Brazilian national values in facilitating this transition. Twenty-six probing semi-structured interviews were conducted with both local and expatriate middle and senior managers in April 1994 in XBRA HQ in Rio de Janeiro and other XBRA branches in Brazil. The interviews were all in Portuguese and were tape-recorded and translated into English by the author. The managers interviewed were from a cross-section of departments, as the focus of the study was on the core values of XBRA as well as their evolution and transformation. Managers who had been employed by the organization for at least ten years were interviewed. It was felt that such managers would possess the relevant experience within the company necessary to document the transition process. The questions covered data related to the history of the organization, that is, founders’ and past leaders’ values and also the historical and prevailing expected managerial behaviour. The strategy top management utilized to transform the organization was further questioned. The factors which both hindered and facilitated this changing process were highlighted during the interviewing process. The country’s national traits, its idiosyncrasies, and its impact upon the business were also targets of data collection.

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A Briefing on Xerox Corporation Xerox is a world leader in technology products and services. Xerox markets copiers, duplicators, electronic printers, optical scanners, facsimile machines, networks and related products. The document-processing activities encompass the designing, developing, manufacturing, marketing and servicing of a complete range of document-processing products and systems that make office work more productive. The Xerox Corporation was established in the USA in 1959 with the introduction of the X914, the first plain-paper copier which was based on a new technology – xerography. With the invention of the X914, Xerox created a new industry. ‘It was a product customers were waiting in line to use’ (Palermo and Watson 1993). Fortune magazine would later publish that, ‘this is the most successful business product ever introduced’. During the early days, Xerox experienced very rapid growth worldwide. As a corporation it has always been creative and innovative – a ‘winning’ organization. During the 1960s and 1970s, Xerox was the leader in the international market, enjoying almost a monopoly situation.

A Briefing on Xerox do Brazil Xerox do Brazil (XBRA) followed the success of other operations worldwide. With very little competition in their particular industry sector (only Nashua and a few local dealers) the company grew and developed services serving the entire country, even in very small towns in the countryside of Brazil. As mentioned by a manager at HQ in Rio, ‘XBRA was everywhere.’ The brand image is so strong in Brazil that the word ‘xerox’ quickly became synonymous with photocopy. The verb ‘xeroxar’ was introduced to the colloquial conversation. Today, both the noun and the verb are parts of the Portuguese language dictionary. Xerox’s reputation for quality services was also established. Managers were confident that they dominated the Brazilian market. This can be illustrated by a sales manager’s account: ‘It was very comfortable working for XBRA during the 70s.’

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XBRA was established in 1965. It was one of the 104 Xerox operations around the world. XBRA’s HQ is located in Rio de Janeiro. At the time the interviewing process took place, XBRA employed around 5,300 people. It had 46 branches handling marketing and customer services activities throughout Brazil. Its manufacturing plants are located in Manaus, Resende, Salvador and Victoria.

Brazil’s Socio-Political Background Brazil is the eighth largest economy in the world. It has a population of 190 million and it is Latin America’s largest economy. From 1965 to 1985, the period of the Brazilian military regime, the government protected the national industry by creating import barriers. This forced companies to engage in rapid and extensive manufacturing as a key to accessing Brazil’s internal market. This facilitated the growth of some companies. For other companies, however, this policy sounded like a marching order out of Brazil. By taking the option to stay and invest, Xerox quickly became the leader in the industry in Brazil.

Re-Creating Entrepreneurial Culture at Xerox XBRA: Historical Culture and Management Style during the 1960s and 1970s Henrique Sergio Gregory was the founder of XBRA and responsible for introducing the X914 into the Brazilian business market. XBRA’s historical culture reflected Mr Gregory’s values. A senior manager stated: This is a Christian organization with rigid and humanitarian values, family-oriented, informal, paternalistic. Mr Gregory was a Catholic Brazilian citizen who ran the organization from its creation (1965) until he decided to become its chairman leaving the day-to-day business management to a general manager in 1989. Reflecting Mr Gregory’s values, XBRA management practices had always given emphasis on developing its human resources processes and practices. Consequently, XBRA’s level of employee satisfaction was 76 per cent, which was the highest amongst the 104 Xerox worldwide affiliated companies. XBRA human resources bestpractices were exported to other Xerox operations as well as being a benchmark

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in Brazil. The aggressive sales force and the excellence in technical services were always a strength of XBRA historical culture. With no competition, however, the organization became inward looking. There was no incentive to improve or to update the products. Import barriers also contributed to this relaxed situation. Consequently, towards the end of the 1980s and beginning of the 1990s, XBRA products were becoming obsolete. Only very old-fashioned machines were available to the customers. However, as the Brazilian market virtually belonged to XBRA in those days, there was a conformist situation in which salesmen were imposing the outdated machines on the customers. Quoting a marketing senior manager at XBRA HQ in Rio: Our clients had two choices in the past: either buy Xerox products and services, or buy Xerox products and services. The ‘monopolistic’ environment in which Xerox grew up had not fostered external competitiveness. It had been company practice, however, to compare the quality of one Xerox machine by the standards of other Xerox machines, and to compare sales results with the previous year’s and with those of the other national operations: Brazil vs. Argentina, Germany, UK and so on. During the last years of the 1970s, different functional areas – such as marketing, finance, manufacturing and human resources – were working in isolation to achieve their individual targets. Teamwork was not stimulated by management at that time and there was an arrogant attitude towards clients. Internally, this was still a bureaucratic organization as perceived by managers interviewed. This was due to the fact that the Brazilian government had a strong influence on setting up the prices of products and how much these could be modified. This is explained by Alan Cardoso, the quality director: It was all regulated. The management did not have to make decisions concerning prices and products and that represented a barrier for their own development with regards to management skills. CACEX (a government entity created to control the prices of imported goods via price quotes in the international market) would tell us what to import and how much to import. A marketing manager at XBRA HQ in Rio reinforces this idea when he mentioned that:

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In the past, the prices of products were fixed by the government, therefore, we could not develop our negotiation skills. Thinking retrospectively, a branch manager commented during an interview: ‘It was becoming boring to work for Xerox do Brazil during those years.’

The Challenges of the 1980s While the Xerox Corporation internationally, during the 1960s and 1970s, enjoyed remarkable success, its market share dropped from nearly 100 per cent to below 50 per cent in the 1980s. It was on the verge of a ‘near-death experience’ triggered by intense competition from IBM, Kodak and Canon. A major process of organizational change was triggered at Rochester (HQ, USA) during 1983– 1984 through the implementation of the Leadership Through Quality strategy. This programme was perceived by Xerox HQ (USA) as the only way to survive in the highly competitive photocopy industry during the 1980s. The Brazilian government imposed severe controls and restrictions on companies operating in Brazil; on the other hand it protected the national industry by keeping prohibitive barriers to newcomers from Europe and the USA in the 1980s. However, it was clear for XBRA top management that the situation enjoyed by the company would sooner or later have to change. One of the managers said that ‘It was a paradise.’ Top management decided that the implementation of the Leadership Through Quality programme would prepare XBRA employees for the possibility of facing a transformation in the market situation. The fear of unknown future economic transformations motivated XBRA managers to prepare themselves in terms of management skills and practices. Leadership Through Quality, a corporate strategy to cascade down the training by family group through the organization, level-by-level, was used. Although Xerox was struggling to survive internationally, during 1980s the market competition was almost insignificant for XBRA as Brazil was still enjoying a closed economy: ‘The crisis elsewhere forced us to prepare ourselves for the future.’

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The Quality Programme Implementation Process in XBRA The introduction of the quality programme by XBRA enjoyed full topmanagement commitment. Top management recognized that the programme could help XBRA to grow and to be prepared for any eventual competitive market. Gunnar Vickberg, a Swedish CEO, who was in charge of XBRA at that time, always believed in this new programme. Carlos Sales, the field operations director at that time, was quite sceptical about it at first because he feared that Brazilians could reject this rather structured programme, but soon he realized that the Leadership Through Quality strategy was helping employees to see the obvious: he called it, ‘The rediscovery of the client.’ They also realized that the client is ‘like an animal which reacts immediately to stimuli’, said Salles. He also added that, ‘Customers do react positively to good services and negatively to bad services.’ A top management team studied the programme and adapted it to the Brazilian culture; XBRA was given freedom to implement it to suit Brazilian national values and to specific local behaviour. Jose Moura was the mentor of the Leadership Through Quality implementation programme in Brazil. He was, then, the human resources director and responsible for educating over 5,000 employees. The training in quality tools was done slowly and steadily through directors, managers, supervisors, and so on down. The training consisted of problem-solving techniques, interactive skills and statistical analysis for measuring problems and the results of solutions implemented. As seen by managers, XBRA became a different organization as a result of a massive programme of training. It is explained by a senior manager: ‘The company had a bath of education.’ According to Jose Moura, the secret of XBRA’s successful corporate culture transformation was the way people were trained: perseverance, patience and discipline were vital elements for the success of such an initiative. Moura commented that, ‘It was a challenge and a very rewarding experience.’ Leadership Through Quality at XBRA was seen as a ‘company programme’. People at the top of the organization were involved with and committed to the strategy. A senior marketing manager at XBRA HQ in Rio said:

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My training was done by my director. I myself trained my staff at a hotel. This was then followed up by the quality specialist. In the beginning, we were very disciplined with each small step. Now it is like the sound of music. It is quite automatic. It is amazing to see the salesmen and supervisors working in a very disciplined way. From the management perspective, the programme helped to change people’s mandates. ‘Those who did not adapt to these changes (around 15 per cent) had to leave the company.’ The programme stimulated teamwork, involvement and the decisionmaking process based on facts and problem-solving analysis. The notion of the internal customer was introduced, which helped people to understand customer’s requirements and their importance to the business. The training impacted on day-to-day managers’ behaviour. A sales manager remarked: In the past, we worked intuitively, using feelings, emotions. Now it is more professional, we do not make any decision without analysing the problem, identifying the causes, doing an action plan. We have more chances to succeed and less risks to take. Communication seemed to play a fundamental role in the implementation of the Leadership Through Quality Strategy at XBRA. As a senior manager commented: ‘You have to prepare people, to discuss with them, to communicate.’ Employee involvement (EI), a major part of the culture-changing strategy, became an important catalyst for further development for XBRA in turning the business around.

The Challenges of the 1990s: Brazil’s New Open Economy Since the opening up of the Brazilian economy in 1990, there has been a boom in the launching of state of the art machines followed by the introduction of new management processes in Xerox do Brazil. The creation of the magic concept: ‘Competicao’ triggered in us a new attitude: of challenging our competitors in order to keep our acquired 70–75 per cent of market share. It has been a tremendous challenge in the economy to increase productivity. A change for the better. (XBRA senior manager’s account)

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Since the beginning of the 1990s, Brazil has continued to undergo a number of dramatic economic reforms that are positioning the country to resume economic growth in the medium-to-long term. Trade liberalization, privatization, deregulation, fiscal austerity and tax reform were the keys to the new economic reform programme in Brazil. Since the Brazilian President Fernando Collor came to power in 1991, the country’s business landscape had begun to change quite rapidly. Trade barriers were falling and the overnight liberalization and deregulation marked the beginning of a new era. A competitive and pluralist political system had been established in Brazil. The import barriers were progressively abolished and the new competition started to threaten the comfortable situation of XBRA. On the other hand, the stabilization of the currency – the real – associated with low inflation triggered a rapid rise in purchasing power. Brazil suddenly became a high consumer society – vehicles, electronic goods, construction materials, high-tech products. The creation of the magical concept of ‘Competicao’ (competition) in Brazil, triggered in XBRA managers a new attitude: of challenging their new competitors (that is, Canon) in order to keep the acquired 75 per cent of market share. It was a tremendous challenge in the company to increase its productivity and to become more innovative in its marketing strategies. XBRA developed a new mission: to become a global document-processing company: ‘The Document Company’. XBRA’s culture during the 1990s reflected the leader’s values and a single person was seen as responsible for influencing the culture in a major way: the MD, Mr Carlos Salles, who had worked for XBRA in 18 different jobs for about 25 years. Salles soon became a ‘guru’ in XBRA. He was described by his staff as full of enthusiasm, dynamism, challenging attitudes, frank, an excellent communicator, positive and optimistic. Salles considered that the great change in XBRA was that in the past a product was the end of the line, but now it was the start of a process. He explains in detail: We would sell a copier and this would be all. Now the copier is just one of the players of our tray. In the past, when we were playing alone, we could establish the rules of the game. When the Xerox machine entered a client’s business, it created a new market area. Today, it enters to add value to an existing market area.

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The internal situation is also drastically different: in the old days, XBRA would launch one new machine every two years. As illustrated by Salles during the interview: ‘On such occasions, usually, a big celebration party would take place in the presence of local authorities.’ During the time of this project, XBRA was launching 40 new high-tech products every year. This imposed pressures on the organization to change its structures, to revise its processes, and to increase staff training at all levels. In 1994, four new marketing divisions were created in XBRA. In addition to that, the products in the past were reasonably simple to use, and the relationship with the client was straightforward. Management and employee profiles were redesigned. For the new managers of the 1990s, knowledge of English, an MBA and computer literacy were new requirements. With regards to service and sales people, a graduate level was required. These profiles were different from the traditional ‘well spoken’ sales force. Training of the sales force, technicians and managers had been intensified as the updated machines were based on a high level of technology. The demands from management and employees had been changed dramatically since 1991 with the opening up of the Brazilian economy. People management had always been an important skill in XBRA. However, the firm’s leadership style had become focused much more on participation and empowerment. Managing people became much more complex as explained by Salles: ‘The people we deal with now are more sophisticated, so the requirements for a leader are more complex.’ Mr Cardoso, the quality-control manager for XBRA, had created three specific programmes based on the overall philosophy of the corporate strategy for quality in order to help XBRA employees with their challenges of the 1990s. These are examples of Employee Involvement (EI) initiatives.

1. Clientar (to customerise) ‘Clientar’ is a pragmatic programme to stimulate people in seeing customer satisfaction as their number one priority. All efforts were then directed to satisfying the customer. The company was encouraged to become outwardlooking as a reflection of the new market situation: fiercer competition had been established in Brazil. ‘Clientar’ later gave birth to another very innovative initiative ‘The guardian angels’.

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In every XBRA branch, each employee, regardless of rank or function, was personally responsible for about 40 customers. The employee established a direct and personal link with their 40 accounts and served as a background resource in case the XBRA customer attention-system should fail in any respect.

2. Desafio (Challenge) This is a profit-related scheme that encouraged the involvement of all employees in the business results. It linked each individual’s salary to the company’s overall target of achievements. Bonuses were offered to the employees at the end of each financial year. This was a self-financed programme for increasing productivity. The structure of ‘Desafio’ was based on a corporate programme but it was localized. In Brazil, it was applied to all employees at XBRA, and not only to management as happened in several other companies. Also, in XBRA, bonuses were given to teams (that is, branches, plants, and so on), thereby stimulating integrated efforts/results.

3. Empowerment of Work Groups Work groups of four to seven task-interdependent people were empowered. They shared responsibility and accountability for providing their external and internal customers with innovative products and services that fully satisfied their requirements. The first line employees had the authority to change their work schedules in order to meet their own results targets. This paradigm shift required an understanding of resources planning such as manpower, work distribution, budget-management and overall management of assets. XBRA spent energy on training the groups before actually implementing new ways of working. A different structure was put in place in order to reinforce new expected behaviour from both supervisors and technicians. The role of leader was changing considerably, so specific training was designed to help supervisors in their new roles as coaches, instead of bosses merely collecting and demanding results. A high level of employee morale was found in teams where managers used empowered work groups more efficiently: motivation and productivity were higher. The speed of the decision-making process accelerated as a consequence of empowerment. Self-managed groups were created in different areas of the organization. The communication process had been intensified. The organization learned to act in a very dynamic way.

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Due to the quality tools (teamwork, problem-solving), XBRA faced the challenges of the 1990s in a relatively comfortable way. People felt well prepared to change gears quickly and to shift the marketing direction to meet the organization’s new needs. A marketing manager observed that, ‘When people are already prepared to accept changes, then you can introduce new processes.’ Due to the intensive training programme, XBRA employees felt prepared and motivated to change their behaviour in order to become a more competitive workforce, and, therefore, able to keep their customers and ultimately keep their market share. A manager explains: ‘If we had not had the quality programme, we would not have installed half of the machines we managed, because we would not have had our people prepared.’ As perceived by the XBRA management team, the company became more agile, less bureaucratic and more flexible in order to face the new demands imposed by the open economy and freer market. In 1993, XBRA received the Brazilian National Quality Award which is a local version of the Malcolm Baldrige Award. Best practices in quality management were described and shared with other industries in Brazil. This programme was created as part of Brazil’s efforts to step up the competitiveness of its industry. Carlos Salles, the MD since 1988, had seen no problems in accepting challenges (that is, high targets) from Xerox Corporation because he had faith in XBRA. XBRA was described by Xerox Corporation officials as ‘the can do organization’. Reflecting the aim to continue as the dominant document-services provider in a rapidly growing market, XBRA top management launched a new challenge to the company. They were working towards the aim of reaching the mark of US$2 billion revenue in 1997. Their projection for 1995 exceeded US$1.3 billion. This new challenge was well described by Salles’s message to employees in September 1995: By 1997 we will have increased our revenues by 20 times in 20 years. XBRA revenue in 1997 was $100 million. It will be 20 times in 20 years when we will get to the mark of US$2 billion.

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Management was confident that the company could meet the 1997 objectives and, in fact, XBRA maintained 75 per cent of market share despite the appearance of new, strong competitors in the business arena in Brazil at the beginning of the 1990s.

Xerox Analysis of Culture Change: From Bureaucracy to Entrepreneurship The scale of organizational change prompted by the Brazilian government liberation process provides an ideal focus for the investigation of corporate culture transformation. In keeping with the literature, this empirical study showed that XBRA culture tended to remain the same until a change in the environment occurred and threatened its survival. When dealing with change in organizations, one might prefer to think in an evolutionary way. The historical culture of XBRA was understood, challenged and improved, not destroyed. This approach, which top leaders at XBRA adopted, helped to prevent/minimize possible resistance coming from those who had been contributing to the firm for a long time. The Change Programme in Brazil took time to be implemented, as it was meant to be done slowly and systematically. Its results greatly accounted for the success of the company in keeping its market share even after the opening up of the Brazilian economy. As revealed through this story, unless people change their work-related values first, new methods are deemed to fail. Social systems and culture are parts of the same phenomenon (see Part II of this book, Figure 2.3). Therefore, it is necessary to challenge people’s ways of thinking prior to the introduction of new working methods. In XBRA, this was successfully achieved through mainly intensive training and communication programmes involving top management and cascading down to the lower levels of the organization. A massive education initiative aimed at training XBRA employees on Leadership Through Quality was fundamental for XBRA’s success in transforming its culture. Reward systems were re-designed to create additional incentives to behavioural change. As revealed in this success story, continuous learning and innovation were encouraged in the company following the Brazilian liberalization process. There was a consensus, reached through all the interviews with both expatriates and local managers, on the impact of national culture on XBRA‘s

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culture-change process. XBRA managers described their staff as flexible, driven to grow and overcome challenges. The interviewees considered Brazilian employees as good learners: The response from the training efforts towards the new organisation’s goals and mission was fantastic. (Jose Moura, Training and Development Director) Motivated to assimilate knowledge, keen to contribute, XBRA employees were eager to develop and to prove their capacity. The boundaries between national and corporate culture are still to be well understood in the management literature. The data extracted from this project reveal that although very interdependent and linked, there is still a clear distinction between the values of the country and those of the organization. There is today a shared understanding among theorists that the values and beliefs of a nation’s population impinge on the make-up of an organizational culture. Nevertheless, the impact of those values and beliefs on the process of changing corporate culture seems to be a neglected topic in the organizational literature.

Summary This chapter explored the process of cultural transformation – from bureaucracy and inertia to innovation – experienced by XBRA when facing increased demands arising primarily from the national liberalization process and increased competition in the industry. The strategy for culture change aimed to overcome the inertia and bureaucracy created by the ‘monopoly’ situation experienced by the firm during the military period. The story shows how the empowerment groups, training and other management tools were crucial for the process of gradually re-creating entrepreneurial behaviour at XBRA. Changes in the external environment did affect the organization’s behaviour and processes. The proactive decisions taken by XBRA top management towards the implementation of a culture-change strategy accounted for the successful way the firm handled the competition.

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Xerox do Brazil Today: Looking Forward XBRA has remained the leader in document-processing and specialized services for office environments. To remain a market leader, XBRA constantly reviews its processes to reduce costs and boost efficiency throughout its corporate structure, using information technology, employee involvement and empowerment as some of their essential tools. Xerox Corporation is a global company with 61,100 professionals and a turnover of US$15.7 billion. Xerox is engaged in the entrepreneurship process by creating strategies and also seeking alternative synergies and expansion.

References Palermo, S.C. and Watson, G.H. (1993). A World of Quality: The Timeless Passport. ASQC: Quality Press.

PART IV

Creating Entrepreneurial Synergies Through Cross-Border Acquisitions

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11

Corporate Entrepreneurship and Acquisitions

Moving away from ‘Corporate Entrepreneurship’ associated with an organic internal development process (Part III), this part of the book analyses in detail the entrepreneurship synergies associated with mergers and acquisitions (M&A). It focuses on the integration process the acquirer sets up to address the organizational cultural transformations required in cross-border acquisitions. The main contribution is to offer a model for integration strategies to support the achievement of cultural and entrepreneurial synergies. The model was derived from five pairs of firms undergoing the challenges of an acculturation and integration process.

Why Entrepreneurship and Acquisitions? Corporate entrepreneurship can play a central role in the integration process during international acquisitions (Thomson and McNamara 2001). Top leaders of the acquiring corporation are faced with the dilemma of how to integrate efficiently the acquired firm into the systems of the wider corporation without destroying distinctive features of either firms that could generate new wealth for the combining company. Synergies achieved through learning processes will help innovation and growth, hence, creating an entrepreneurial culture. Synergies, however, are only created if the acquisition adds something distinctive to the acquiring corporation. Synergies can be created through novel combinations of distinctive knowledge, resources and capabilities. The success of a post-acquisition integration is reflected in the top management’s ability to address the important steps of the integration process (see Figure 11.1).

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STEP 1 Planning phase A The creation of the integration team

STEP 2 Planning phase B Creation of task forces and new mgt team; identification of synergies-culture analysis

Figure 11.1

STEP 3 Implementation phase A Sharing new vision through communication and involvement strategies

STEP 4 Implementation phase B New organization structure for the combining firm; new mgt attitudes

STEP 5 Team building Workshops, human resources practices and philosophy revisited

Achieving entrepreneurial synergies through acquisitions

An appropriate integration strategy can foster learning within organizations involved in international acquisitions. From the review of literature and data analysis focused on investigating five pairs of firms, a framework or model was created that can be applied in future cases of organizations dealing with similar problems, that is, of trying to achieve cultural learning which aims to maximize synergies-fostering entrepreneurial behaviour. As a renewal strategy, acquisitions may potentially incorporate old and new. Encouraging employees to share their knowledge, learn from each other, innovate and implement new ideas is difficult in the context of the change, fear and uncertainty that characterizes acquisitions. However, when communication and involvement take place within the integration strategy, synergies can flourish beautifully. One of the challenges experienced by leaders involved in international acquisitions is that they are normally under pressure to identify synergies that will provide a short-term financial return. However, as discussed previously in this book, entrepreneurial corporate culture implies a long-term and sustainable growth process – not only a shortterm return. Therefore, under an entrepreneurial focus and perspective, it is important to ensure long-term success, that is, encourage innovation to attend future market demands and achieve a sustainable growth through entrepreneurial actions.

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The integration process associated with acquisitions leads to change in the cultures and practices of employees from both groups. A transformational style of leadership can facilitate the acculturation process by promoting the values of a learning culture.

Explanation of Each Step Common practices associated with the process of learning during the integration process in these five pairs of organizations analysed led to the creation of the model below. Success and failure seem to correlate with the firms’ integration strategy being accomplished by following the five steps of the suggested model.

Step 1: The Creation of the Integration Team and Planning the Integration Process The integration team is responsible for deciding on the necessary steps for putting together two groups of people to ensure the achievement of high synergy levels through the learning process between employees from both firms. The creation of an ‘integration team’ was a common practice in the five stories analysed in Chapters 12 and 13.

STEP 2: Identification of Potential Synergies and Culture Analysis An appropriate culture assessment exercise aims to identify any significant differences or similarities between the core values, beliefs, attitudes and management styles of the target company and potential acquirer partner before the deal is completed. This was clearly a decision made by Deutsche Bank– Bankers Trust top executives, and it proved a useful and valuable part of their integration strategy. Cartwright and Cooper (1993) agree that it is important to consider cultural compatibility as a criterion for screening potential candidates for M&A. On the other hand, learning through cultural differences has been proved a more realistic and successful strategy in the integration process than finding the ‘ideal culture fit’. The latter is the position in this book. Successful integration can be achieved between diversified organizational cultures (Buono and Bowditch 1989). This will be a function of the implementation process.

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STEP 3: Sharing a New Vision – Communication and Involvement While nationality and cultural differences may decrease the perception of a common identity, the awareness of a common set of goals and objectives may reinforce integration. Building a new corporate vision to guide the future of the new organization is an important step to be achieved by the integration team. Learning about and developing the appreciation of a combining partner’s vision helps to bridge the gaps between the combining firms and aid in the convergence towards a shared vision and culture for the new organization. A new vision is established for the combined organization. Leaders are now challenged to review their own behaviour and values. Training and development are useful tools in this direction. New systems are re-designed to reinforce different behaviour. A new culture starts to emerge gradually in the new organization. The human resources systems and new structure must reinforce the required new behaviour. It is important that all available means of communicating the new vision are utilized to convey the new direction for the combining firm. Awareness of the strengths and weaknesses of each corporate culture are highlighted.

STEP 4: Re-Designing an Organizational Structure Although the success of the integration process normally lies in the preparation period (culture assessment exercise and the communication strategies), the post-merger phase is when the integration of the two organization structures takes place. The integration process is seen as the real source of value creation in acquisitions (Haspeslagh and Jemison 1991). It is also believed that the need for strategic interdependence between the two firms associated with the need for organizational autonomy is normally a source of uncertainty among employees during the integration process. The balance between these needs determines the appropriate integration approach for each particular acquisition, as can be seen from the five cases presented in Chapters 12 and 13.

STEP 5: Human Resources Philosophy and Practices Revisited New human resources philosophy and practices which reflect the new vision and culture of the combining firms will be necessary and new criteria for recruitment/selection, training and development programmes and reward/

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appraisal systems may be required. Human resources practices vary between organizations as a reflection of each firm’s leaders’ values and beliefs and their approach to people management. They also vary among countries as they reflect each nation’s ideologies and social structures. A rewards system can be a useful tool to convey the new values of an organization. Training and development are normally instruments that can also reflect a new vision for a combining organization. A new culture starts to emerge gradually in the organization. The new human resources systems will be reinforcing the required managerial behaviour for the combined organization. The following Chapters – 12 and 13 – offer an analysis of five pairs of global cross-border acquisitions and their integration strategies. It is assumed that an appropriate strategy to integrate two firms into one single unit is the key element in achieving entrepreneurial synergies derived from the international merging process. Chapter 12 focuses primarily on the acculturation process experienced by a German bank acquiring an American bank; a large American carmanufacturer acquiring a smaller European (Swedish) family car-manufacturer and a large British oil company acquiring a smaller American oil company. Chapter 13 focuses on the integration strategies implemented by Electrolux that led to successful acquisitions of Italian and Belgian organizations.

References Buono, A.F. and Bowditch, J.L. (1989). The Human Side of Mergers and Acquisitions: Managing Culture and Human Resources. San Francisco: Jossey-Bass. Cartwright, S. and Cooper, C.L. (1993). The Psychological Impact of Mergers and Acquisitions on the Individual: A Study of Building Society Managers. Human Relations, vol. 46, no. 3. Haspeslagh, P.C. and Jemison, D.B. (1991). Managing Acquisitions. New York: The Free Press. Thomson, N. and McNamara, P. (2001). Achieving Post-Acquisition Success: The Role of Corporate Entrepreneurship. Long-Range Planning, vol. 34, 669–97.

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12 

The Role of the Acculturation Process in M&A: Deutsche Bank–Bankers Trust, BP–Amoco, Ford–Volvo

This chapter explores how transferring capabilities from acquisitions can lead to value creation and entrepreneurial behaviour. The stories in this chapter include three large acquisitions that took place in the European/US markets within related industries. It explores the challenges and opportunities in integration processes, and the factors responsible for the success of cross-border acquisitions. Emphasis is given to the corporate strategies the three partnered companies applied to maximize synergies, and minimize the negative effects of the unavoidable, but necessary and complex, acculturation process.

Data Analysis The cases examined a specific question: What are the practical steps necessary to minimize the feelings of uncertainty normally expected by employees, and also to facilitate the learning process that occurs between the two groups of people during cultural and behavioural integration?



This chapter is based on work developed previously with Professor Gerald Vinten and Dr Wayne Holland.

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Value Creation and Entrepreneurial Synergies in International Acquisitions Mergers and acquisitions have unique potential to transform firms, and to contribute to corporate renewal (Angwin 2001). They can help a firm renew its market position more quickly than through internal development (Haspeslagh and Jemison 1991, Harrison 2002). This chapter explores international integration strategies and the way the companies cope with challenges from firm- and nationspecific differences. While the literature tends to emphasize the high rate of failure due to inappropriate integration strategies, the present stories, by contrast, describe best practices, which resulted in success. ‘Integration process is the real source of value creation in acquisitions’ (Haspeslagh and Jemison 1991, 167). Value creation is an important objective in successful acquisitions as it leads to entrepreneurial synergies. Yet, empirical and other studies continue to highlight the low success rate of acquisitions (Lawrence 2002, Marks and Mirvis 1965). No matter how attractive the business opportunity associated with an acquisition process, value is not created until capabilities are transferred, and people from both organizations collaborate in order to create the expected benefits and the unpredicted entrepreneurial opportunities. This collaboration relies on the will and ability of managers from both organizations to work together towards a new future. The key to integration is to obtain the participation of the people involved without compromising the strategic task. Finding similar organizational cultures and management styles has become a common panacea for avoiding employee dissatisfaction that could undermine M&A performance (Larsson 1993). Different authors, like Cartwright and Cooper (1992), agree that it is important to consider cultural compatibility as a criterion for screening potential candidates for M&A. On the other hand, managing cultural differences has been proven recently as a more realistic and successful strategy in integration processes than finding the ‘ideal culture fit’ or ideal partner. Buono and Bowditch (1989) consider that successful integration can be achieved even between diversified organizational cultures. This viewpoint is adopted in this book. This chapter examines strategies being used by executives that encourage employees’ diversity tolerance while allowing for learning to occur within the parent and the acquired firm. It looks at strategies that firms implement to facilitate the units to work together, and integrative practices involving firms within the same industry but from different countries and contrasting corporate values.

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Effective integration is defined as the combination of firms into a single unit or group, and the generation of joint efforts to fulfil the goals of the new organization. This combination is often obstructed by the challenges of nationality and perceived cultural differences (Olie 1994). International mergers are more likely to bring together people with different values and beliefs about the work place (Hofstede 1980). Factors like an individual country’s ideologies and industrial relations systems increase the national distinctiveness of organizations. Merging implies the construction of a new social identity. Two organizational integration variables are particularly relevant in the acquisition process (Datta and Grant 1990): 1.

The motive for the acquisition (strategic fit and decision-making process).

2.

The process of implementation (including the ‘acculturation’ process).

The motive for an acquisition is important in that it will influence the degree of required interaction between members of each organization. Implementation strategies, if not handled well, may prove to be detrimental to organizational effectiveness, particularly if they lead to high levels of tension and conflict. Acculturation conflict during an acquisition is often held accountable for failure to successfully implement an organizational integration strategy.

ACCULTURATION Process Nahavandi and Malekzadeh (1988) adopted the anthropological term ‘acculturation’ to describe the cultural changes resulting from the interaction of one organizational culture with another, or ‘the ways in which two groups adapt to each other and resolve emergent conflict’ (p. 82). A basic acculturation process occurs between: 1.

Conflicting subgroup desires for Cultural differentiation, and

2.

Conflicting subgroup desires for Organizational forces for integration.

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Some individuals may refuse to give up particular culturally bound ideologies, traditions or behaviours and, therefore, may purposely delay the acculturation process, or ‘lag’ behind the rest of the organization in terms of accepting culture change (Vansina 1991). Acquisition selection decisions are generally driven by financial and strategic considerations. Nevertheless, many organizational alliances fail to meet expectations because of difficulties in the acculturation process, which could be a function of either or both the integration strategies or the incompatibility of the partners’ cultures. Potential synergies will result in superior performance only if there is effective post-merger or post-acquisition implementation (Hunt et al. 1987). This goal is not easily accomplished, as integrating two separate companies with different traditions and backgrounds into a single unit often proves to be a difficult and time-consuming process. Conflicts between the two organizational groups engaged in a merger can frequently be observed during the post-merger situation. Members of the organizations typically start defining the situation in antagonistic terms of ‘us’ versus ‘them’, and power struggles evolve as organizational groups engage in bickering over scarce resources. In spite of formal attempts to blend or create a common identity or culture, the persistence of original identities can be observed in post-merger situations long beyond the consummation of the merger. According to Elsaa and Veiga (1994), the success of a particular integration strategy depends primarily on the manager’s ability to reconcile the need for strategic interdependence between the two firms and the need for organizational autonomy. Post-merger integration efforts can generally be described as ranging from minimal assimilation, which leaves the acquired firm more or less autonomous, to complete assimilation or blending of operations and cultures. The balance of these two factors determines the appropriate integration approach for each particular acquisition. This current project is focused on describing integration processes experienced by three case studies. It is clear to observe in these firms a need for strategic interdependence – as expected within related industries – and the desire by each group to keep their own identity and autonomy.

CASE 1: Deutsche Bank (DB) and Bankers Trust (BT) Acquisition I would always maintain that the D.B./B.T. deal was one of the most successful integration processes in our industry, in investment banking … Two years after the acquisition we can say that our own position in

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the States has been improved and also our position in corporate finance has improved. (Harald Schuler) Timing and integration strategies were perceived as contributing to the bank’s acquisition success. On June 1999, when the deal between DB and BT took place, there was a very favourable market situation. This is illustrated by Harald’s account: The synergies we created in bringing the two banks together were immediately seen because the market was there and … of course, success breeds success … the moment you are on a winning tour all challenges will be overcome. Besides the favourable market situation, decision-makers at DB planned the integration process carefully. As Harald states: ‘Internally we did a number of things obviously right …’

Reasons for DB Acquiring BT: The Strategic Fit DB’s process of growth had been quite successful, particularly marked by the Bank’s cultural transformation which occurred in 1995 – ‘changing a German bank into a global organization’. Still, the corporate finance of DB, according to the interviewee, was lagging behind particularly in the States. The attractiveness of BT was that it included people from Alex Brown, the oldest USA investment bank. BT had acquired Alex Brown two years earlier and this was a very sensitive situation. Alex Brown was celebrating its 200th anniversary when the DB–BT acquisition took place.

The pre-integration period: ‘the courtship phase’ Harald admitted that the crucial successful action taken by top management of DB was the way they used the due diligence period: the time between announcing the deal and closing the deal. As he emphasizes: This was a very tricky six month period when the acquirer had made a commitment, but the approval procedures take time … The two companies operate and continue to operate independently … it is a very difficult and hugely artificial scenario.

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Cultural assessment exercise During the due-diligence period, DB top management decided to undertake a cultural assessment exercise. This was a powerful strategy to minimize culture clashes between the German and the American banks. The cultural assessment was conducted by external consultants and aimed to uncover perceptions of each other’s groups of people.

Cultural assessment outcomes The cultural awareness exercise disclosed that DB employees were not convinced about the validity of the deal. The following illustrates this: Some people felt that Bankers Trust was a second/third kind of franchise and that it would not really help us to improve on our reputation. This perception was seen by top management to be the result of an information gap. Better communication to the employees about the rationale and validity of the acquisition process was then implemented. The cultural awareness exercise also revealed the internal conflict that existed between Bankers Trust and Alex Brown. The exercise uncovered that these two banks had not been integrated properly and as a consequence BT and Alex Brown were operating on different levels. There was a big crisis between them emphasized by the Alex Brown employees feeling that ‘they had lost their identity.’ To gain Alex Brown employees’ confidence and trust was an important strategic target for Deutsche Bank. Top management then decided to name the merged company in the USA, The Deutsche Bank – Alex Brown Investment Bank. This way, they kept the identity of Alex Brown and also reinforced the brand. Alex Brown employees felt that DB had rescued them from BT and they had actually kept their identity. The cultural exercise also revealed some issues relating to the national culture differences. BT felt that DB was a very German company, bureaucratic, hierarchical, with a slow decision-making process. This cultural awareness helped us to start challenging our own work values and embracing new ones.

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The Integration Phase: ‘the marriage’ The integration team The integration team is a group of key executives who would be in charge of making the necessary decisions, ‘the tough calls’, relating to integration strategy. The team consisted of division heads, the human resources head and the CEO. The integration team had to decide which part of BT fits into GCI – the investment side of DB. Managers were not forced to take over people they did not necessarily need: We stripped out a few component parts of BT business structure. Many parts we were able to integrate, others it was not possible – that is why we made these people redundant. In other areas, DB managers clearly admitted that BT people had a much stronger position than they had themselves: In those circumstances we made the very ruthless decision that our people would have to go and we took over BT’s people … So it was really the best of breed approach in that we picked the best parts of either side.

Incentive programmes (redundancy packages) Top management decided to implement specific incentives for those employees who would be redundant after the deal was closed. These programmes were linked to the closing date. ‘For some people it is still a very negative experience to be made redundant.’

Retention Strategies for BT Employees In order to avoid undesirable employee turnover and also to minimize uncertainties, top management implemented a very special retention programme for the ‘key people’ from BT. Special commitments and guarantees were made so that ‘their minds were put at rest’. These ‘special people’ would get additional rewards if they were still on board on the second anniversary of closing – 4 June 2001, and the third anniversary of closing – 4 June 2002. The integration team did not offer retention packages for DB employees.

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CASE 2: British Petroleum and Amoco Acquisition It was a successful acquisition … because it achieved more synergies than had originally been forecast … It achieved them faster than we had forecast … it went further and faster than we had promised the market and shareholders. (Nick Starritt) BP–Amoco is one of the most successful cases of integration strategies. (Angus Knowles-Cutler)

Pre-Merger Phase The success of integrating BP–Amoco lay in the preparation phase. An integration team – ‘pre-merger task force’ – was created in order to face the challenges of merging two large international groups (American and British). The integration team was led by a senior line manager reporting to the CEO. This leader would have good project management skills in order to plan and coordinate across all the various departments and divisions who were acting together. During the due diligence period, the team assessed the possible synergies. They focused on combining the two head offices and merging twin operating divisions (such as computing systems, accounting, HR).

Post-Merger Phase (The Marriage Situation): Integrating Duplicated Areas Nick Starritt borrowed the metaphor of a marriage in order to explain some of the activities: Decision on the common assets – in a marriage the couple needs to decide about how to deal with duplication of houses, telephones, cars, washing machines, and so on … Cost of each unit – again decisions need to be made regarding: how much do you spend on telephone bills; how much do I spend on telephone bills? Benchmarking – how much do other couples (companies) spend on telephone bills?

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Vision/desired future situation – how much our telephone bill should cost in the future?

Establishing the Management for the New Company Like Noah, you have two of everything, but you usually only need one manager for each post. Which one are you going to choose? Or do you want a third candidate from outside? What are the specifications for the expanded job? It was important to create opportunities for personnel in both companies. BP accounted for 60 per cent to Amoco’s 40 per cent share of the merger. Out of the top 500 management appointments in the new BP–Amoco company: It was very interesting that approximately 60 per cent came from heritage BP and approximately 40 per cent came from Amoco. At the business unit level, people coming from both companies are managing the new organization: So we effectively blended or feathered in Amoco and BP personnel at the business unit level, so the new company was not dominated exclusively by one company or other. It was necessary to uncover the best practices inside each organization. For example, the BP performance-management process was considered best practice in terms of generating strong performance. However, when it came to allocating capital, they adopted the Amoco model. Human resources integration was very complex and it generated strong emotions among employees: Introducing a new common job grading system and practical remuneration issues worldwide was not particularly complex in the intellectual sense, but it clearly had emotional connotations. For many thousands of people their job grade was a big part of their former identity within their heritage company. ‘Changing their letter codes meant explaining the basis of evaluation.’ Integrating all the benefit packages, training and recruitment activities and so on would be a huge effort for a human resources department. They set up

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a mini task-force and project teams with line and HR people to accomplish all the necessary changes.

Building a New Corporate Culture for the Future Organization Several meetings with the top 500 managers were held in order to explain BP’s operating philosophy. It also encouraged them to socialize and mix with their counterparts from the Amoco organization. These activities encouraged breaking down the barriers between the two groups. During these meetings, the main focus was to reinforce the target synergies and future growth prospects and try to avoid ‘living in the past’. ‘We are not a prisoner of our past.’ They offered clear boundaries and guidelines about expected performance and the desired new values of the future company.

Monitoring the Progress of Implementing the Integration Strategies The integration teams ‘took the pulse’ of the organization on a regular basis. They surveyed a sample of staff in the big locations on a monthly basis for the first 18 months to see how people felt as the merger process unfolded. This strategy helped to inform the subsequent communication effort as well as providing top management with good data with which to monitor attempts to influence ‘the hearts and minds’ of the work force and to assure themselves that the staff were completely committed to the new company.

CASE 3: Ford and Volvo: Merging Two Distinct Cultures Ford is investing in us … and we are further developing our unique brand ‘Volvo’ for an even brighter future. (Anita Beijer) This third case study focuses on describing and explaining how a large ‘very Swedish’ traditional family organization and a huge Anglo-Saxon corporation are developing their own ways of living together.

Cultural Differences between Ford and Volvo As perceived by employees from both organizations, Volvo is a decentralized firm and teamwork oriented. The participatory style of management prevails

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in the Volvo corporate culture. Volvo’s decision-making process happens at the lower levels of the organizational structure: That is the Scandinavian way of working together, there is no hierarchy. You get credibility due to the knowledge you have and to your contribution to the company. It has nothing to do with ranking. Volvo’s Swedish culture is seen as very strong and, in many cases, overrides the host national values: Volvo culture you will find in Japan, in South America. You find it where you go in Volvo around the world. The Volvo Japanese people are very Swedish. In contrast with the Swedish organization, Ford is viewed as a structured and hierarchical American operation. As perceived by top management, another important cultural trait which differentiates Ford from Volvo is the way both organizations deal with union issues. At Volvo, management and employees work very closely with the union representatives to achieve better business results. This high level of cooperation is not perceived in Ford. Another sensitive area is the gap between levels of employees. Volvo employees receive monthly salaries, including the blue collar workers. This is not the case in Ford. This is an area where both companies perceive themselves distant from each other. Both Volvo and Ford employees are in the process of learning about each other’s values and beliefs, which underlie their behaviour and their differences in business practices. According to Anita Beijer, this cultural awareness is seen as important in order to integrate the two organizations and maximize the potential synergies. She illustrates this idea as: We have to live with the differences, we can’t overcome them. We have to show great respect to each other … we all have to understand the differences.

Ford–Volvo Integration Strategies and Acculturation Process Volvo employees felt an impact moving from the AB Volvo group to the Ford Motors group. In the original situation, Volvo represented 51 per cent of the whole business group, which involves also buses, marine engines and related

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products. Being acquired by Ford meant that this position changed dramatically. Volvo now represents only 8 per cent of Ford Motors total business. For us it is a big change … going from the majority to become a minority within a larger group.

The New Organizational Structure In order to differentiate two main product lines, Ford Motor Company established two major divisions: Premium Automotive Group (PAG) and Ford Cars. The Ford Cars division concentrates on the more traditional products such as the Ford Fiesta. PAG division, on the other hand, focuses on their premium products: Jaguar, Land Rover, Aston Martin, Lincoln and Volvo. Quoting the president of PAG: Premium products are the engine that drives technology progress forward … they motivate manufactures to produce the best and lead consumers to expect the best. (Dr Wolfgang Reitzler, Ford’s Annual Report, 2001)

The Due Diligence Period and the Post-Acquisition Strategies The due diligence period of six months has focused primarily on potential financial synergies. ‘They looked at everything that could have an impact on money, the culture impact was not investigated at that time.’ Immediately after the deal was done, ‘18 matching pairs’ consisting of both Volvo and Ford executives were created. These formed the integration team. They reported to a steering committee consisting of the Volvo president and some key players within Ford. The integration teams were created in order to find synergies in specific areas such as power trend, purchasing, marketing, research, and so on. These teams were set up with equal numbers of participants from both companies working together on an equal basis. ‘That was really an interesting way to overcome the cultural differences.’ In terms of technology transfer, immense opportunity for synergies was foreseen by both parties. Volvo engineers visited American plants in order to offer American engineers knowledge, primarily on safety and ergonomics:

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We are working in collaboration. American engineering comes to Swedish plants to transfer modern technologies such as: new engines, different and more modern raw materials to work with. These synergies are perceived by employees from both companies as very positive outcomes from the acquisition process.

Marketing and Sales From the product point of view, Volvo employees wanted to keep their brand, to develop it further and ‘not to damage it or to dilute it’. In the marketing department there was a lot of excitement regarding the merger process generated by Volvo’s employees’ pride in their products. It was regarded as the soul of the company. Volvo’s Scandinavian office spaces represent also ‘our brand specific’. Volvo employees now enjoy a much better relationship with the car dealers. Being a small brand, it was difficult to find the right dealer, as selling only Volvo vehicles offered limited scope. But if they are able to sell Jaguar, Land Rover and Volvo, it is a more attractive proposition. ‘We are more attractive on the dealer market now that we are together … we are more powerful financially.’ The new dealers’ approach is shared within PAG, the premium car models not with Ford. Another interesting aspect of synergies between Volvo and Ford is related to research and development and the future development of fuels. These activities are still developed in the Ford group. However, Volvo have their own people joining them in specific projects. The best engineers from Volvo are transferred to the US research and development department ‘in order to work for all of us.’ There are other areas where interesting synergies can be found: for example, purchasing and environmental care. Almost 100 per cent of a Volvo car can be recycled. Ford is applying this knowledge.

Integration Strategies: Similarities Between the Three Stories There are common practices associated with success in these three pairs of firms undergoing the challenges of cross-border acquisitions. The common issues are linked to the steps the three acquirers used to integrate their different entities, that is, in their acculturation process. The creation of an integration team was a common practice in the three case studies. A strong commitment from top executives to

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lead the new entities into the future seems vital to minimize the uncertainties associated with employees’ roles and future direction. The cases also illustrate that appropriate integration strategies can overcome cultural diversity. A fundamental question is not ‘Do we fit?’ but ‘Are we willing to fit?’ (Gaertner et al. 1989). An appropriate culture assessment exercise aims to identify any significant differences or similarities between the core values, beliefs, attitudes and management style of the target company and the potential acquiring partner before the deal is completed. This one was clearly a decision made by DB–BT top executives and it proved a useful and valuable part of their integration strategy. With Volvo, as seen by management, a culture awareness exercise, if conducted before the deal closed, would have facilitated the acculturation process by fostering better understanding of each other’s working values and beliefs at an earlier stage. In this particular case, it is clear that success-achieving synergies could have been more significant if top executives of Ford had planned the cultural awareness exercise and team involvement had taken place as in the case of BP–Amoco. The case studies have demonstrated that while nationality and cultural differences may decrease the perception of a common identity, the awareness of a common set of goals and objectives may reinforce integration. In the three case studies, intergroup cooperation was fostered by top management, but at different levels of intensity. The creation of integration teams induced the members of both groups to conceive themselves primarily as one large group rather than separate entities: from an ‘us and them’ into the more inclusive ‘we’ (Gaertner et al. 1989). The cases illustrated that a learning process can be triggered in merging firms which allows for inter-cultural and inter-organizational learning to occur. Having the time to learn about other units early in the partnership may be a way of avoiding clashes later. Over time, managers learn about each other as colleagues rather than as stereotypical groups of people, like ‘Americans and Germans’. While companies usually conduct financial due diligence to assess prospective targets for acquisition, fewer consider the people dimension. The learning process is clear particularly in the two case studies, DB–BT and BP–Amoco. They are now competitively stronger. In the case of Ford–Volvo, while some synergies were achieved, it seems that the integration process has not been fully completed. The culture assessment exercise was not undertaken and communication processes did not develop as expected.

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Summary This chapter examined the process of creating entrepreneurial synergies associated with international acquisitions, looking at Deutsche Bank, BP–Amoco and Ford–Volvo. An underlying assumption was that success is only possible when potential benefits are realized through effective post-merger integration and acculturation which trigger entrepreneurial behaviour and culture. The three stories illustrate that the impact of cultural differences in international M&A can be minimized when the buying firms take time to create a positive atmosphere for capability transfer before initiating any actual consolidation of human and physical assets (Ghoshal and Haspeslagh 1990). The need for strategic interdependence (low or high) and the need for organizational autonomy (low or high) vary between the uniqueness of each acquisition process. It became clear that a culture-change process had been triggered in the three merging groups which seems to have been a positive sign of company development, revitalization and growth. New ideas have been implemented and old ideas challenged; a new organizational culture gradually emerged which reflects in performance and profitability accordingly. As shown in the three stories, appropriate integration strategy implementation can facilitate the acculturation process, resulting in minimizing the uncertainties in the work place, and increasing willingness to cooperate and to be part of a new culture entity. The socio-cultural integration of two previously discrete workforces and their organizational cultures is a major management task. Entrepreneurial synergies will emerge in cases when the specified steps of Figure 11.1 are implemented accordingly.

References Angwin, D. (2001). Mergers and Acquisitions across European Borders: National Perspectives on Pre-acquisition Due Diligence and the Use of Professional Advisers. Journal of World Business, vol. 36, no. 1, 32–57. Buono, A.F. and Bowditch, J.L. (1989). The Human Side of Mergers and Acquisitions. San Francisco: Jossey-Bass. Cartwright, S. and Cooper, C.L. (1992). Mergers and Acquisitions: The Human Factor. Butterworth-Heinemann, UK.

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Datta, D.K. and Grant, J.H. (1990). Relationships Between Type of Acquisition, the Autonomy Given to the Acquired Firm, and Acquisition Success: An Empirical Analysis. Journal of Management, vol. 16, 29–44. Elsaa, P.M. and Veiga, J.F. (1994). Acculturation in Acquired Organizations: A Force-Field Perspective. Human Relations, vol. 47, no. 4. Gaertner, S.L., Mann, J.A., Murrell, A. and Dovidio, J.F. (1989). Reducing Intergroup Bias: The Benefits of Recategorization. Journal of Personality and Social Psychology, vol. 57, 239–49. Ghoshal, S. and Haspeslagh, P. (1990). The Acquisition and Integration of Zanussi by Electrolux: A Case Study. European Journal of Management, vol. 8, no. 4, 414–33. Harrison, J. (2002). Probing a Target in Tough M&A Market. Mergers and Acquisitions, vol. 37, no. 1, 7–12. Haspeslagh, P.C. and Jemison, D.B. (1991). Managing Acquisitions. New York: The Free Press. Hofstede, G. (1980). Culture’s Consequences: International Differences in WorkRelated Values. Newbury Park, CA: Sage. Hunt, J.W., Lees, S., Grumbar, J.J. and Vivian, P.D. (1987). Acquisitions: The Human Factor. London Business School and Egon Zehnder International. Larsson, R. (1993). Barriers to Acculturation in Mergers and Acquisitions: Strategic Human Resource Implications. Journal of European Business Education, vol. 2, no. 2, May. Lawrence, J. (2002). Playing the Value Game in a Down Market. Mergers and Acquisitions, vol. 37, no. 3, 35–8. Marks, M.L. and Mirvis, P. (1965). Merger Syndrome: Stress and Uncertainty. Mergers and Acquisitions, Summer, 50–5. Nahavandi, A. and Malekzadeh, A.R. (1988). Acculturation in Mergers and Acquisitions. Academy of Management Review, vol. 13, 79–90. Olie, R. (1994). Shades of Culture and Institutions in International Mergers. Organization Studies, vol. 15, no. 3, 381–405. Vansina, L.S. (1991). Mergers and Acquisitions: A Strategic Organizational Change Perspective. Centre for Organizational Studies, Working Document no. 2, Barcelona: Foundation Jose M. Anzizu.



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Integration Strategies and Entrepreneurial Synergies: Electrolux–Zanussi and Electrolux–Diamant Boart Introduction

This chapter explores acquisitions integration strategies and their impact on entrepreneurial synergies. As discussed in Chapter 12, international transactions have more levels of complexity than domestic acquisitions as they have to consider not only different corporate cultures, but also different national cultures. It is therefore fundamental to minimize the prospect of acquisition failure and maximize synergies through successful integration strategies. Previous experience with acquisitions is an important factor helping firms overcome integration challenges. The nature of the leadership and the way top executives set direction are other key factors in overcoming integration difficulties. Part of the leadership task is to provide a common external focus for the members of merging firms. The final aim in every M&A is the achievement of synergies between the companies. Synergy is achieved through the acculturation and learning processes.

Why Electrolux–Zanussi and Electrolux–Diamant Boart Stories? Electrolux provided suitable cases, as it has experienced a long history in the integration process and the overcoming of cultural clashes. The chapter explains; (a) the background of each of the three organizations, (b) the strategic fit foreseen 

This chapter is adapted from a working in progress paper being developed by Marta Lorenzon and Dr Wayne Holland.

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by Electrolux top leaders when they acquired each of the two organizations, (c) the cultural implications, that is, potential culture synergies and also the potential cultural clashes considering that both the corporate and national culture between the organizations under investigation are quite different, and (d) the Electrolux successful integration strategies in the light of the integration model (see Figure 13.1). Case 1: Electrolux (Sweden) – Zanussi (Italy). This acquisition happened in 1984, where the particular approach to the integration process was in development by the company. Case 2: Electrolux (Sweden) – Diamant Boart (Belgium). This more recent acquisition happened in 2002, and displays the integration process fully developed and tested by the acquirer. A comparison between these two stories will be carried out. The data was collected in May and June 2009 using a mixture of semi-structured interviews and participant observation. Up to five management participants from each of the three organizations were interviewed. This data was complemented by the authors’ own observations.

A Briefing on Each of the Three Organizations Electrolux The Electrolux Group is a Swedish corporation which manufactures electrical appliances, selling more than 40 million products to customers in 150 countries every year. The origins of Electrolux can be traced back to the introduction of the world’s first household vacuum cleaner (LUX1) in 1912. Today, Electrolux products include refrigerators, dishwashers, washing machines, vacuum cleaners and cookers sold under brands such as Electrolux, AEG-Electrolux, Zanussi, Eureka and Frigidaire. Electrolux also makes Kenmore Appliances for Sears Holdings Corporation. Electrolux was founded in 1910, but only in the 1970s did the company grow exponentially under the leadership of Hans Werthen. In the next two decades, he and his teams developed the company from a small and marginal player into the world’s largest manufacturer of household appliances. Growth through acquisitions was their strategy. At the beginning they concentrated on

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acquisitions in Nordic firms. Today Electrolux has 22 factories in Europe and is the world’s second largest appliance-manufacturer after Whirlpool Corp. In 2002, Hans Stråberg was appointed president and CEO, since when Electrolux has started an overall restructuring programme around Europe. Factories were relocated from western to eastern Europe, despite strong union objections.

Zanussi Zanussi was the largest private company in Italy after Fiat. The Zanussi company began in 1916 as a small workshop of Antonio Zanussi in Pordenone, in the north-east of Italy, producing wood-burning cookers and home stoves. During the 1950s and 1960s, under the leadership of Lino Zanussi the company went through substantial growth and development, acquiring a series of Italian producers of appliances and components. Zanussi became a leading brand for domestic kitchen appliances in Europe. Similar branches were opened in other European countries, including the UK where it traded under the name of Zoppas. After Lino Zanussi’s death, the management embarked on unsuccessful ventures that led the company in 1982 to amass debts of over IL 1,300 billion. Two years later, Zanussi was acquired by Electrolux.

Diamant Boart Diamant Boart was established in 1937 and originally developed tools and machines for industrial use, using boart, a low-quality diamond found in mines in the Congo. Subsequently, synthetic industrial diamonds, developed in the 1960s, have replaced natural diamonds; they now represent 95 per cent of world industrial diamond consumption. One of the first and most important contributions by Diamant Boart to the marble industry was the introduction in 1955 of the diamond blade. Diamant Boart has expanded its business to include all international markets. Globally, Diamant Boart is recognized as the leading brand in the stone industry. Diamant Boart was acquired by the Electrolux group in 2002. It was only because Electrolux successfully integrated Diamant Boart into its existing stone-cutting operations that they were able to spin off the integrated division as a working successful company in 2006, four years after the acquisition.

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The Strategic Fit Analysis The story of the Electrolux–Zanussi acquisition started in 1983 as the Italian company, in trouble at that time, was the perfect fit for the growth and expansion of Electrolux in Europe as seen by leaders from both organizations. The two organizations were significantly complementary in products, markets and opportunities for vertical integration. Electrolux was well established in microwave-ovens, cookers and fridge-freezers; Zanussi was Europe’s largest producer of wet products such as washing machines, traditionally a weak area for Electrolux. Zanussi was the market leader in Italy and Spain – two markets that Electrolux had failed to crack. Zanussi was stronger in some countries such as Germany and France where Electrolux was quite weak. In 1962, Electrolux was on a download curve. Profits were falling. It had a limited range of products compared with competitors (Philips, Siemens, CEC). The core business was made up of vacuum cleaners and absorptiontype refrigerators. The acquisition has been considered by financial analysts as very successful, which gave Electrolux a sustainable leadership in the major appliance industry in Europe. According to the management interviewed, the acquisition of Diamant Boart by Electrolux was strongly desired by both parties to face the heavy losses in Diamant Boart in previous years. ‘Diamant Boart is an excellent fit to our own business, and this acquisition will make us the world’s largest manufacturer of diamond tools for the construction and stone industries’, a senior manager said.

Cultural Analysis: National and Organizational Culture Potential Clashes and Synergies Organizational culture can be summarized as ‘the range of values and beliefs shared and adopted by the people working in an organization in all their relationships’. Culture is a complex concept. People tend to employ their own national culture in the workplace. Hofstede (2001) was able to demonstrate the existence of national and regional cultural groups that affect the behaviour of societies and organizations, and that are persistent across time. The way people address problems and solve conflicts vary vastly among different countries and will be associated with their own national culture. However, in terms of organizations, national culture needs to be linked to corporate culture deviations. There are three main factors that contribute to create corporate

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culture: leaders’ values, industry dominant values and national values. In the next session of this chapter, an analysis of Electrolux, Zanussi and Diamant Boart’s corporate culture will be analysed. Most acquisitions require a cultural change in the post-acquisition phase. An understanding of each organization’s cultural characteristics and how the two companies can learn from these is crucial for the success of the integration process. Hofstede’s (2001) comparative analysis of national cultures was applied to identify the potential cultural problems in the integration phase. Table 13.1 shows the three countries differ quite dramatically as far as the four dimensions are concerned. In addition to that, even though there are some similarities between the two acquired companies’ national values, Italian and Belgian (Power distance, masculinity and uncertainty-avoidance), the Swedish acquirer has different national values from both the acquired companies. Swedish values are characterized by low power-distance, low uncertaintyavoidance and a highly ‘feminine’ society. Table 13.1 National cultural dimensions index score, Hofstede (2001) Country

Power distance

Individualism

Masculinity

Uncertainty-avoidance

Sweden

Low 31

Individualism 71

Feminine 5

Low 29

Italy

High 50

Individualism 82

Masculine 70

High 75

Belgium

High 65

Individualism 70

Masculine 54

High 94

Table 13.2 shows how the different organizational cultures are influenced, not only by national values, but also by other factors: industry values and management/top leaders’ values, that is, their leadership styles. This comparative analysis can help us to understand the difficulties the companies must have faced when the acquisitions took place. Table 13.2 highlights where the companies can develop a cultural fit and where they could develop cultural clashes. Starting from the top leaders’ values we notice immediately that even though the acquirer and acquired share some values such as dynamism and innovation (between Electrolux and Zanussi) they have also some differences, such as the informality present in Electrolux and the bureaucracy that permeates both Zanussi and Diamant Boart.

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Table 13.2 Organizational culture at Electrolux, Zanussi and Diamant Boart Top leaders’ values

National value

Industry value

Expected managerial behaviour

Electrolux

• informality • innovation • openness • dynamism

• feminine • low power-distance • low uncertainty  avoidance • individualism

• perfectionism • technically biased • customer-oriented • commercial-biased

• commercial  awareness • participative • technically  competent

Zanussi

• bureaucracy • paternalism • benevolence • drive • dynamism • innovation

• masculine • high power-distance • high uncertainty  avoidance • individualism

• perfectionism • technically biased • customer-oriented • commercial-biased • engineering-biased

• paternalistic • formal • technically  competent

Diamant Boart

• formality • drive • bureaucracy • dynamism

• masculine • high power-distance • high uncertainty  avoidance • individualism

• perfectionism • technically biased • customer-oriented • commercial-biased

• formal • technically  competent • hard worker

Comparing Table 13.2 with Table 13.1, we observe that the ‘power distance index’ (PDI) is contrasting in the three countries. Belgium and Italy have relatively high scores, 65 and 50 respectively, on the PDI compared with Sweden which has a relatively low score, 31. According to Hofstede, this would imply that Belgian and Italian organizations are more centralized and have taller organizational pyramids than Swedish organizations. On the other hand, in Swedish organizations managers are seen as making decisions after consulting with subordinates, and the employees are less afraid of disagreeing with their boss than in Italian organizations where decisions are taken at a higher level of the organization and employees often fear to disagree with superiors (Hofstede 2001). As far as individualism (IVD) is concerned Italy and Belgium do not differ much from Sweden in this regard. While in low IVD countries employees believe that training and the use of skills are important, in more individualistic countries such as Sweden, Italy and Belgium more importance is attached to freedom and challenging jobs. However, Sweden scores 5 in the masculinity index (MAS), demonstrating that it is a highly feminine society. None of the other countries investigated in this study scores as high in ‘feminine’ as Sweden. Consequently, managers in Sweden will be more people-oriented than in the other two countries. In Sweden it is usual to solve conflicts by negotiation

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and compromise, whereas in masculine societies conflicts are solved through letting ‘the best man win’ in a good fight (Hofstede 2001). Uncertainty-avoidance deals with a society’s tolerance for ambiguity and risk-taking. Among the three countries discussed in this chapter, Sweden is the only one with weak uncertainty-avoidance (UAI score 29). That means that, for example, hierarchical structures of organizations can be bypassed for pragmatic reasons in Sweden. This would not happen in Italy or Belgium as they score high on the UAI (75 and 94 respectively) and thereby prefer clear and respected organizational hierarchies. Managers in weak uncertainty cultures, such as Sweden, are also more interpersonal-oriented and flexible in their style and they are more willing to make individual and risky decisions than in cultures with high uncertainty-avoidance. Far clearer is the interpretation of industry values. We can see clearly from Table 13.2 that industry values are very similar between the three companies. This will help notably the acquisition process as the acquirer and the acquired can develop an easy cultural fit as far as industry value is concerned. These three factors – top leaders, national and industry’s values – are basic to understanding the expected managerial behaviour and, above all, to identifying the potential synergies and potential clashes between acquirer and acquired.

Electrolux Integration Strategies: A Proven Successful Process Electrolux group integration strategies are a product of a learning experience: over 200 acquisitions in 40 countries in 20 years (from the 1960s to the 1980s). All the acquisitions were possible thanks to the nature of Electrolux as, according to an interviewee’s account: A highly decentralized organization where the small headquarters maintained a very direct control over the strategic decision and return in asset performance. Electrolux normally has numerous decentralized operating units which were structured as a matrix organization with global and local result responsibilities reflecting the low power-distance discussed in the previous session. This decentralized structure of Electrolux was perceived by both acquired firms as flexible and apt to hold in the long run.

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Figure 13.1

Planning phase (pre-acquisition)

The acquisitions were handled through two main phases: the planning and the implementation phases. The two phases are shown in Figure 11.1 (Chapter 11, p. 136).

Planning Phase This is the pre-acquisition phase, where the action plan was set up as well as the integration team and team leaders. The analysis of potential synergies begins and also the decision on the new CEO.

Implementation Phase During the post-acquisition phase, efforts were made to manage the key strategic capabilities transfer in terms of resources-sharing and skills learning process. Due to the nature of Electrolux as a highly decentralized organization the two corporate cultures, at least at the beginning, remained independent. The implementation phase (steps 3, 4 and 5 of Figure 11.1) was carefully designed in order to minimize the resistance triggered by cultural differences and to maximize the potential synergies already identified during the planning phase (steps 1 and 2 of Figure 11.1). The integration/implementation strategies used when Electrolux acquired Zanussi and when Electrolux acquired Diamant Boart were quite similar. As the two acquisitions were international, the companies had numerous issues to solve during the integration process. The creation of an ‘integration team’ was a common practice in the two case studies. The integration team was responsible for deciding the necessary

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steps for putting together the two groups of people, ensuring the achievement of high synergy levels through the learning process and knowledge transfer. To handle the integration process, a single managerial entity should be appointed to lead the integration process. In the Electrolux–Zanussi case the choice was a two-manager team; for Diamant Boart, it was a more collegial arrangement. Top management at Zanussi were replaced and middle managers kept intact. The only mid-manager who was replaced was the industrial relations manager. The purpose was to give a clear signal to the entire organization of the need to change working practices. The old board was substituted and two Italian managers, both with experience working with Swedish companies, were appointed, the chairman and the CEO. With their past experience in SKF, another Swedish multinational, they were thought as the perfect bridge between the two companies and their vastly different cultures. The plan forecast a reduction in Zanussi’s overheads and marketing costs by integrating sales operations and shifting at least 600,000 units to Italy to improve capacity utilization (Haspeslagh and Jemison 1991). Task forces were formed during both acquisitions to address the integration and rationalization of activities in different functional areas. They would come up with recommendations, for example, in the Zanussi case, a reduction of 4,848 employees in three years by early retirement or voluntary exit. They identified key areas of synergies, in particular, culture analysis, and created task forces consisting of managers from Electrolux and Zanussi/Electrolux and Diamant Boart, in order to address each of the issues identified. Communicating the new vision for the combining organization is crucial; it will guide their future. Workshops and team building were useful in order to achieve this goal. In the Zanussi case the shared vision was to become a market leader in Europe with a significant position in other world areas, in supplying homes, institutions and industry with systems, appliances, components and after-sales service. Electrolux main values were to be near to the customers, to accept challenges and develop a leader mentality, to deliver total quality not only in the production area but in all areas of activity, and to become international competitors. However, the central value, underlying all of the above, is transparency both in information and attitude. Communication strategies are crucial for the companies to be efficient and effective in the integration process. The acquisition of knowledge, upon which standards are determined, is a prerequisite for a smooth acquisition. Interviews

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revealed that the feminine management in Sweden was usually more keen on understanding the importance of communication. They were more ‘people oriented’ than the management from Zanussi and Diamant Boart, where the top management did not feel the need to share important decisions vertically through different levels. As a manager from Zanussi explained: At the beginning of the implementation phase when we were speaking with the Swedish management and they used the conditional ‘would’ before the requests, we cannot understand if they were giving us advice or an order. Thanks to a number of team building sessions facilitated by an external consultant and clear and transparent communication, trust in the new management started to build. In the case of Electrolux–Zanussi restoring competitiveness by focusing on capacity utilization, improving production technology and cost reduction. Synergies achieved included Jet System, which was the new machine design as a product of the two companies’ integration process. Acquisitions typically occur in an environment of suspicion, confusion and rumour. Consequently, an essential task is to communicate honestly, clearly and frequently both vertically and horizontally. During the Diamant Boart integration process, the main cultural change was to move from French to English as the business language. This and the other cultural issues were dealt with through a new workshop programme installed by the management team dealing with the integration process, to overcome the cultural clashes that could appear. Changes in the organizational structure to incorporate two entities that were separate require a redesigning of the organization. For instance, a hierarchical organization that has been acquired by a flat structure needs to become a balance between the two. The organizational structure is revised by the top management according to specific needs to be achieved and the new mission and vision. An organizational structure is not only simple lines on an organizational chart, it is about the relationships between people and it implies control and accountability. Each organization, therefore, influences the preferred

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management style, and the change towards Electrolux styles evolves slowly to avoid cultural clashes. New human resources philosophy and practices will be necessary which reflect the new vision and culture for the combining firms. New criteria for recruitment/selection, training and development programmes and reward/ appraisal systems may be required. Human resources practices vary between organizations as a reflection of each firm’s leaders’ values and beliefs and their approach to people management. They also vary among countries as they reflect each nation’s ideologies and social structures. Reward systems can be useful tools to convey to employees and management the new values of an organization. Training and development are normally instruments that can also reflect a new vision for a combining organization. A new culture starts to emerge gradually in the organization. The new human resources systems will be reinforcing the required managerial behaviour for the combined organization. Training is probably one of the most important activities in the implementation phase as it is the opportunity to change aspects that can generate cultural clashes as decisionmaking, communication or attitude to management. As Dott.Canzini, the Diamant Boart CEO, emphasized ‘thanks to the workshop and the training programme the willingness of the company during the Integration phase increased 10 times’.

Creating entrepreneurial synergies Results from data analysis show evidence that both Zanussi and Diamant Boart employees and management valued the preservation of their own culture. On the other hand, both companies were acquired in hard financial times and this allowed the acquired companies to develop a feeling of openness regarding Electrolux and its Swedish culture, as a survival strategy. Managers interviewed argue, as a consensus, that both the Belgian and the Italian organizations have a well-defined corporate culture and that the employees were very loyal to their own companies to start with. For instance, in 1984, Zanussi’s managers remembered signing an agreement ‘to work without receiving salary’, as confirmed by the director interviewed. This loyalty to the original company is something highly appreciated and cannot be changed in a day. During the integration process this feeling changed due to the attentive work done by the team building sessions (phase 3 of Figure 11.1).

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A senior manager commented that ‘the employees in Zanussi started feeling pride in the new company and somehow they started to feel Electrolux not as the acquirer but a partner to work with’. In Diamant Boart the feeling was exactly the same. In addition, the series of workshops planned by the integration team to develop a communication plan and overcome the cultural differences enhanced the managers’ willingness to cooperate. An executive from Diamant Boart pointed out that the company was passing from a situation where: A general point of view there was less control and where it was difficult to have a dialogue, to discuss and to achieve something to one where managerial style is that you don’t only give instructions but explain why you want to have it somehow or other. And it is the motivation you want to have. The Italian managers interviewed pointed out that they were passing from an atmosphere where ‘they would never question or tell their boss off to one where the climate was more focus on team and consensus focused’. The Italian or Belgian managers prefer to work within a more rigid organization structure as events can become more predictable and interpretable and the organizational hierarchy is clear and respected. This was totally opposite to the Swedish characteristic as a low uncertainty-avoidance culture. For this reason the introduction of open communication and management workshops, as in the three stories analysed, can be considered the better proactive approach to achieve synergies. Despite the preferred level of decentralization in an organization, there are other national cultural differences that determine how decisions are made. The interviews show that both Italian and Belgian managers perceive that there is not much power distance between subordinates and bosses at Electrolux and it is expressed to be typically Swedish. The managers at Electrolux emphasize that decisions should be made after consulting subordinates, who are not afraid of disagreeing with their boss. This management style clearly corresponds to low in the power-distance index. Before making a decision Swedish managers first gather information from all stakeholders and then make a decision on which people agree. The managers express that Swedish management prefers a consensus. This also characterizes the ‘feminine’ society which, according to Hofstede (2001), is typically Swedish management and clashes with the ‘masculine’ Italian and Belgian styles. One such manager said:

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I believe that irrespective of the hierarchical level and how we work as managers there is consensus behind each decision; however, in the end it is the boss who decides. Swedish managers perceive what is expected in other cultures and are quick to adapt, partially maintaining their personality and working smoothly to move from the native ways to make the decision, as it is in their culture. This can involve cultural clashes if not monitored in detail, as most of the managers in other cultures are not supposed to be questioned. Decision-making is always a difficult task but the best practice for management attitude is to be aware of the differences from both sides, which makes it easier to cooperate and work, through training and workshops, to smoothly convert the acquired organization.

Summary The purpose of this chapter was to analyse the integration strategies and to understand the key practices for the integration process in the cross-border M&A that leads to entrepreneurial behaviour. The level of integration is intimately linked to the top management perceptions of cultural differences between the acquired and acquiring firms. Despite the cultural differences between the two firms, an appropriate integration process can minimize potential clashes and maximize achieved synergies. The use of the integration model was important to clarify the steps taken by Electrolux in trying to put together different groups of people with contrasting cultural backgrounds and, therefore, with high potential for a clash of both corporate and national values. Although each acquisition is unique in its own objectives and characteristics of the combining firms, it is important to design a framework that covers the main steps in the integration process with the aim of achieving learning, as a replicable process.

References Haspeslagh, P.C. and Jemison, D.B. (1991). Managing Acquisitions. New York: The Free Press. Hofstede, G. (2001). Cultural Dimensions for International Business. Beverly Hills: Sage.

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Conclusions and the Future of Corporate Entrepreneurship In conclusion, one can affirm that the entrepreneurial leadership process can include teamwork, a more democratic climate and a focus on stakeholders’ value. Entrepreneurial leadership can enable firms, within either the private or public sector, to both keep their current market position and also compete successfully in the future. Building new businesses through innovative ideas originating from different groups within organizations is viewed as an integrated and continuous part of the company strategy. The practice of developing a corporate entrepreneurial culture is a collective responsibility: top management teams and working teams throughout the organization are necessary. Corporate entrepreneurship has been associated primarily with the private sector. However, there is a great demand for the public sector to become more innovative in order to overcome the symptoms of inertia and bureaucracy. Public sector entrepreneurship is a process of creating value for citizens by bringing together unique combinations of public and private resources to exploit social opportunities. In the UK, the NHS and the Post Office would perhaps benefit from a corporate culture transformation towards entrepreneurship. I highlight two main areas that need to receive special attention in the future: the relationship between entrepreneurship and the stakeholder’s value and strategies to facilitate the emergence of public-sector entrepreneurship.

When is the Best Time for Entrepreneurial Initiatives? Some authors believe that entrepreneurial activity is most active during periods of economic, social and political upheaval (Morrison 2000). They embrace the idea that innovation becomes necessary when traditional systems and ways of doing business within large corporations are no longer effective. An interesting example is the emergence of eco-entrepreneurship as a reactive response to inertia and inward-looking management behaviour in many industrial sectors worldwide.

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Experts claim that it is time for a change in order to overcome the recent worldwide economic recession. This book, however, takes the view that entrepreneurial activities are always important for sustainable growth and not just in moments of economic crisis. It must be a strategy which prevents crisis, rather than just curing it. This assumption implies that incremental sustainable changes are always expected and not only during problematic economic phases. It is important for leaders to move from reactive to proactive behaviour. Only a minority of firms initiate discontinuous change before a performance decline. This is partly due to the risks associated with proactive change. However, inertia seems to be a more risky strategy. This idea is reinforced by Nemanich and Vera (2009): We expect ambidexterity to be also important in stable contexts since it enables firms to be proactive and prepared for the next round of renewal. In conclusion, the important stories discussed throughout this book show in the majority of cases evidence of positive organizational transformation. This is an optimistic perspective suggesting that it is possible for firms operating in hostile industries and economic environments to adopt corporate management values and beliefs that will foster entrepreneurship. The future of corporate entrepreneurship, if we can predict it, is an optimistic one: organizations can, in fact, transform themselves to become more entrepreneurial, flexible and innovative through the involvement of people from all layers of the hierarchy, developing cooperation between areas and rewarding people according to expected behaviour and results achieved. Some firms illustrated in this book have achieved high levels of transformation, whereas within others, fewer changes were observed. These different results are directly linked to top management’s leadership styles and their strategies to implement organization transformation programmes. The end result and vision to be achieved by this complex process of creating and re-creating corporate entrepreneurial culture will be a more developed society which is ethical, profitable, sustainable and ultimately happier.

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References Morrison, A. (2000). Entrepreneurship: What Triggers it? International Journal of Entrepreneurial Behaviour and Research, vol. 6, no. 2, 59–71. Nemanich, L.A. and Vera, D. (2009). Transformational Leadership and Ambidexterity in the Context of an Acquisition. The Leadership Quarterly, vol. 20, 19–33.

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Index

Acculturation process 141, 143, 151 Adam Smith 58 Ambidextrous leadership skills 2, 173 Apple 2, 8 BA BA history 61 BA need for a change 61 BA new culture 66 BA new personality 73 BA old culture 63 BA old personality 73 BA story 61 BAA BAA prevailing culture 104 BAA career systems 110, 111 BAA critical analysis of culture change 117 BAA historical culture 102 BAA history 101, 102 Biographical approach 37 Biography of organizations 27, 28 BNFL 75 BNFL need for a change 83 BNFL new culture 86 BNFL old culture 80 BP monitoring culture change progress 150 BP–Amoco acquisition 147 BP–Amoco, building a new culture 149

Brazil social–political background 121 Briefing on BA 61 British Airports Authority, looking forward 117 Britrish Airways, looking forward 75 British Nuclear Fuels, looking forward 91 Career systems 86, 97 Corporate culture definitions 18, 19 Corporate entrepreneurial culture 7 Corporate entrepreneurship definitions 17 Creating entrepreneurial synergies 167 Creation of corporate culture 21, 22 Crisis of autonomy 29 Crisis of control 29 Crisis of leadership 29 Crisis of red tape 29 Critical analysis of Jaguar culture change 98 Cross-case analysis 39 Cultural differences 150 Culture and behaviour 17 Culture and social systems (iceberg) 17 Culture assessment exercise 145, 160, 161 Culture change 22 Culture change process 48, 54, 55, 56, 57

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Culture definition 15 Culture transfornation at British Nuclear Fuels 91 Deutsche Bank incentive programmes 147 Deutsche Bank acquisition 144 Deutsche Bank retention strategies 146 Drucker, P. 7 Due diligence process 152 Electrolux successful integration strategies 163, 164, 165 Electrolux–Diamant Boart 157, 158, 159 Electrolux–Zanussi 157, 158, 159 Empowerment groups at Xerox 128 Entrepreneurial behaviour 59, 136, 169 Entrepreneurial characteristics 11 Ford–Volvo 150 Founders’ values 20, 33, 34 Freud 28 Future of corporate entrepreneurship 173 Google 2 Historical behaviour in Jaguar, BNFL, BA, BAA 34 How corporate culture is reinforced 57 How managers are expected to behave 21 Human Resources Management practices 37, 43, 56 Individual self-analysis 28 Integration strategies 153, 157

Integrative culture change process 54, 55 Intrapreneur 11, 12 Involvement and empowerment 56 Jaguar change programme 95 Jaguar desired culture 96 Jaguar historical culture 54 Jaguar, looking forward 99 Jaguar’s history 93 Larry Greiner model 29, 30 Learning culture 3, 137 Longitudinal analysis 30 Looking forward: Xerox Corporation 132 M&A and entrepreneurship 135 M&A integration phase (marriage) 146, 148 M&A integration team 146 M&A strategic fit 145, 159 Managerial careers and culture 44, 45, 46, 48, 87 Military culture 61 National Health Service (NHS) 171 National values 20 Opetimistic perspective in entrepreneurship 173 Organic growth strategies 3, 51 Organization age 28 Organization core mission and vision 56 Organization growth process 29 Organization inertia 58, 59, 53 Organization life cycle 28, 35 Organizational self-analysis 54, 55

index

Personality as a metaphor 32 Personality of Jaguar, BNFL, BA, BAA 32, 33 Personality of organizations 32 Positive results 173 Post-privatization period BAA 48 Pre-privatization period BAA 48 Privatization in the UK 58, 59, 60 Public sector entrepreneurship 171 Sellafield culture 78 Size of organization 29 Stages of organization growth 29 Stakeholders’ values 171 Steps for entrepreneurial culture 136, 137, 138 Strategic model for culture change 58 Sustainable growth process 136

185

UK Post Office 171 Value creation 141 What is corporate culture change 22 World economic recession 172 Xerox Xerox challenges of 1980s 123 Xerox challenges of 1990s 125 Xerox changing process 121, 122 Xerox Corporation 120 Xerox do Brazil (XBRA) 121 Xerox Quality Program (TQM) 124 Xerox re-creating entrepreneurial culture 130 Zanussi 159